Organizational Culture, Performance, and Competitive Advantage: What Next?

Bianca Jochimsen and Nancy K. Napier

For over 20 years, beginning in the late 1970s and early 1980s, the topic of organizational culture has been a key area of interest for managers and scholars worldwide.1 Much of the literature has focused on defining the term "organizational culture,"2 and its relationship to an organization's performance3 and competitive advantage.4 In particular, research has examined its importance, its links with other variables that may influence performance, and how managers can use corporate culture to create and build successful organizations. In this chapter, we present an overview of selected past research on organizational culture and how it is viewed as a contributor to performance and competitive advantage. We also identify selected areas where existing research has not been fully pursued, for example, how to sustain culture over time, and offer observations on promising directions for future research. Building upon these observations, we offer a simple framework that categorizes ways that organizational culture and performance or competitive advantage may be related and that may suggest new areas for research. In this discussion, we seek to contribute to management's comprehension and awareness of organizational culture as a source of competitive advantage, while acknowledging that links between culture and advantage may sometimes appear to be loose.

WHAT IS ORGANIZATIONAL CULTURE?

During the last few decades of research on organizational culture, one avenue of inquiry has been the development of a concrete definition of organizational culture, its characteristics, and its development and application in organizations. As might be expected, many different definitions of culture and its influence in an organizational environment have emerged.5 Specifically, organizational culture has been defined as "a complex set of values, beliefs, assumptions and symbols that define the way in which a firm conducts its business,"6 "a multidimensional control system to measure behaviors,"7 and "a pattern of shared and stable beliefs which develop within an organization over time."8 These definitions imply that an organization's culture is a unique phenomenon with multiple layers, and can help frame an organization in specific ways. Although initially looking at culture as a "set of shared meanings," scholars subsequently began to understand it had multiple levels. Schein discussed three levels of organizational culture: artifacts and creations, values, and basic assumptions.9 Although the three levels have specific characteristics that make them visible (e.g., technology) or invisible (e.g., assumptions and values) to organizational members or outsiders, all three levels need to be shared by members to create an organizational culture. Schein's initial model was modified by other scholars such as Hatch, who added another key level, symbols.10 Fiol further delineated culture as an unobservable (culture, norms) system of meaning.11 These changes and additions over time are important as they further develop the ideas and models underlying culture, making them more adaptable and suggesting how the various levels of culture are linked. For example, the establishment of culture can be viewed as manifesting, realizing, symbolizing, and interpreting the four levels of artifacts/creations, basic assumptions, values, and symbols. 1 2 These four factors could be set within an organization in a proactive or a reactive way. In other words, management could set and reinforce the key factors or the factors could develop on their own, almost organically, with little direct guidance from management. Regardless of how the elements come into play, only when they become "recognizable values" can they be internalized by members and become part of the organization's foundation.

Other early research focused on external adaptation or ways to define and describe the types of organizational governance reflected in culture. Based on their observations of Japanese firms, Wilkins and Ouchi characterized culture in terms of clans, bureaucracies, or markets.13 They argued that the clan culture, which they considered most likely to be associated with high levels of organizational performance, demonstrates goal congruence, shared social knowledge through a long history, collective member interaction, and high loyalty to the organization. In contrast, bureaucracy cultures are the simplest form of organizational governance and operate merely through a "sharing of certain social understandings." They described market cultures as representing a more advanced form of corporate governance since members share a more specific common understanding about the organization, such as competition, prices, and ideas. Other scholars have argued that organizational culture is an important factor in governing how members of an organization interact with each other within and outside of the organization, and that those interactions and behaviors result in the organization's identity.14

Culture has long been considered to be a variable that is a key to establishing a competitive advantage,15 and intuitively, this would suggest that it could have an influence on organizational performance.16 However, research is inconclusive on the questions of if and how management can actively influence the development and implementation of culture to improve the overall economic and financial performance of the organiza-tion.17 A deeper understanding how culture develops is thus critical in determining whether and how it may relate to performance and competitive advantage.