Differential Impact of Cultural Elements on Financial Performance

Eric Flamholtz and Rangapriya Kannan-Narasimhan

European Management Journal, 2005, vol. 23, issue 1, 50-64

Abstract: 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.

Keywords: Organizational; culture; Financial; performance; Organizational; performance; Organizational; culture; scale; reliability; Factor; analysis; Customer; focus; Corporate; citizenship; Performance; standards; Identification; with; the; Company; Human; resources; practices; Organizational; communication (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (5)

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