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Organizational Culture: Can It Be a Source of Sustained Competitive Advantage?

Author(s): Jay B. Barney


Source: The Academy of Management Review, Vol. 11, No. 3 (Jul., 1986), pp. 656-665
Published by: Academy of Management
Stable URL: http://www.jstor.org/stable/258317
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Organizational Culture:
Can It Be a Source of
Sustained Competitive Advantage?
JAY B. BARNEY
University of California, Los Angeles
Three attributes that a firm's culture must have to generate sustained
competitive advantages are isolated. Previous findings suggest that
the cultures of some firms have these attributes; thus, these cultures
are a source of such advantages. The normative implications of the
analysis are discussed. Firms that do not have the required cultures
cannot engage in activities that will modify their cultures and gener-
ate sustained superior financial performance because their modified
cultures typically will be neither rare nor imperfectly imitable. Firms
that have cultures with the required attributes can obtain sustained
superior financial performance from their cultures.

Recent attempts to explain the sustained supe- ways they conduct business. It is these core val-
rior financial performance of firms like IBM, ues (about how to treat employees, customers,
Hewlett-Packard, Proctor and Gamble, and Mc- suppliers, and others) that foster innovativeness
Donald's have focused on the managerial val- and flexibility in firms; when they are linked with
ues and beliefs embodied in these firms' organi- management control, they are thought to lead to
zational cultures ("Corporate Culture," 1980;Deal sustained superior financial performance.
& Kennedy, 1982; Peters & Waterman, 1982; Many of these explanations have a strong nor-
Tichy, 1983). These explanations suggest that mative orientation. Firms with strong cultures are
firms with sustained superior financial perfor- pointed out as examples of excellent manage-
mance typically are characterized by a strong ment (Peters & Waterman, 1982); mechanisms
set of core managerial values that define the for modifying the cultures of other firms to approxi-
mate closely the cultures of successful firms have
Major funding for this research was provided by the Office been widely discussed and applied ("Corporate
of Naval Research, by the US-Japan Friendship Commission,
Culture," 1980; Tichy, 1983; Quinn, 1980). These
and by the Mellon Foundation. Additional support was pro-
vided by the IBM Corporation; the General Electric Founda- efforts are seen not only as ways of improving
tion; the Westinghouse Electric Corporation; Amp, Inc.; and employee morale or quality of work life, but also
the Alcoa Foundation. Discussions with William G. Ouchi, as vital for improving a firm's financial perfor-
William McKelvey, Richard Rumelt, Alan Wilkins, Stan mance. Recall that Peters and Waterman (1982)
Ornstein, Maggi Phillips, Connie Gersick and the Organiza-
chose firms for their sample that not only had an
tional Economics Seminar at UCLA have been invaluable in
the development of this work. excellent reputation for management, but also
Correspondence should be addressed to Jay B. Barney, were superior financial performers over the last
Graduate School of Management, University of California, two decades (Peters & Waterman, 1982, pp.
Los Angeles, CA 90024. 22-23).

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This paper examines the relationship between these numerous and subtle definitional conflicts,
organizational culture and sustained superior a definition that is consistent with most of the
financial performance. The conditions under research about organizational culture and a
which a firm's culture can be a source of sus- firm's performance is used here (e.g., Deal &
tained competitive advantage, and thus by im- Kennedy, 1982;Peters & Waterman, 1982). In this
plication, a source of sustained superior finan- work, organizational culture typically is defined
cial performance are examined (Hirshleifer, as a complex set of values, beliefs, assumptions,
1980). It is concluded that, under a relatively nar- and symbols that define the way in which a firm
row set of conditions, a firm's culture can be the conducts its business. In this sense, culture has
source of such sustained advantages. However, pervasive effects on a firm because a firm's cul-
arguments suggest that the normative implica- ture not only defines who its relevant employees,
tions of studies on organizational cultures are customers, suppliers, and competitors are, but it
limited significantly. While some firms may obtain also defines how a firm will interact with these
sustained superior financial performance from key actors (Louis, 1983).This conception of organi-
their organizational cultures, firms without such zational culture blurs classical distinctions be-
cultures cannot expect to engage in managerial tween an organization's culture and its structure
activities which will develop cultures that, in turn, and strategy (Tichy, 1983) because these attri-
will generate such performance. Thus, the nor- butes of a firm are direct manifestations of cul-
mative implications of studies on organizational tural assumptions about what business a firm is
cultures are limited to describing how firms in and how it conducts that business.
enjoying sustained superior financial perfor- While there is little consensus concerning the
mance can maintain their success, and how less definition of organizational culture, there is
successful firms can obtain average, or normal, broader agreement about sustained superior
performance. Studies of cultures cannot be used financial performance. In microeconomics, the
to describe how less successful firms, by modify- financial performance of firms is divided into
ing their cultures, can come to enjoy sustained three categories: normal performance, superior
superior performance. performance, and below normal performance.
First, some of the key concepts used in this Normal economic performance is that rate of
analysis are defined. Second, the attributes that return on a firm's investments just large enough
a firm's culture must have in order to be a source to keep a firm's assets engaged in their current
of sustained superior performance are discussed. activities (Hirshleifer, 1980). Using language from
Third, the organizational cultures of at least some organization theory (McKelvey, 1982), a normal
firms are examined to see if they meet these return is a return just large enough to ensure a
criteria. Finally, whether or not firms that do not firm's survival. Technically, a normal return is
currently have organizational cultures that are a the expected rate of return of a firm in perfectly
source of this level of performance can engage competitive markets (Copeland & Weston, 1979).
in managerial actions to develop such cultures Superior financial performance is a rate of return
is considered. greater than a normal return and indicates that
a firm is prospering. Below normal financial per-
Culture and Performance formance is a rate of return insufficient to keep a
Few concepts in organizational theory have firm's assets engaged in their current activities.
as many different and competing definitions as Firms that obtain this level of return for a rela-
"organizational culture." Smircich (1983), for tively long period of time typically do not survive
example, has cited five classes of such defini- (McKelvey, 1982).
tions in her review of the literature on organiza- Superior financial performance can be either
tional cultures. Rather than attempt to resolve temporary or sustained. Temporary superior per-

