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Relationships Between Corporate Culture and Firm Performance

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Relationships Between Corporate Culture and Firm Performance

The culture of the organization and its learning are closely related to each other. Few researchers conceptualize the culture of the organization as the learning process from the history. Organizational culture is characterized as the learning organization while attempts to orders, rationality, and meanings as it gain experience (Weick ,1985).

The concepts of organizational culture and its learning has to gain interest in past few years. (Trice et.al, 1993). Few researchers revealed that it is very difficult to measure organizational culture and effects of it on the organization ( Martin et.al, 1990). Many scholars assume that culture as a characteristic which is measurable of the firm(Chatman et.al, 1996).

Two Types of Organizational Cultures

Basically, there are two types of organizational cultures. One is strong corporate structure and other is week corporate structure.

Strong organizational culture exists where members of the organization react due to their arrangement to the values of an organization, whereas A weak culture can emerge when the values of an organization are not unmistakably characterized, conveyed or broadly acknowledged by the members of the organization. One of the major set back of strong organizational culture that consistency of behavior all around the organization is increased due to it.

The major drawback of the strong corporate culture is increasing the consistency of the behavior of the firm’s employees is observed due to it(O’Reilly, 1989)

Strong Corporate Culture

In order to study the impact of strong corporate culture, a research was conducted by the Jesper ( 2002). The researcher asked the top management of the organization to fill the short questionnaire which was mailed to them. In these questionnaires, the respondents were asked about the strength of their firms and their impacts. Following are the results of the study:

It is evident from the tables and figures shown above that organizational culture is strongly correlated with the performance of the organization. In the first table, the Return on investment of the organization is also positively affected by the strong corporate structure.

Thus we can confidently say that the consistency in the performance of the organization is mainly dependent on the values and culture of the organization which is learned from the past experiences.



Weick, K. E. (1985) “The significance of corporate culture.” In P. J. Frost, L. F. Moore, M. R. Louis, C. C. Lundberg, and J. Martin (eds.), Organizational Cultures: 381-389. Beverly Hills, CA: Sage.\

Trice, H. M., and J. M. Beyer (1993) The Cultures of Work Organizations. Englewood Cliffs, NJ: Prentice Hall.

Siehl, C., and J. Martin (1990) “Organizational culture: A key to financial performance?” In B. Schneider (ed.), Organizational Climate and Culture: 241-281. San Francisco: Jossey-Bass.

O’Reilly, C. A., and J. A. Chatman (1996) “Culture as social control: Corporations, culture and commitment.” In B. M. Staw and L. L. Cummings (eds.), Research in Organizational Behavior, 18: 157-200. Greenwich, CT: JAI Press.

O’Reilly, C. A. (1989) “Corporations, culture and commitment: Motivation and social control in organizations.” California Management Review, 31 (4): 9-25.

Sørensen, J. B. (2002). The strength of corporate culture and the reliability of firm performance. Administrative science quarterly47(1), 70-91.

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