On the strength of corporate cultures

We model corporate culture(s) as production technologies for which employee s have to undertake culture-specific investments that improve their effecti veness. At a later date, the organization can adopt cultural changes that m ake this investment partially redundant. This leads to under-investment. Ho wever, as agents invest more, the organization's opportunity cost of a chan ge increases, which in turn increases each agents' incentives to invest. Th is externality among agents leads to multiple equilibria. Otherwise similar organizations can thus exhibit either high investment levels and low proba bility of changes (strong culture) or low investment levels and high probab ility of changes (weak culture). We also explore some implications for the nature and management of corporate culture. (C) 1999 Elsevier Science B.V. All rights reserved.