Strategy and culture

Assignment 1: Discussion—Culture and Strategy

An organization’s culture can be defined as “the unwritten set of rules and informal policies that direct employer behavior.” This definition is an amalgamation of organizational behaviorists’ thinking with industrial psychologists’ position, and human resource development researchers. Denise Rousseau’s research on the psychological contract probably comes closest to this amalgamation. Think about your own organization’s culture

Using the module readings, Argosy University online library resources, and the Internet, respond to the following for your organization:

  • What are the cultural norms that govern the organization, and what types of behaviors does the culture promote?
  • What behaviors does the culture punish? Do the specific behaviors you describe help enable the business strategy?
  • Do the behaviors you describe block the strategy?

Write your initial response in approximately 300 words. Apply APA standards to citation of sources.

By Friday, February 1, 2013, post your response to the appropriate Discussion Area. Through Tuesday, February 5, 2013, review and comment on at least two peers’ responses.

Consider the following when you respond to your peers’ posts:

  • Comment on what you found most helpful and the reasons you found them helpful. Provide a citation or resource to each response based on your learning or research.

4

12

4

20

Assignment 1 Grading Criteria Maximum Points

Described the cultural norms of the organization and the resultant behaviors. Explained the impact of these behaviors on the organization’s business strategy.

Actively contributed to the discussion by providing points of view with rationale, challenging points of the discussion, or drawing relationships between points of the discussion.
Wrote in a clear, concise, and organized manner; demonstrated ethical scholarship in accurate representation and attribution of sources; displayed accurate spelling, grammar, and punctuation.
Total:

 

Organizational culture and supply
chain strategy: a framework for

effective information flow

s

James Jungbae Roh, Paul Hong and Youngsoo Park

Department of Information Operations and Technology Management,
College of Business Administration, University of Toledo, Toledo, Ohio, USA

Abstrac

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Purpose – Critical information flows in the supply chain reflect the patterns of organizational culture
and supply chain strategy (SCS). This paper aims to links organizational culture and SCS using
competing values and an uncertainty framework.

Design/methodology/approach – Anchored at literature review on organizational culture an

d

SCS, this paper presents a typology with four patterns of organizational culture with four types of
corresponding SCS.

Findings – This paper presents diverse requirements for effective design of supply chain in that for
each pattern of organizational culture, corresponding SCS is identified: efficient for hierarchical,
risk-hedging for group, responsive for rational, and agile for developmental culture.

Research limitations/implications – The exploratory nature of this study requires empirical
research validation. Firms may use this research framework in design and evaluation of their supply
chain management structure according to their organization’s cultural elements and requirements.

Practical implications – Using this integrative framework business executives may better manage
the informational infrastructures that reflect the rich dynamics between their particular organizational
cultural traits and supply chain behavioral practices.

Originality/value – This paper expands the concept of organizational culture in the extended
supply chain network context and identifies information strategy profiles.

Keywords Supply chain management, Corporate strategy, Organizational culture, Information systems

Paper type Conceptual paper

Introductio

n

Rich communications in organizations reflect the intangible cultural traits and tangib

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strategic practices (Canessa and Riolo, 2003; Carmeli and Tishler, 2004). Effective
information flows require high level of congruence between organizational culture and
strategic practices (Leisen et al., 2002; Gallivan and Srite, 2005). Outstanding
organizations integrate their organizational value architecture and strategic
information system (Wagner, 2004; Avison et al., 2004).

Researchers have recognized the importance of strategic fit between structure and
infrastructure of organizations for their sustainable competitive advantages (Hill, 2000;
Slack and Lewis, 2003). It is reported that organizational culture is a significant factor
that accounts for the productivity gap between US and Japanese companies (Denison,
1984). Cabrera et al. (2001, p. 251) state:

Whether or not the organization is able to achieve its strategic objectives will depend on
whether it can deploy the right kinds of processes and behaviors, which are in turn
determined by the organization’s architecture.

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/1741-0398.htm

Organizational
culture and SCS

361

Journal of Enterprise Information
Management

Vol. 21 No. 4, 2008
pp. 361-

376

q Emerald Group Publishing Limited
1741-0398

DOI 10.1108/17410390810888651

The right kind of organizational process, practices and behaviors decisions utilize the
vital strengths of organizational culture (Schein, 1992).

However, the consistent challenge for researchers is how to connect organizational
culture in the implementation level of business goals and practices (Denison and
Mishra, 1995; Flamholtz, 2001). Here lies the need for rigorous examination of
organization culture in the context of ever expanding strategic business reality. In
particular, as firms interact and align with the diverse network of suppliers and
customers as their supply chain partners, rich dynamics of organizational culture
become more illusive and less understandable. In this sense, organizational culture in
the context of supply chain strategy (SCS) deserves a careful research.

This article examines the vital links between organizational culture and SCS and
addresses three specific research questions:

(1) How critical is the fit between organizational culture and SCS?

(2) How are patterns of organizational culture and types of SCS interrelated as an
integrative framework?

(3) How would this framework be useful in design and implementation of effective
information flows in supply chain?

