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.