These arguments have a variety of normative implications, both for man- agers in firms without valuable cultures and for managers in firms with valuable cultures.
1. FIRMS WITHOUT VALUABLE CULTURES
For firms without valuable cultures, the normative implications of these analyses are somewhat limiting. Such firms cannot expect to obtain even temporary competitive advantages on the basis of their organizational culture. However, because a firm’s culture can have such a significant impact on the ways a firm conducts its business, these firms are often forced to engage in activities that modify their culture to include at least some economically valuable attributes. Thus, a firm facing a competitive environment that requires low-cost production strategies with a culture that does not emphasize managerial efficiency often will engage in actions to try to develop the value of efficiency among its managers.
Suppose, through significant managerial efforts expended over time, a firm is able to modify its culture. Could this modified culture, then, be a source of sustained competitive advantage? Given our previous analysis, this seems unlikely for at least two reasons. First, if this firm is imitating the valuable culture of a competing firm, then even if this firm is successful at modifying its culture, that modified culture will only enable it to do the things that the firm it is imitating already does. Such successful imitation does not give a firm a competitive advantage, sustained or otherwise, in the area of organizational culture. Rather, it suggests that the valuable culture in question is less rare than it was before imitation, which in turn implies the likely development of reduced margins due to competitive entry. Thus, the best return that a firm can expect from imitating the valuable culture of a competing firm is competitive parity.
The second reason is that if one firm can consciously manage its culture to modify it to enhance its value, then other firms also are likely to modify their cultures in this manner. Returns to culture modifications depend not only on improving the economic value of a firm’s culture, but also on the ability of other firms to make modifications in their cultures that result in similar cultures. If a large number of firms can successfully manage this change, then these culture changes will not result in any one firm enjoying a culture-based competitive advantage. But if only a few firms are able to modify their cultures appropriately, then these firms can enjoy a sustained competitive advantage.
There are at least two reasons why modifying a firm’s culture in this manner might be possible for only a small number of firms. On the one hand, firms that are able to successfully modify the economic value of their cultures may enjoy a superior understanding of the skills necessary to accomplish this change. That is, they may have superior culture man- agement skills. Such skills, if they are understood by only a few firms (i.e. if they are rare) and if those firms that do not have these skills can- not obtain them (i.e. if they are imperfectly imitable), can enable some firms to make culture changes while other firms cannot. On the other hand, some organizational cultures may be more susceptible to change than others. Young and small firms, for example, often have more flexible organizational cultures than older and larger firms (Tichy 1983). If these changeable cultures are characteristic of only a small number of competing firms (i.e. rare), and if firms without changeable cultures cannot develop change-facilitating attributes (i.e. these changeable cultures are imperfectly imitable), then firms with these types of cultures can obtain sustainable advantages. However, if a large number of competing firms have equally flexible cultures, or if firms without such cultures can engage in activities to increase the changeability of their cultures, then these cultural traits cannot be a source of sustained competitive advantage.
There is a paradox central to this discussion. For an organization’s culture to be the source of sustained competitive advantage, it must be valuable, rare, and imperfectly imitable. To obtain sustained advantages from modifying its culture, a firm must have either valuable, rare, and imperfectly imitable culture management skills or it must have a valuable, that is, flexible, rare, and imperfectly imitable culture. Firms either have these attributes, in which case they endow a firm with at least the potential of sustained advantages, or they do not have them. If they do not have these attributes, but are successful in acquiring them, then these attributes are not imperfectly imitable, and thus cannot be the source of sustained competitive advantages. If it was possible to tell a large number of firms how to modify their cultures to include economically valuable attributes, then culture would cease to give any one firm a competitive advantage. Thus, the normative implications of culture research are limited to assisting firms that already possess valuable, rare, and imperfectly imitable cultures and culture management skills in recognizing and nurturing these orga- nizational characteristics to obtain sustained advantages. Such research, and the consulting it implies, cannot be used to help firms without valu- able, rare, or imperfectly imitable cultures or culture management skills to obtain such performance, for such efforts are, in principle, imitable.
2. FIRMS WITH VALUABLE CULTURES
From this brief review of findings on organizational culture, it is possible to conclude that at least some firms have valuable, rare, and imperfectly imitable cultures. For such firms, the normative implications of these arguments are clear. These firms should attempt to understand what it is about their cultures that gives them competitive advantages, and then to nurture and develop these cultural attributes, thereby increasing the likelihood that their competitive advantage will not be dissipated through mismanagement (Stevenson 1976; Lenz 1980).
From another point of view, the injunction that firms should study their culture to nurture its strengths is a reaffirmation of the now popular notion that firms should ‘stick to their knitting’ (Peters and Waterman 1982). The analysis suggests that this recommendation only applies to those firms that have valuable, rare, and imperfectly imitable cultures. For firms without valuable cultures, sticking to what they know best cannot generate even competitive parity. Such activities will jeopardize a firm’s survival in the long run. Even if firms have valuable cultures, if those cultures are not rare or imperfectly imitable, they cannot be expected to lead to sustained competitive advantages. Only if a firm’s culture is valuable, rare, and imper- fectly imitable will ‘sticking to one’s knitting’ generate sustained superior financial performance.
Source: Barney Jay B., Clark Delwyn N. (2007), Resource-Based Theory: Creating and Sustaining Competitive Advantage, Oxford University Press; Illustrated edition.