Birds of a Feather … Enforce Social Norms? Interactions among Culture, Norms, and Strategy

Does culture eat strategy for breakfast? This paper investigates the interactions among corporate culture, norms, and strategy, in order to better understand this issue and related questions. It first shows, through microfoundations, how the forces that drive toward “culture as shared beliefs and preferences” also cause the emergence of social norms (when these beliefs and preferences are unobservable), with people even endogenously enforcing norms that go against their own beliefs and preferences. The latter effect may cause a disconnect between the organization’s norms and its underlying beliefs and preferences. The paper then makes predictions on the kinds of shared beliefs, preferences, and norms that are likely to emerge, and when they are most likely to emerge. It shows, for example, that social norms are more likely in attractive organizations, for behaviors that have modest personal consequences, and on dimensions along which employees depend on others’ choices to a moderate degree. Building on these insights and on the definition of “strategy as core guidance,” we finally discuss how corporate culture and strategy interact. We show, in particular, how culture is not just an input into strategy but also a direct substitute for strategy and often even a competitor. The results throw light on ways to deal with the “breakfast” issue.