Culture, Competence, and the Corporation

Abstract

We provide an economic treatment of two central ideas from management studies: corporate culture ,a ndcorporate competence. We follow Weber and Camerer’s (2003) experimental work, which identifies both the importance of cultural norms in communication, and the efficiency costs of moving to an unfamiliar culture. These costs reduce employee mobility and hence serve to incentivise employer-financed training in general skills. To the extent that cultural ties bind skilled employees to the firm, their competences are the corporation’s. This suggests a cultural link between technological shocks and training incentives: if new information systems reduce the cultural specificity of communication channels then employees will become more mobile and firms will perform less training. Advances in information technology will therefore increase the demand for professional schools, and will increase employee mobility.