To explore the above research questions this paper is organized as follows. The first
section identifies four major patterns of organizational culture based on the competing
value framework (CVF) by Cameron and Quinn (1999). The second section introduc

es

the four types of SCS with the uncertainty framework. The third section delineates an
integrative framework of organizational culture, SCS and strategic information
profiles. The conclusion derives the managerial implications from the researc

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framework.

Organizational culture
The analysis starts with organizational culture because it has more pervasive and
stable traits than strategy practices do (Al-Khalifa and Aspinwall, 2001; Stock et al.,
2007; Schein, 1992). Schein (1996) defined organizational culture as:

the basic tacit assumptions about how the world is and organization to be that a group of
people share and that determines their perceptions, thoughts, feelings, and their overt
behaviors.

This definition includes three levels of organizational culture: artifacts, the espoused
values, and the basic underlying assumptions. Artifacts refer to primarily visible,
audible, and touchable behaviors taking place in an organization. Examples are
organizational structures and practices. In the lower level of artifacts are the espoused
values. The espoused values are “ought to be” in the organization whereas the artifacts
are “what is” (Schein, 1992, 1996). Strategies, goals, and philosophies exemplify the
espoused values. This definition of organizational culture suggests that an effective
strategy should be aligned to the organizational culture.

With some exceptions the majority of highly effective supply chains involve leading
organizations that shape and influence the supply chain practices. McAfee et al. (2002)
also report the impact of human resource policies of a principal company on suppliers.
For an example, with its enormous size Wal-Mart’s organizational culture and SCS
impact how its suppliers and distributors share relevant information and do business

JEIM
21,4

362

with one another. Hence, organizational culture in this paper means the overriding
culture in the supply chain that reflects the organizational value traits of the dominant
company in the supply chain.

By nature the organizational culture is context-specific and its study therefore
requires careful attention to the contextual details. For this reason, we choose the CVF
by Cameron and Quinn (1999) for its theoretical validity and wide acceptance. The CVF
has been widely used for the broad range of organizational culture studies (Quinn and
Kimberly, 1984). According to Al-Khalifa and Aspinwall (2001, p. 420), CVF is “a useful
model for organizations to adopt in taking a system perspective of their businesses and
to plan and manage major change.” Although not exhaustively representing cultural
phenomena, the framework defines key elements and dimensions of organizational
culture.

Figure 1 presents a typology of the CVF. It constitutes two-dimensional space that
reflects different value orientations (Denison and Spreitzer, 1991):

(1) the degree to which the organization emphasizes change or stability (the
flexibility-control axis); and

(2) the nature of business strategic initiatives orientation (the internal-
external-axis).

A flexibility orientation suggests adaptability and spontaneity, while a control
orientation indicates stability, control, and order (Stock and McDermott, 2001) An
internal orientation displays a focus on the sustenance and enhancement of the existing
organization, while an external orientation reflects an emphasis on competition,
interaction and growth with the external environment (Stock et al., 2007). An
organization that shows internal orientation may allocate its resources for maintenance
and improvement goals. In contrast, an organization that stresses a high level of
market orientation may invest more resources in impacting market environments
(Stock and McDermott, 2001). The combination of these two dimensions produces four
types of culture: hierarchical, rational, group, and developmental.

Table I is a summary of four patterns of organizational culture. These four patterns
of organizational culture show differences in terms of focus, leadership styles, criteria

Figure 1.
The competing value

framework

Organizational
culture and SCS

363

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characteristics

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for effectiveness, management of employees, organizational glue and criteria of success
(Cameron and Quinn, 1999). Hierarchical culture emphasizes stability or control with
high level of internal focus. This orientation is characterized by uniformity,
coordination, internal efficiency, and a close adherence to rules and regulations.
Developmental culture would be its opposing contrast in that it underlines flexibility
and external orientation toward changes. Creativity, innovation, and external growth
are emphasized in response to the changing demands of the external environments
(e.g., competitors and customers). Group culture is similar to hierarchical culture in that
it stresses the internal aspects of an organization, but different in that an emphasis is
given more on the flexibility dimension. In this culture, employees are empowered and
encouraged to participate in enhancing and optimizing internal resources and business
processes. Rational culture is externally oriented with a stress on control and stability.
Organizations with rational culture accentuate productivity and achievement with
well-defined objectives against external competitions (Stock et al., 2007).

It should be noted, however, that these patterns of cultures are not mutually
exclusive (Al-Khalifa and Aspinwall, 2001). No organization may show only one
cultural pattern. Rather, an organization is comprised of the mixed set of the four
cultures. This classification of four patterns of organizational culture is for the purpose
of comparison. The relative intensity of particular cultural traits defines the pattern of
organization culture in a value chain (Denison and Spreitzer, 1991).

