On the origin of shared beliefs (and corporate culture)
By Eric Van den Steen. 2010
156 citations recorded by the source corpus.
This paper shows why members of an organization often share similar beliefs. I argue that there are two mechanisms. First, when performance depends on making correct decisions, people prefer to work with others who share their beliefs and assumptions, since such others 'will do the right thing'. Second, beliefs will converge over time through shared learning. While such homogeneity reduces agency problems, it does so at a cost. I show that, from an outsider's perspective, firms invest on average too much in homogeneity. The theory further predicts that homogeneity will be strongest in successful and older firms where employees make important decisions. Within a firm, homogeneity will be stronger among more important employees. Homogeneity will also be path-dependent, making managers more selective on early hires. Since shared beliefs are an important aspect of corporate culture (Schein 1985, Kotter and Heskett 1992), I finally show that the model matches some observations on corporate culture, such as the influence of a manager on her firm's culture and the persistence of culture in the face of turnover. A fundamental difference from earlier economic theories of corporate culture is that I show that culture, instead of being created for its own good, can be a side-effect of other purposeful actions. As a consequence, there can be too much culture in firms.
Subfields: Demography, Economics and Econometrics, Safety Research
View Paper: https://www.semanticscholar.org/paper/fbbc8320b5952d51378b86f234d79a5473cadc94
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Citations in the corpus
- Knowledge Beyond the Individual? Making Sense of a Notion of Collective Knowledge in Organization Theory (2012, background): “Collective knowledge according to this conceptualization usually originates from two sources, common experiences and knowledge-sharing activities (e.g., Chatman, 1991; Lave & Wenger, 1991; Reagans, Argote & Brooks, 2005; Van den Steen, 2010).”
- The Effect of Cultural Similarity on Mergers and Acquisitions: Evidence from Corporate Social Responsibility (2018, unknown): “…that “corporate culture” shapes individual behavior in a firm such that culture is a means of coordinating or facilitating cooperation when formal contracts are not practical or would be overly costly (e.g., Schein, 1985; Kreps, 1990; Lazear, 1995; Akerlof and Kranton, 2005; Van den Steen, 2010b).”