The Evolution of Organizational Culture

Abstract

We use a Cultural Evolution model to study the evolution of organizational culture. The account of culture that emerges is one of adaptation to the environment via a process of learning, consistent with the canon of Schein (2010). This adaptation is achieved via several levers. The first two levers are “technology” and “learning behaviours”. The organization or group can acquire technology, broadly defined, by resorting to: i) individual learning, which is costly but generates well-adapted technology, or ii) social learning, which is cheaper (because relies on the organization’s technological tradition) but may become outdated. The third lever is “cognition about the environment”. Our model incorporates signals/cues from the environment that informs the members’ decision between innovation (individual learning) versus inherited technology (social learning). Organizations vary in their capacity to interpret and act-on these signals. Organizations excelling at this, are better at inferring environmental changes and at changing its member’s beliefs and cognition. The fourth and fifth levers are “cooperation” and “norms of social interaction”. Members of the organization have the capacity to exert costly effort to help other members learn socially. Organizations can affect this behaviour by putting in place norms about cooperation, whose strength are reflected in the member’s payoffs (which includes a weight to the benefit generated to others). Our key finding is the trade-off that emerges between innovation and cooperation, consistent with the tight-loose perspective (Gelfand et al, 2011). Also, we find that i) improving cognition about the environmental increases innovation, ii) increasing the weight placed on norms of cooperation, increases cooperation, iii) whether to improve cognition or place higher weight on cooperative norms depends on environmental uncertainty. We map our model and results to theories of culture in the organizations and economics literature.