SCS
Different types of SCS have received increasing attention from both researchers and
practitioners. In the 1980s and the early 1990s, the focus was on the “lean” paradigm
modeled after the successful experiences in Toyota (Womack et al., 1990; Womack and
Jones, 1996). The core concept of lean supply chain is in eliminating waste from
production to delivery (Womack et al., 1990). In the late 1990s, the new approach of SCS
was the “agile” paradigm in response to turbulent market environments (Mason-Jones
et al., 2000). In this way, context-specific SCS has become more appealing than general
SCS. Fisher (1997), for example, presented a typology based on types of products (i.e.,
functional and innovative) and SCS (i.e., efficient and responsive). Afterward, Lee
(2002) put forth a demand and supply uncertainty framework that produces four types
of SCS: efficient, risk-hedging, responsive, and agile.

A specific type of SCS indicates the stable sets of business practices that are deeply
ingrained in organizational culture (i.e. management philosophies, patterns of
organizational routines and behavioral norms). Table II is the summary of four
different types of SCS based on its inherent characteristics. A firm may pursue efficient
supply chains (ESC) when a market is mature and competitive advantage is achieved
primarily through low cost and high productivity. Firms take ESC strategy mainly to
manufacture quality products efficiently and to provide customers with reliable
services. Risk-hedging supply chains (RHSC) are adopted when a supply chain is
evolving with the presence of uncertainty whereas its market demand is stable and
predictable. Hydro-electric power and some food producers are examples of this
category (Lee, 2002). To leverage supply uncertainties, a firm would increase buffer
stock for its core products or components and attempt to share the cost of the safety
stock with other companies. This strategy is often used in the retail industry or
dealerships. A firm that adopts responsive supply chain (RSC) offers a variety of

Organizational
culture and SCS

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r
c
e
s
:

A
d
a
p
te
d
fr
o
m

L
ee

(2
0
0
2
)

a
n

d
V

o
n
d
er

em
b

se
et

a
l.

(2
0
0
6
)

Table II.
Characteristics of supply
chain strategies

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products with high quality and performance. Often this strategy is implemented
through product innovation and improvement. In order to accommodate constantly
changing customer demands, this supply chain may postpone making the final form of
a product until the demand becomes specifically disclosed. Fashion apparel, computers
and pop music industries are representative of this strategy (Lee, 2002). The agile
supply chain (ASC) is the most flexible and the most market-oriented strategy because
a firm in this category faces uncertainty from both demand and supply sides. A firm
surrounded by high uncertainty endeavors to adjust promptly to volatile market and
unstable supplier conditions. The firm responds sensitively to the highly uncertain
demand via a variety of products with features such as high quality, high performance,
and excellent customer service. The firm will also hedge the risk arising from suppliers
such as supplier disruptions by leaving room for flexibility. The firms that implement
ASC could be found in high-end computers and semiconductor industries.

Competitive priorities and organizational culture
Competitive priorities of a supply chain are expressed in terms of cost, quality,
flexibility and innovation. Managing competitive priorities requires focusing on
particular goals over others and deploying organizational resources according to these
priorities. In this sense, competitive priorities reflect elements of organizational culture
that thrive on espoused values and goals of organizations (Youndt et al., 1996). Table III
is the summary of competitive priorities and organizational culture elements.

Organizational culture and SCS
Culture comprises three components: basic assumptions, values, and visible artifacts
(Schein, 1992). An organization derives its visible artifacts from the values, and the
values are based on assumptions that the organization takes. Thus, assumptions are
more fundamental and aggregated than strategies are. Therefore, it implies that SCS
should be aligned with organizational culture for effective implementation. Some

Competitive
priorities Organizational culture elements Literature

Cost Minimize the impact of individual
differences, standardization, repetitive
and predictable environment, internal
effectiveness, economy of scale,
bureaucracy

Youndt et al. (1996); Hofstede (1980);
Panayotopoulou et al. (2003);
Panayotopoulou and Papalexandris
(2004)

Quality Knowledge work/sharing, skill
acquisition and development,
continuous improvement, teamwork,
empowerment

Deming (1982); Youndt et al. (1996)

Flexibility High technology, adaptable workforce,
creativity and imitative, unpredictable
environment, internal and external
effectiveness

Upton (1995); Parthasarthy and Sethi
(1992); Youndt et al. (1996)

Innovation Creativity, adaptation, open
communication and continuous learning,
autonomy

Cameron and Quinn (1999); Youndt et al.
(1996); Schuler and Jackson (1987)

Table III.
Competitive priorities

and organizational
culture

Organizational
culture and SCS

367

researches recognized the importance of the strategic fit between organizational
culture and SCS. Chorn (1991) and Gattorna and Walters (1996) explained the
importance of strategic alignment between organizational culture and strategy.
McAdam and Brown (2001) attempted to tackle the alignment between organizational
culture and strategy with an exploratory quantitative case study approach in the Steel
industry in the UK and Ireland. Mello and Stank (2005) studied the relationship
between organizational culture and supply chain success by using Schein’s (1992)
theoretical framework. They found that organizational culture plays an important role
in forming suppliers’ behaviors. Tummala et al. (2006) also emphasize the
compatibility of supplier’s cultures in developing long-term relationships.

Figure 2 shows the integrative framework that combines the two parameters (i.e.,
demand and supply uncertainty) from the SCS uncertainty framework (Lee, 2002) with
those (i.e., internal-external and control-flexibility orientation) from the CVF
framework (Cameron and Quinn, 1999). this framework identifies SCS with
corresponding organizational culture.

