Culture as a Signal: Evidence from a Natural Field Experiment

By: Wei Cai, Dennis Campbell and Jiehang Yu

Format:Electronic
| Language:English
| Pages:57

Abstract

The importance of culture as an informal management control system is increasingly acknowledged in academia. While prior research mainly focuses on the value of culture on internal stakeholders (e.g., employees), we examine whether culture serves as a credible signal in building trust with external stakeholders (i.e., customers). We focus on one important aspect of culture, teamwork, and leverage a company’s proprietary data of a natural field experiment that generates exogenous variation in team composition. Each customer is served in an app-based group chat by a randomly assigned team of employees. Our data contains more than 2 million group chat messages and over 16 thousand customers. We find that close teamwork among employees serves as a credible signal in gaining customer trust. Moreover, the effect is more pronounced 1) when the signals are more frequent and 2) when the signals are more intense. The results are robust to controlling various confounding factors and using alternative measures of customer trust. Our findings provide important implications for the value of organizational culture as a signal in building trust with external stakeholders.