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Corporate Culture and Organizational Fragility

Author

Listed:
  • Elliott, M.
  • Golub, B.
  • Leduc, M. V.

Abstract

Complex organizations accomplish tasks through many steps of collaboration among workers. Corporate culture supports collaborations by establishing norms and reducing misunderstandings. Because a strong corporate culture relies on costly, voluntary investments by many workers, we model it as an organizational public good, subject to standard free-riding problems, which become severe in large organizations. Our main finding is that voluntary contributions to culture can nevertheless be sustained, because an organization’s equilibrium productivity is endogenously highly sensitive to individual contributions. However, the completion of complex tasks is then necessarily fragile to small shocks that damage the organization’s culture.

Suggested Citation

  • Elliott, M. & Golub, B. & Leduc, M. V., 2023. "Corporate Culture and Organizational Fragility," Janeway Institute Working Papers 2305, Faculty of Economics, University of Cambridge.
  • Handle: RePEc:cam:camjip:2305
    Note: mle30
    as

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    References listed on IDEAS

    as
    1. Robert Gibbons & John Roberts, 2012. "The Handbook of Organizational Economics," Economics Books, Princeton University Press, edition 1, volume 1, number 9889.
    2. Timothy J. Quigley & Craig Crossland & Robert J. Campbell, 2017. "Shareholder perceptions of the changing impact of CEOs: Market reactions to unexpected CEO deaths, 1950–2009," Strategic Management Journal, Wiley Blackwell, vol. 38(4), pages 939-949, April.
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