Collaborative Research: An Experimental Approach to Organizational Culture

California Institute Of Technology, Pasadena CA

Investigators

Abstract

Organizational culture is a familiar concept to both researchers and managers. It is frequently cited as the source of a firm's efficiency or as the cause of problems in firm adaptation or mergers. However, in spite of its familiarity, it has been difficult to capture exactly what organizational culture is and how it affects firms. We propose a series of studies that use an experimental procedure to create something very similar to culture in the laboratory. The basic elements of culture, based on common threads in the research literature, are that it is something that arises through shared history and understanding between members of an organization, that it depends on the organization's history and can therefore vary greatly between firms, and that it allows members of a firm to coordinate activity and therefore perform more efficiently. Our experiments use a task that allows "firms" consisting of two or more subjects to develop culture through repeated interaction. In our experiments, language serves as a metaphor for culture - subjects need to develop a way to refer to unknown and complex objects using simple, short phrases in order to perform a task quickly. These "cultures" that subjects develop end up being based on the group's shared history in performing the task (what aspects of the objects did they focus on initially?), they end up being idiosyncratic and varying greatly between groups (as an example: one group came to refer to an object as "Macarena" while another group referred to the same object as "coffee cups"), and they end up allowing the groups to coordinate and improve efficiency (the one word descriptions allowed groups to jointly identify objects quickly). Our initial experiments investigate what happens when two groups that have developed culture independently - and have become efficient at performing the task - are merged. Not surprisingly, differences in cultures lead to decreases in the efficiency with which the merged group performs the task. In addition, subjects are not aware of how difficult it will be to integrate even these simple cultures, leading them to overvalue the merged firm. Finally, once culture conflict arises, subjects blame the source of the failures on incompetence on the part of other subjects rather than on the difficulty in integrating different cultures. Future experiments will further explore the last phenomenon by more closely examining the extent to which subjects place the blame for merger failure on others rather than on culture incompatibility. One implication is that managers may fire employees too frequently, blaming low performance on their incompetence rather than on the need for cultural integration. We will also explore how cultural integration is related to whether members of an organization have common or opposed incentives.