most welcomed Economics & Corporate Culture ∗

Most non-economists would question whether economists know anything about culture. Indeed, given some faculty meetings I’ve been through, I imagine they might go so far as to say economists are uncultured. Although the second sentiment probably does go too far, there is certainly merit to the first. In particular, with a few exceptions (notably Kreps, 1990; Crémer, 1993; Lazear, 1995; Hodgson, 1996), economists have ignored the issue of corporate culture in their studies of firms and other organizations.1 There are many reasons for this lack of attention: culture is not relevant in most economic modeling; culture is not rational (or at least not obviously so) and, hence, does not fit well with the rational-agent methodology of neoclassical economics; and culture is difficult to define or measure, making it hard to use or control for in econometric analyses. Yet, like these other authors before me, I think economics has something to offer the study of corporate culture. This is true even if the ambitious research program suggested by Kreps to develop a complete economic theory of corporate culture proves infeasible. There are many ways in which economics can contribute at the margin, either by shedding light on specific aspects or roles of corporate culture or by explaining behavior that complements corporate culture. By choosing to write this chapter, I’m agreeing with the proposition that corporate culture is a phenomenon that is both worth studying and is amenable to study. I rec-