Culture Clash: The Costs and Benefits of Homogeneity
AbstractThis paper develops an economic theory of the costs and benefits of corporate culture--in the sense of shared beliefs and values--in order to study the effects of "culture clash" in mergers and acquisitions. I first use a simple analytical framework to show that shared beliefs lead to more delegation, less monitoring, higher utility (or satisfaction), higher execution effort (or motivation), faster coordination, less influence activities, and more communication, but also to less experimentation and less information collection. When two firms that are each internally homogeneous but different from each other merge, the above results translate to specific predictions about how the change in homogeneity will affect firm behavior. This paper's predictions can also serve more in general as a test for the theory of culture as shared beliefs.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by INFORMS in its journal Management Science.
Volume (Year): 56 (2010)
Issue (Month): 10 (October)
corporate strategy; culture clash; mergers and acquisitions; corporate culture; performance; differing priors; heterogeneous priors;
Other versions of this item:
- Eric J. Van den Steen, 2009. "Culture Clash: The Costs and Benefits of Homogeneity," Harvard Business School Working Papers 10-003, Harvard Business School.
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Kandel, Eugene & Massa, Massimo & Simonov, Andrei, 2011. "Do small shareholders count?," Journal of Financial Economics, Elsevier, vol. 101(3), pages 641-665, September.
- Felipe Balmaceda, 2011. "Job Design and Incentives," Documentos de Trabajo 279, Centro de Economía Aplicada, Universidad de Chile.
- Hiller, Victor & Verdier, Thierry, 2014. "Corporate culture and identity investment in an industry equilibrium," Journal of Economic Behavior & Organization, Elsevier, vol. 103(C), pages 93-112.
- Van den Steen, Eric, 2005. "Too Motivated?," Working papers 18180, Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Dennis Campbell, 2010. "Employee Selection as a Control System," Harvard Business School Working Papers 11-021, Harvard Business School, revised Sep 2010.
- Rajiv Sethi & Muhamet Yildiz, 2012.
American Economic Journal: Microeconomics,
American Economic Association, vol. 4(3), pages 57-95, August.
- John R. Graham & Campbell R. Harvey & Manju Puri, 2011. "Capital Allocation and Delegation of Decision-Making Authority within Firms," NBER Working Papers 17370, National Bureau of Economic Research, Inc.
- Carretta, Alessandro & Farina, Vincenzo & Fiordelisi, Franco & Schwizer, Paola, 2006. "Corporate culture and shareholder value in banking industry," MPRA Paper 8304, University Library of Munich, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc).
If references are entirely missing, you can add them using this form.