Organizational dynamics: culture, design, and performance

by

Timothy Besley and Torsten Persson

Abstract

This paper examines the two-way interaction between organizational culture and a key aspect of organizational design, namely the choice between centralization and decentralization. We model culture via the share of managers in an organization that adopt one of two types, which affects the way they choose projects and internalize the payoffs of other managers. Using a class of "Darwinian" cultural dynamics based on the relative payoffs of each type, we investigate the conditions under which different cultures become dominant. Our generic model delivers insights into the interplay between organizational design and culture, the coexistence of different organizational cultures, the emergence of dysfunctional cultures, and organizational resistance to change. We apply special cases of this generic framework
to the behavior of bureaucracies, …firms, and political parties.