High demand uncertainty occurs in the market environment in which volatile
demand and fluctuating customer order patterns are the norm. Innovative products
usually show such a demand pattern. On the other hand, low demand uncertainty
refers to the market environment with predictable demand and stable customer order
practices. Functional products with mature product life cycles display such low
demand uncertainty. High supply uncertainty refers to a supplier network that is fairly
new and not yet well-established and where the supply patterns are not so stable. In
contrast, low supply uncertainty is possible in supplier network that has many
suppliers with stable production capabilities.

A specific SCS may be more fitting to a particular organization culture. ESC (low in
both demand uncertainty and supply uncertainty) operates in organizations that are
characterized with hierarchical culture. Hierarchical culture, with the low level of
external orientation, focuses on the internal process for stability. This culture is
characterized by standardization, internal efficiency and organizational routines
(Cameron and Quinn, 1999). This hierarchical culture naturally supports efficient SCS
practices that are built on mechanistic and internal control mechanisms.

RHSC (low in demand uncertainty but high in supply uncertainty) operates in
organizations that are classified as group culture. Group culture is characterized with
the human relations model of organizational theory. Group culture, with its emphasis

Figure 2.
Organizational culture and
supply chain strategy

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368

on interpersonal trust and rich internal participative mechanisms fits to RHSC
practices that utilize the high level of cross-functional coordination and focus on
internal resource allocations.

RSC (high in demand uncertainty and low in supply uncertainty) operates in
organizations that are characterized with rational culture. Rational culture corresponds
to the rational goal model that is high on external-orientation and control-mechanisms.
Rational culture, with its strong focus on results and competent decision-making
mechanisms, is well-aligned to a responsive supply chain that has high value emphasis
on achievement, market leadership and competitiveness (Stock et al., 2007).

ASC (both high in demand uncertainty and supply uncertainty) operates in
developmental culture. Developmental culture, adopting the open system model, is
characterized with creativity and passion for innovative problem-solving mechanisms.
Developmental culture supports ASC practices that are high on resource acquisitions,
product leadership and entrepreneurship (Stock et al., 2007).

Information system, SCS and organizational culture
As mentioned at the beginning of this article, this integrative framework of
organizational culture and SCS is further extended to identifying styles of strategic
information system as caretakers, defenders, analyzers and prospectors. This
classification is adapted from the works of Miles and Snow (1978) and Apigian etal. (2006).

Tables IV-VI shows the integration framework for information flows, SCS and
organizational culture. The design of information system considers the fit between the
organization’s culture and strategic focus. Effective information flows enable firms to
better create, process and deliver products and services that their ultimate customers
value.

Four styles of strategic information system deserve even a brief explanation.
Caretakers have a consistent and stable internal focus that processes organizational
routines with great efficiency. Defenders try to protect their particular strategic
resources and markets. Analyzers are highly organized according to their goal-driven
results. Prospectors continue to seek and locate new market opportunities while
sustain their current markets with resilience. The strategic information system has a
profile in the context of integrative framework of SCS and organizational culture.

The ESC focuses on obtaining low cost and good quality to win in the market. The
ESC is adopted usually in a predictable and mature market where the manufacturing
process is characterized as rules and regulations, standardization and repetition for
optimized processes and for the economy of scale. To attain this goal, an organization
would attempt to minimize the impact of individual differences and increase the
internal effectiveness the most by developing hierarchical and mechanistic culture
(Nahm et al., 2003, 2004). The relationship with suppliers would be transactional-based
and control-oriented. The stability and control emphasis through internal efficiency go
along with hierarchical culture. Therefore, ESC adopts the practices of caretakers in its
information process and system flows.

Information strategy style Caretakers Defenders Analyzers Prospectors

SC management SC integration SC coordination SC collaboration SC alignment
Table IV.

Information system

Organizational
culture and SCS

369

S
u
p
p
ly
ch
a
in

st
ra

te
g

y
ty

p
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ffi
ci
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t
su
p
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ly
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a
in
(E
S
C
)
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is
k
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ed
g
in
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su
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ch
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in
(R
H
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a
in
(R
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)
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g
il
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(A
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)
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it
iv
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ti
es
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st
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n
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q

u
a
li

ty
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o
st
,
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ex
ib
il
it
y
,
q
u
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li
ty
S
p
ee
d
,
fl
ex
ib
il
it
y
S
p
ee
d
,
fl
ex
ib
il
it
y
,
in
n
o
v
a
ti
o
n
P
ro
d
u
ct
io

n
sy

st
em

L
ea

n
m

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fa

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g
,

JI
T

,
sc

a
le

ec
o
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ie
s,

o
p
ti
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iz
a
ti
o
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te
ch

n
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u
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M
u

lt
ip

le
su

p
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ly
so

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rc

es
,

sa
fe

ty
st

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ck

,
sh

a
re
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e
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st
o
f
sa
fe
ty
st
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ck
L
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a
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u
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ct
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g
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sc
o
p

e
ec

o
n
o
m

ie
s

F
le

x
ib

le
sy

st
em
s
M
u
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le
su
p
p
ly
so
u
rc
es
,
sa
fe
ty
st
o
ck
,
sh
a
re
th
e
co
st
o
f
sa
fe
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st
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,
e-

h
u

b
D

is
tr

ib
u

ti
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n

sy
st

em
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te
g

ra
ti

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n
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te

rm
ed

ia
ti

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n

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o
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p
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p
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4
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)
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ed
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th
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to
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)

