DP17382 Organizational Dynamics: Culture, Design, and Performance

Author(s): Timothy J. Besley, Torsten Persson
Publication Date: June 2022
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Programme Areas: Organizational Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=17382

We examine the two-way interplay between organizational cultures and organizational design, where culture is modeled as the prevailing social identities among workplace groups that can affect project choices. In a setting where cultural dynamics depend on the expected relative payoffs of holding different identities, we investigate how tribalism and charismatic leadership shape organizational dynamics and steady-state cultures. We show how a strong culture can be a virtue when it permits greater delegated authority, but a vice when the culture is poorly aligned with organizational objectives. We apply our analysis to concrete debates about the interaction of design, performance and culture.