On the Origin of Shared Beliefs (and Corporate Culture)

Eric J. Van den Steen

Article | RAND Journal of Economics

On the Origin of Shared Beliefs (and Corporate Culture)

Abstract

This article shows how corporate culture, in the sense of shared beliefs and values, originates (often unintentionally) through screening, self-sorting, and manager-directed joint learning. It shows that such culture will be stronger among more important employees and in older and more successful firms where employees make important decisions and the manager has strong beliefs. It further shows how a manager's beliefs influence culture, how culture persists despite turnover, and why the suggested link between culture and performance may be a case of inverse causality. It finally shows that, from an outsider's perspective, organizations may tend to over-invest in corporate culture.

Keywords: Organizational Culture; Learning; Values and Beliefs; Employees; Decisions; Power and Influence; Performance; Perspective;

Format: Print

32 pages

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Citation:

Van den Steen, Eric J. "On the Origin of Shared Beliefs (and Corporate Culture)." RAND Journal of Economics 41, no. 4 (Winter 2010): 617–648.

This paper analyzes how shared beliefs and preferences (or values) cause the emergence of social norms; why people may enforce norms that go against their own beliefs and preferences/values; and how this may cause a disconnect to develop between the organization's norms and its underlying beliefs and preferences. We further show, among other things, that such social norms are more likely in attractive organizations, for behaviors that have modest personal consequences, and in organizations where employees depend on others' choices to a moderate degree. We finally discuss how these mechanisms help our understanding of culture change and of the interaction between culture and strategy. We argue that culture is not only an input to strategy, but also a substitute and a potential competitor.

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On the Origin of Shared Beliefs (and Corporate Culture)

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