S
h

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(3
m

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to
1

y
ea

r)

Table V.
Supply chain strategy

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370

O
rg
a
n
iz
a
ti
o
n
a
l
cu
lt
u
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ty
p

e
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n
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m
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rg
a
n
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ti
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a
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ra
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er
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C

o
n
tr
o
ll

ed
,

st
ru
ct
u
re
d

F
o
rm

a
l
p
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ce
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x
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m
il
y
,
p
er
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n
a
l
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p
en

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n
ic

a
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es
u
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-o
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en
te
d
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p
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m

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a

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ri
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ec

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y
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a
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ic

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p

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s
P

er
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a
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b
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it
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,
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fi
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en
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,
co
n
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o
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d
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o
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er
a
ti

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H
u

m
a
n
d
ev
el
o
p
m
en

t,
h

ig
h
tr
u
st
,
o
p

en
n

es
s,
a
n
d
p
a
rt
ic
ip
a
ti
o
n
C
o
m
p
et
it
iv

e
a
ct

io
n
s
a
n

d
a
ch

ie
v
em
en

t,
w

in
n
in
g
in
th
e
m
a
rk

et
p

la
ce

A
cq

u
ir

in
g
n
ew
re
so
u
rc
es
,

cr
ea

ti
n

g
n

ew
ch

a
ll

en
g

es
,
p
ro
sp
ec
ti
n

g
fo

r
o
p

p
o
rt

u
n

it
ie

s
C

ri
te

ri
a
o
f

su
cc

es
s
E
ffi
ci
en

cy
,d

ep
en

d
a
b

le
d

el
iv

er
y

,
sm

o
o
th

sc
h

ed
u

li
n
g
a
n

d
lo

w
-c

o
st
p
ro
d
u
ct
io
n
D
ev
el
o
p
m
en
t
o
f
H
R

,
te

a
m

w
o
rk

,
em

p
lo

y
ee

co
m
m
it
m
en

t,
a
n

d
ca

re
fo

r
p

eo
p

le

M
a
rk

et
sh
a
re

,
o
u

tp
a
ci

n
g
th
e
co
m
p
et
it
io

n
H

a
v
in
g
th
e

m
o
st

u
n

iq
u

e,
n

ew
es

t
o
r

in
n
o
v
a
ti
v
e
p
ro
d
u

ct
s

Table VI.
Organizational culture

Organizational
culture and SCS

371

The RHSC is employed when demand is stable and yet suppliers are uncertain. Since
demand is stable and predictable, firms in this environment would more concentrate its
resources on optimizing internal resources and the manufacturing and procuring and
delivering processes. But the uncertainty driven from suppliers leads the firms to
respond more flexibly in dealing with suppliers. They may make efforts to build a
long-term and collaborative relationship with suppliers. For this, they may also
empower employees to do knowledge/work sharing, skill acquisition, teamwork and
continuous improvement (Youndt et al., 1996; Parthasarthy and Sethi, 1992). The
flexibility and internal efficiency are suited for the group culture. Therefore, RHSC
adopts the practices of defenders in its information process and system flows.

The RSC aims to compete through offering a variety of innovative products to
customers with an affordable price (Frohlich and Dixon, 2001; Cagliano et al., 2005). To
be innovative and keep up with market needs, a firm must be sensitive to the external
environment and foster creativity, adaptation, continuous learning, and autonomy
(Cameron and Quinn, 1999). However, in dealing with suppliers, it is more
control-oriented because suppliers are well-built. For example, for the efficiency sake, a
dominant firm may attempt to integrate suppliers as much as it can. For this, it may
utilize postponement strategy. It may put off making the final form of products until
the demands become clearer. In this case, although market-orientation is emphasized,
control-orientation for supplier aspects is also given weight. In this supply chain,
productivity, goal achievement, and competition would be of importance, which are
similar to the features appearing in rational culture. Therefore, RSC adopts the
practices of analyzers in its information process and system flows.

Organizations with emphasis on the ASC try to employ differentiation from others
by pursuing excellence on multiple fronts such as quality, product design and
performance, deliveries, and after-sales service (Frohlich and Dixon, 2001). The
orientation demands quick adaptation to external changes and stresses growth,
creativity stimulation, resource acquisition, and innovation. The supplier uncertainty
may require organizations to be more flexible and market-oriented. Developmental
culture is fit for organizations implementing the ASC. Therefore, ASC adopts the
practices of prospectors in its information process and system flows.

