Culture of Trust and Division of Labor

Stephan Meier () and Matthew Stephenson ()
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Stephan Meier: Columbia University
Matthew Stephenson: Columbia University

No 8974, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Firms exhibit heterogeneity in size, productivity, and internal structure, and this is true even within the same industry. It has been thought since the time of Adam Smith that a firm's internal structure affects its productivity through the channel of gains from specialization. Our paper provides evidence of a link between an organization's culture – specifically the trust environment – and its internal structure. We show experimentally that exogenously imposed culture endogenously leads to variation in organizational form. We prime trust using past performance from a pilot study and demonstrate that the level of trust within an organization affects division of labor and consequently organizational productivity. This evidence is consistent with a cross-country link between trust and the division of labor that we observe in data from the European Social Survey. Our results point to a mechanism that can help explain existing results on the connection between generalized trust and growth. It also points to an important determinant of a firm's internal structure: corporate culture (of trust).

Keywords: organizational structure; division of labor; trust (search for similar items in EconPapers)
JEL-codes: C90 D03 D20 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2015-04
New Economics Papers: this item is included in nep-bec, nep-hrm and nep-soc
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Published - revised version published as 'Culture of Trust and Division of Labor in Non-Hierarchical Teams' in: Strategic Management Journal, 2019, 40 (8), 1171-1193 (with Patryk Perkowski)

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