Corporate Culture and Economic Theory
David M. Kreps
In this chapter, I explore how an economic theorist might explain or model a concept such as corporate culture. While the theoretical construction that is given is far from inclusive (which is to say that many aspects of corporate culture are not covered), I conclude that economic theory is moving in the direction of what seems a reasonable story. But before that story can be considered told, we must employ tools that are currently missing from the economist's tool kit. In particular, we require a framework for dealing with the unforeseen.
I can give two explanations for why I present this topic. The first concerns
This work was prepared in 1984 for presentation to the Second Mitsubishi Bank Foundation Conference on Technology and Business Strategy. It subsequently appeared in Japanese in Technological Innovation and Business Strategy, M. Tsuchiya (ed.), Nippon Keizai Shimbunsha Press, Tokyo, 1986, and appears here in English with the kind permission of the previous publishers. The chapter surveys the current state of research and is, of course, quite dated now. But, with the kind permission of the current editors, it appears now much as it was written in 1984, except that references have been updated where appropriate and punctuation and English have been made more correct. In a very brief postscript, following the appendix, I engage in a bit of updating and revisionist thinking. And, in one place in the text, where it is too painful to reread what I wrote, I alert the reader that something more on this issue will be said in the postscript.
I have benefited from discussion with too many colleaques to give a comprehensive list, but two individuals must be cited for particularly helpful ideas: Jose Scheinkman, concerning the overlapping generations model, and Bengt Holmstrom for stressing to me the important distinction between observability and verifiability. The financial assistance of the National Science Foundation (Grants SES-8006407 and SES-8408468), the Sloan Foundation, and the Mitsubishi Bank Foundation are all gratefully acknowledged.