Organizational Culture as Barriers to Employee Mobility: Evidence from Employer Reviews & Job Posts

Abstract

What firm level strategies can firms adopt for reducing employee mobility? While firms make large investments in their corporate cultures, their effects on the labor force are not yet completely understood. We argue that strong cultures act as a retention mechanism by facilitating shared understanding of the task environment, enhancing employees’ sense of homophily and ability to coordinate and reducing the portability of their task related firm specific skills. We test these predictions on a subsample analysis of 6,208 firms based in Illinois and Michigan. We measure labor-related variables from 1,265,760 job vacancies posted by those firms, and their cultural strength from 203,093 employees’ text reviews about the companies. We find that, following a regulatory shock that increases employee mobility in Illinois, strong cultures post fewer jobs and offer lower salaries than weak ones, compared to Michigan. We propose heterogeneity in cultural distributional properties as a novel retention mechanism to explain cross-firm variation in human capital strategies.