Do consistent corporate cultures have better business performance? Exploring the interaction effects

Abstract

Past research has shown a close connection between organizational culture and effectiveness, but nearly all of this research has examined the direct effects of culture on performance outcomes. In contrast, this article examines the idea that the effects of cultural consistency on organizational performance may differ depending on the levels of other culture traits. Data from 88,879 individuals in 137 public companies using the Denison Organizational Culture Survey were paired with three objective measures of organizational performance and used to examine the interaction effects of consistency with mission, adaptability, and involvement. Consistency shows a significant positive interaction with all three traits in predicting market-to-book ratios and sales growth. Firms that are both consistent and adaptable, for example, are high performers. In contrast, the results show a significant negative interaction when predicting return on assets. The implications of these results are discussed with respect to future culture and effectiveness research.