Managerial implications
Effective information flows are the important enablers of supply chain performance
outcomes. Successful supply chain outcomes require strategic approaches, and thus
SCS matters. SCS is about making values and goals of an organization’s network
explicit; therefore, an effective strategy may not ignore organizational culture. We now
summarize a few managerial implications of our integrative framework here.

First, senior executives may better understand the contextual differences of an
organizational culture and supply chain. Theories of supply chain management have
examined diverse patterns of supply chains. However, many supply chain studies
implicitly assume that SCS might be implemented without any consideration of
organizational culture. However, increasingly critical challenges of supply chain
management are to:

. define the organizational cultural context of a particular supply chain;

. formulate relevant SCS; and

. implement supply chain practices through effective information flows.

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The research framework presented in this paper might be useful for managers to
consider different strategic contexts from organizational culture perspectives.

Second, supply chain executives also may be aware of the linkage between SCS and
organizational culture. The concept of strategic fit has been well discussed in the
management strategy literature. Strategic fit refers to the extent of congruency
between organizational resources and market/customer requirements. Organizational
resources are not automatically allocated to satisfy customer needs. It is fulfilled
through a deliberate and concerted effort of applying resources to meet customer
requirements. Such deliberate and concerted efforts make strategic practices possible.
However, if a particular strategy has little relevance to proper usage of resources for
desirable outcomes, it indicates a misfit. Such a misfit may occur when SCS is
implemented without the support of effective information system flows that provide
the rich strategic contexts.

Third, information executives may design and manage their strategic information
flows based on the contexts of SCS and organizational culture. Firms invest a great
amount of resources on IT system development. Design issues of an information
system are important in that much of the resources committed in design stages may
not be easily changeable or replaceable in the implementation stages. More effort has to
be made in the areas of strategic design of information flows. With keen understanding
of their organizational culture and strategic practices,, information executives may
better define the requirements of their strategic information systems. This integrative
framework can be a useful guide for building strategic and effective information
infrastructure in the context of supply chain management.

Conclusion and future issues
Despite the acknowledgement of the vital role of organizational culture in SCS
formulation and implementation, scant research has been carried out on the
relationship between SCS and organizational culture. This study develops a research
model that attempts to link SCS and organizational culture based on the uncertainty
framework by Lee (2002) and CVF by Cameron and Quinn (1999).

In a rapidly changing business environment, although the formation of networks is
important, the cultural patterns are less clear and more undistinguishable. Firms may
not easily grasp the complexity that exists between organizational culture and SCS.
However, a successful formulation and implementation of SCS may need to consider
deeply-held cultural traits and intangible behavioral response patterns of supply chain
participants. In this sense, this paper clarifies how a particular type of organizational
culture may fit better to a particular SCS and furthermore suggests an appropriate
style of strategic information system.

An effective design of supply chain information infrastructures requires solid
understanding of the underlying organizational cultural traits, strategic priorities and
behavioral practices. This paper suggests that the organizational culture of a dominant
or principal organization influences the suppliers and distributors in the same supply
chain. However, the dynamic interactions between a dominant organization and many
participating organizations might not be so straightforward and therefore deserve
their complex relations deserve further examination. The exploratory nature of this
study requires much more empirical research for theoretical validation. Even so, this
conceptual paper may still be useful for theory development and practical applications.

Organizational
culture and SCS

373

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About the authors
James Jungbae Roh is a PhD Student at the University of Toledo. Mr Roh holds an MA in
Economics and an MBA from the University of Toledo. He also holds a BA in Economics from
Dongguk University, Seoul, Korea. His research interests are in supply chain management,
manufacturing strategy, e-procurement and RFID adoption strategy. His article has been
published in Journal of Enterprise Information Management.

Paul Hong is an Associate Professor of Operations Management at the University of Toledo,
USA. Dr Hong holds a doctoral degree in Manufacturing Management and Engineering from the
University of Toledo. He also holds an MBA and an MA in Economics from Bowling Green State
University, USA and a BA from Yonsei University in Seoul, Korea. His articles have been
published in professional journals, including European Journal of Innovation Management,
International Journal of Operations and Production Management, Journal of Operations
Management, Journal of Enterprise Information Management, Journal of Knowledge and
Information Management, International Journal of Quality and Reliability Management, Korean
Journal of Tourism Research, and Tourism Culture and Science. His research interests are in
operational strategy and global supply chain management. Paul Hong is the corresponding
author and can be contacted at: phong@utnet.utoledo.edu

Youngsoo Park is a PhD Student at the University of Toledo. Mr Park holds an MA in
Economics from Sogang University and an MS in Industrial Engineering from Virginia Tech. He
also holds a BA in Economics from Sogang University, Seoul, Korea. His research interests are in
supply chain management, manufacturing strategy, and human resource management practices.

JEIM
21,4
376

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158 Academy of Management Executive November

mann also found that focused cable firms (i.e.,
firms with no diversification into other lines of
business) were less likely to buy out their compet-
itors than diversified companies.

