Culture Clash: The Costs and Benefits of Homogeneity

Eric Van den Steen

No 10-003, Harvard Business School Working Papers from Harvard Business School

Abstract: This 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 homogenous but different from each other, merge, the above results translate to specific predictions how the change in homogeneity will affect firm behavior. The paper's predictions can also serve more in general as a test for the theory of culture as homogeneity of beliefs.

Pages: 38 pages
Date: 2009-07
New Economics Papers: this item is included in nep-soc
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Citations: View citations in EconPapers (4)

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http://www.hbs.edu/research/pdf/10-003.pdf (application/pdf)

Related works:
Journal Article: Culture Clash: The Costs and Benefits of Homogeneity (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:hbs:wpaper:10-003

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