Abstract

Firms exhibit heterogeneity in size, productivity, and internal structure, and this is true even within the same industry. It has been thought since the time of Adam Smith that a firm's internal structure affects its productivity through the channel of gains from specialization. Our paper provides evidence of a link between an organization's culture — specifically the trust environment — and its internal structure. We show experimentally that exogenously imposed culture endogenously leads to variation in organizational form. We prime trust using past performance from a pilot study and demonstrate that the level of trust within an organization affects division of labor and consequently organizational productivity. This evidence is consistent with a cross-country link between trust and the division of labor that we observe in data from the European Social Survey. Our results point to a mechanism that can help explain existing results on the connection between generalized trust and growth. It also points to an important determinant of a firm's internal structure: corporate culture (of trust).

Authors
Stephan Meier, Matt Stephenson, and Patryk Perkowski
Format
Journal Article
Publication Date
Journal
Strategic Management Journal

Full Citation

Meier, Stephan, Matt Stephenson, and Patryk Perkowski
. “Culture of Trust and Division of Labor in Non-Hierarchical Teams.”
Strategic Management Journal
vol.
40
, (January 01, 2019):
1171
-
1193
.