Collaborative Research: An Experimental Approach to Organizational Culture

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Organizational culture is a familiar concept to both researchers andmanagers. It is frequently cited as the source of a firm's efficiency or asthe cause of problems in firm adaptation or mergers. However, in spite ofits familiarity, it has been difficult to capture exactly whatorganizational culture is and how it affects firms. We propose a series ofstudies that use an experimental procedure to create something very similarto culture in the laboratory. The basic elements of culture, based oncommon threads in the research literature, are that it is something thatarises through shared history and understanding between members of anorganization, that it depends on the organization's history and cantherefore vary greatly between firms, and that it allows members of a firmto coordinate activity and therefore perform more efficiently.Our experiments use a task that allows "firms" consisting of two or moresubjects to develop culture through repeated interaction. In ourexperiments, language serves as a metaphor for culture - subjects need todevelop a way to refer to unknown and complex objects using simple, shortphrases in order to perform a task quickly. These "cultures" that subjectsdevelop end up being based on the group's shared history in performing thetask (what aspects of the objects did they focus on initially?), they end upbeing idiosyncratic and varying greatly between groups (as an example: onegroup came to refer to an object as "Macarena" while another group referredto the same object as "coffee cups"), and they end up allowing the groups tocoordinate and improve efficiency (the one word descriptions allowed groupsto jointly identify objects quickly).Our initial experiments investigate what happens when two groups that havedeveloped culture independently - and have become efficient at performingthe task - are merged. Not surprisingly, differences in cultures lead todecreases in the efficiency with which the merged group performs the task.In addition, subjects are not aware of how difficult it will be to integrateeven these simple cultures, leading them to overvalue the merged firm.Finally, once culture conflict arises, subjects blame the source of thefailures on incompetence on the part of other subjects rather than on thedifficulty in integrating different cultures. Future experiments willfurther explore the last phenomenon by more closely examining the extent towhich subjects place the blame for merger failure on others rather than onculture incompatibility. One implication is that managers may fireemployees too frequently, blaming low performance on their incompetencerather than on the need for cultural integration. We will also explore howcultural integration is related to whether members of an organization havecommon or opposed incentives.