Most interesting of all, however, was the finding
that, compared to more focused firms, diversified
companies were the least likely to stand still dur-
ing turbulent times. In fact, Eisenmann found that
diversified firms tended to either gobble up cable
assets or to be gobbled up themselves (i.e., to exit
the cable TV business). In other words, diversified
firms were more likely to take things to extremes
(i.e., to take much more or much less risk) than
focused firms. On top of that, CEO equity owner-
ship had a role to play. Eisenmann discovered that
CEOs who owned a smaller slice of diversified
firms were even less likely to stand still than CEOs
who owned bigger slices.

Needless to say, these are complex results. And
a s Eisenmann noted, they underscore the need for
more research to increase our understanding
about why these results might have occurred in the
first place.

But beyond this, what lessons does Eisenmann’s
study provide? Among other things, it suggests
that CEOs with a larger ownership stake in their
firms find it easier to ignore how the stock market
reacts to their decisions. In short, they’re less likely
to change course when their stock price declines.
Of course, industry liquidity played a major role in
cable industry diversification decisions. Eisen-
mann noted that banks were more than willing to
finance horizontal acquisitions in the cable indus-
try. This allowed CEOs who were also firm owners
to retain control of equity. So different lending
policies might have led to different results. In
short, Eisenmann’s findings may not hold across
industries.

Eisenmann does a wonderful job of identifying
factors that may drive the risk-taking behavior of
CEOs. Two concerns, however, should be raised.
First, Eisenmann sidesteps the question of whether
the risks that CEOs take are actually beneficial for
shareholders or not. Ultimately, we need to know
whether the factors driving the behavior of CEOs
lead them to play it safer or take more chances
than shareholders actually prefer.

Second, Eisenmann doesn’t provide a specific
roadmap for better aligning CEO thinking with
shareholder interests. Of course, in the past year or
so, a major shift in attitudes has taken place. Be-
fore that, many of us automatically assumed that
awarding stock options was the best way to align
CEO and shareholder interests. No longer. Enron,
Worldcom, and Conseco all relied heavily on stock
options. And look what happened.

Nevertheless, Eisenmann does us a great service
by clarifying what influences CEOs to take or not
take risks. Identifying such factors is an important
first step and should help shareholders better un-
derstand how their CEOs are likely to act. In other
words, examining the level of CEO ownership and
company diversification may ultimately help
shareholders make better investment decisions.
Finally, Eisenmann’s study serves a s another call
to arms to identify solutions to the governance
issue. And as firms continue to get bigger, fewer
executives will be able to call the company their
own.

Source: Eisenmann, T. R. 2002. The effects of CEO equity
ownership and firm diversification on risk taking. Strategic
Management Journal, 23(6): 513-534.

Strong Corporate Cultures and Firm
Performance: Are There Tradeoffs?

Adam Zuckeiman, International Survey Research

Does your company have a strong culture? In other
words, does widespread understanding and agree-
ment exist among employees about what behav-
iors are important and what attitudes are appro-
priate? Or is there little consensus around such
issues? The answer definitely matters. Research-
ers have found that companies with the strongest
cultures—where values and norms are widely
shared and strongly held—tend to outperform their
peers. Indeed companies with strong cultures tend
to enjoy better returns on investment, higher net
income growth, and bigger increases in share
price than firms with weaker cultures.

Research cultures tend to outperform
their peers.

It’s easy to understand the performance-enhanc-
ing effects of a strong culture. When values are
clear and broadly accepted, internal controls and
coordination are more effective. Consequently, the
alignment between goals and behavior is greatly
enhanced. Any actions contrary to behavioral
norms can be easily identified and quickly cor-
rected. Moreover, less time is wasted in deciding
what actions to take or how to coordinate actions
across groups. All of this should greatly improve
execution around established routines and pro-
cesses, thereby improving firm performance.

But are any other benefits associated with strong
corporate cultures? And what about limitations?

2002 Isaak 159

Can certain business conditions blunt the positive
impact of strong cultures? A recent study by Jesper
B. Sorensen from the Massachusetts Institute of
Technology examined these questions. Sorensen
reasoned that in addition to achieving higher
performance, companies with stronger cultures
should also have more reliable (i.e., less variable)
performance. Having such performance is impor-
tant for several reasons. Reliable performance
helps planning and decision-making. Likewise,
stakeholders such a s suppliers, employees, and
investors clearly prefer reliable performance. And
they have good reason to do so. Companies with
highly variable performance and, in particular,
highly variable cash flow tend to invest less in
worthwhile projects, placing them at a competitive
disadvantage. Likewise, such firms tend to have
less of a following among analysts, lower bond
ratings, and higher weighted average costs of cap-
ital than firms with more reliable performance.

Sorensen also sought to pinpoint any critical
limitations inherent in firms with strong cultures.
He theorized that although performance should be
more reliable in such firms, this positive impact of
a strong culture could vanish during periods of
industry volatility. Sorensen reasoned that when
industry volatility is low to moderate, a company’s
underlying assumptions and basic procedures re-
main fundamentally sound. As a result, maintain-
ing reliable performance requires only high levels
of communication and coordination, along with oc-
casional incremental adjustments to basic proce-
dures. In short, the key to success in a relatively
stable environment is using the right procedures at
the right time in the right sequences. And this,
Sorensen argued, is the context in which strong
corporate cultures should excel, given their high
level of behavior control and coordination.

