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Journal of Law, Economics, and Organization Advance Access originally published online on September 7, 2006
Journal of Law, Economics, and Organization 2007 23(3):743-771; doi:10.1093/jleo/ewm021
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© The Author 2006. Published by Oxford University Press on behalf of Yale University. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org

Cultural Inertia and Uniformity in Organizations

Juan D. Carrillo*

University of Southern California and CEPR

Denis Gromb

London Business School and CEPR

* University of Southern California and CEPR. Email: juandc{at}usc.edu.

We analyze aspects of the structure of organizational culture. We show that old and culturally uniform organizations are prone to cultural inertia, that is, they are reluctant to adopt a different culture in response to a change in the environment. Cultural uniformity can be beneficial because the associated inertia ex post protects and therefore ex ante encourages culture-specific investments by agents. We also explore the model's implications for such issues as cultural uniformity within an organization, cultural heterogeneity across organizations, the destabilizing effect of growth and mergers, and the conflicts arising in the management of culture.


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