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Differential Impact of Cultural Elements on Financial Performance


  • Flamholtz, Eric
  • Kannan-Narasimhan, Rangapriya


This research provides empirical evidence that some elements of an organization's culture have a differential impact on the financial performance of a firm. The research tested a proposed five factor cultural model, and we determined through factor analysis that there are actually six factors or dimensions of corporate culture. Four of the factors identified in the study (customer focus, corporate citizenship, performance standards, and identification with the company) were found be directly influencing the financial performance of the firm. Two other factors, human resource practices and organizational communication, although not correlated directly with the firm's financial performance, had a significant influence upon the primary cultural factors. In addition, we also assessed the reliability of the proposed instrument for measuring these dimensions of culture, and found that they achieve acceptable levels. These findings have significant implications for researchers and practising managers.

Suggested Citation

  • Flamholtz, Eric & Kannan-Narasimhan, Rangapriya, 2005. "Differential Impact of Cultural Elements on Financial Performance," European Management Journal, Elsevier, vol. 23(1), pages 50-64, February.
  • Handle: RePEc:eee:eurman:v:23:y:2005:i:1:p:50-64

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    Cited by:

    1. Skerlavaj, Miha & Stemberger, Mojca Indihar & Skrinjar, Rok & Dimovski, Vlado, 2007. "Organizational learning culture--the missing link between business process change and organizational performance," International Journal of Production Economics, Elsevier, vol. 106(2), pages 346-367, April.
    2. Arménio Rego & Susana Leal & Miguel Cunha, 2011. "Rethinking the Employees’ Perceptions of Corporate Citizenship Dimensionalization," Journal of Business Ethics, Springer, vol. 104(2), pages 207-218, December.
    3. Neboj?a Jani?ijevi?, 2020. "The Impact Of Organizational Culture On Firm Performance: Organizational Culture As A Magic Wand Or Silent Killer?," Proceedings of International Academic Conferences 10613063, International Institute of Social and Economic Sciences.
    4. Cadden, Trevor & Millar, Keith & Treacy, Raymond & Humphreys, Paul, 2020. "The mediating influence of organisational cultural practices in successful lean management implementation," International Journal of Production Economics, Elsevier, vol. 229(C).


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