Abstract
Abstract We present a model of the formation and evolution of organizational culture and its effect on performance. The analysis reveals circumstances under which, because of cultural externalities, excessive polarization or, alternatively, homogeneity may result, indicating inter alia an important role for the performance of managing cultural diversity in organizations. The exhibited framework can be useful in dissecting how different aspects of cultural diversity and the nature of management–workers’ interactions affect organizational functioning (JEL D02, D23, M54, Z13).
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