Events

Ms. Yaxuan Chen
Ph.D. Candidate in Business Administration
(Accounting and Management)
Harvard Business School

I construct a new measure of organizational cultural inconsistency capturing whether the culture communicated by top management is inconsistent with that perceived by employees within an organization. I provide the first large-sample empirical evidence documenting the industry and time-series distributions of organizational cultural inconsistency and explore its correlation with firm characteristics. My findings suggest that both organizational constraints and short-term performance pressures explain organizational cultural inconsistency. Specifically, firms with greater geographical dispersion, weaker monitoring capacity, less emphasis on long-term performance, and more transient institutional ownership are more likely to be culturally inconsistent. Leveraging local public sentiment towards a social movement as an instrument, I show that cultural inconsistency hurts firm value and profitability. Finally, I demonstrate that firms that focus more on culture in employee selection are less likely to experience cultural inconsistency. Overall, this study contributes to the understanding of organizational cultural inconsistency as a management control problem, provides important practical implications on how to mitigate cultural inconsistency, and opens up an avenue for future research on organizational culture.