The key to success in a relatively
stable environment is using the right
procedures at the right time in the
right sequences.

But once industry volatility becomes substantial,
maintaining reliable performance requires more
than just incremental adjustments to existing pro-
cedures. Instead, a volatile business climate often
demands that firms develop entirely new proce-
dures and embrace an exploration mentality to
survive, if not thrive. Sorensen surmised that firms
with strong cultures would have a harder time
undertaking these types of activities precisely
because of the qualities that helped them excel

during calmer periods. When current norms and
values are widely shared and strongly held, em-
ployees are highly committed to the current
“worldview.” This makes them less likely to seek
out fundamentally new alternatives to existing
procedures or even recognize the need for radical
change in the first place. Moreover, dissenting em-
ployees whose beliefs do contradict the company’s
dominant perspective are less likely to remain,
much less be listened to. Of course, these are the
very employees most likely to facilitate change by
introducing new ideas and novel approaches. This
underscores what some have described a s the dual
nature of strong corporate cultures. In essence, be-
ing clear about who and what you are makes it
tougher to morph into something else.

To examine these issues, Sorensen re-analyzed
data collected in the late 1980s a s part of some
earlier investigations. The data set included infor-
mation on over 150 large, publicly traded compa-
nies representing 19 distinct industries. To assess
corporate performance and performance reliabil-
ity, Sorensen relied on two commonly used mea-
sures: yearly return on invested capital (ROI), and
yearly operating cash flow. Both measures were
examined over a six-year period. Sorensen used
the volatility of stock prices in an industry (relative
to the broader market) a s an indicator of industry
volatility. When industries have to adapt in the
face of wrenching change, investor uncertainty
typically results, bringing with it wider stock price
swings among firms in those industries.

To measure corporate culture, top executives
from each participating company filled out a sur-
vey assessing firms in the sample that were in
their respective industries. For each firm, execu-
tives were asked about the extent to which: 1) com-
pany managers commonly spoke of their firm’s
way of doing things, 2) company values were
clearly stated and serious efforts were made to
have managers follow them, and 3) long-standing
policies and procedures were used beyond those
implemented by the current CEO. Responses to
these items were averaged across executives to
create a “strength of culture” score for each firm.
This approach to assessing cultural strength—one
based on brief evaluations by external observ-
ers—is a limitation inherent in Sorensen’s study.

Nevertheless, Sorensen’s results were consistent
with his predictions. Using advanced modeling
techniques, he found that firms with strong cul-
tures had better and more reliable financial per-
formance over the 6-year period examined than
firms with weaker cultures. However, as industry
volatility increased, the “reliability advantage” of
firms with stronger cultures decreased and even-

160 Academy of Management Executive November

tually became nonexistent. This outcome is consis-
tent with the idea that having a consensus about
company goals and values provides the biggest
benefit when environments are stable. Although
the characteristics present in firms with strong cul-
tures mean that they can efficiently exploit their
established competencies, new competencies and
procedures may be needed when the environment
becomes highly volatile. And that’s when firms
with strong cultures may find it difficult to adapt.

Having a consensus about company
goals and values provides the biggest
benefit when environments are stable.

Taken together, these results prompt two ques-
tions. First, what is the relative value of having the
ability to exploit established routines versus hav-
ing the ability to explore new options and cre-
atively adapt to a changing environment? And sec-
ond, can these two sets of abilities really co-exist
in one organization?

Regarding the first question, Sorensen suggests
that exploitation outweighs exploration. Sorensen
argues that the general tendency of firms with
strong cultures to perform better (and more reli-
ably) over time than firms with weaker cultures
implies that exploitation is more valuable. In other
words, exploitation helps firms with strong cul-
tures be successful enough during stable times to
weather more volatile periods.

On the second question, Sorensen doesn’t say
how firms can hold on to the benefits associated
with a strong culture without losing the ability to
explore and adapt in the face of volatility. Indeed,
he cautions against drawing a tempting conclu-
sion—that if a strong culture is built around the
value of exploration, then it will permit maximum
exploitation as well. Sorensen argues that the ben-
efits associated with strong cultures accrue pre-
cisely because exploitation of established routines
is valued more than exploration.

Whether strong cultures can both exploit and
explore successfully over the long haul remains an
intriguing question for future research. For in-
stance, can companies somehow rebalance their
emphasis on exploitation versus exploration to
match shifts in industry volatility? Does it make
sense for firms to try to strengthen their culture
during quiet times and weaken it during periods of
intense change? If so, how? Overall, Sorensen’s
study does us a great service by empirically dem-
onstrating that stronger corporate cultures gener-
ally produce better and more reliable performance.
At the same time, however, his results show that
the positive impact of a strong culture dissipates
as volatility rises. In doing so, Sorensen has un-
derscored the need for more research and given
corporations yet another reason to look in the
mirror.

Source: Sorensen, J. B. The strength of corporate culture and
the reliability of firm performance. 2002. Adminis(ra(ive Science
Quarterly, 47(1): 70-91.

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