Corporate Culture and Organizational Fragility

Department of Economics and Decision Sciences
Speaker : Mathieu Leduc
Room T- 008
 

Abstract :

Modern organizations are complex and require many successful collaborations among many actors — for instance, workers in a large organization. Some collaborations fail and the failure probability depends on the working environment (e.g. the corporate culture). This environment is endogenous: its quality depends on the individuals' costly contributions. Individual actors can make costly contributions that improve it, exerting effort to resolve disputes and adhering to organizational norms that promote the corporate culture. Although these contributions are subject to a substantial free-rider problem in large organizations, we find that positive contributions can be sustained in equilibrium, but also that the successful completion of complex tasks is then necessarily fragile to small exogenous shocks (e.g. a merger, a change of CEO, etc.).