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formance is the result of competitive dynamics (Barney, 1985a). First, the culture must be valu-
widely described in microeconomics (Hirshleifer, able; it must enable a firm to do things and be-
1980). Suppose a particular firm is able, for any have in ways that lead to high sales, low costs,
of a variety of reasons, to obtain superior finan- high margins, or in other ways add financial val-
cial performance. Other firms, observing this, ue to the firm. Because superior financial perfor-
typically will seek to obtain this same level of mance is an economic concept, culture, to gen-
performance by duplicating whatever makes a erate such performance, must have positive eco-
successful firm successful (Hirshleifer, 1980). Imi- nomic consequences. Second, the culture must
tation increases the competition facing the ini- be rare; it must have attributes and characteris-
tially successful firm, reduces margins, and tics that are not common to the cultures of a large
decreases the level of financial performance. number of other firms. Finally, such a culture
Increased competition through imitation will con- must be imperfectly imitable; firms without these
tinue until no firms are obtaining superior finan- cultures cannot engage in activities that will
cial performance (i.e., until all firms obtain change their cultures to include the required
approximately normal economic returns). characteristics, and if they try to imitate these
Certain firms may enjoy competitive advan- cultures, they will be at some disadvantage (re-
tages that are not subject to imitation, and thus putational, experience, etc.) compared to the
these can be the source of sustained superior firm they are trying to imitate.
performance. In these settings, firms may enjoy These three characteristics result from the defi-
superior financial performance even after imita- nition of sustained superior financial perfor-
tive attempts by other firms cease (Lippman & mance and research on competition by strate-
Rumelt, 1982). Of course, sustained superior gists (Porter, 1980) and economists (Hirshleifer,
financial performance cannot be expected to last 1980). The first requirement, that a firm's culture
forever (Hirshleifer, 1980). Firms may invent new must enable it to do things and behave in ways
ways of competing that do not imitate, but re- that add economic value to the firm, is clearly a
place, old ways (Barney, 1985b; Schumpeter, prerequisite for generating even normal eco-
1950). Also, natural business cycles sometimes nomic performance. If a firm's culture enables it
can jeopardize a firm's sustained superior finan- to behave in ways that are inconsistent with a
cial performance. Many of the firms studied by firm's competitive situation, then that culture can-
Peters and Waterman (1982), for example, cur- not be a source of superior financial performance,
rently are facing some financial difficulties sustained or otherwise.
("Who's excellent," 1984). However, in the con- The requirement that valuable cultures must
text of macroeconomic definitions of a firm's be rare to generate sustained superior perfor-
performance, if these firms are still earning a mance reflects the dynamics of competition dis-
greater than normal economic return, and if this cussed earlier. If many firms have similar cul-
return is not eroded through entry and imitation, tures that allow them to behave and compete in
then they are still enjoying sustained superior approximately the same way, none will possess
financial performance (although it may be at a a culturally-based competitive advantage, and
reduced level). above normal economic performance cannot be
expected (Hirshleifer, 1980).
Culture and Sustained Superior Finally, even if the above conditions are met,
Financial Performance it is still necessary for a firm's culture to be imper-
fectly imitable for it to generate sustained supe-
In order for a firm's culture to provide sustained rior financial performance. Perfectly imitable
competitive advantages, and thus, by implica- cultures, even if they are valuable, and even if
tion, be a source of sustained superior financial they are currently rare, are subject to imitation
performance, three conditions must be met that dissipates any competitive advantages they
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may provide. The culture-driven success of one financial performance based on different com-
firm creates an incentive for other firms to mod- petitive advantages (Lippman & Rumelt, 1982).
ify their cultures to duplicate that success. If the However, it will not be possible for a large num-
culture is perfectly imitable, it cannot give any ber of firms to obtain such performance on the
one firm a sustained competitive advantage and basis of a single type of organizational culture.
the margin reducing dynamics discussed earlier
are likely to emerge. Thus, for example, if the Economic Profit from
cultural attributes isolated by Peters and Water- Organizational Culture
man (1982) are, in fact, easily transferable, as is
suggested on the cover of the paperback edition If a firm's culture, in order to be the source of
of their book, then these cultural attributes can- sustained competitive advantages, must be valu-
not be a source of sustained competitive advan- able, rare, and imperfectly imitable, then the
tage, and their existence in a firm cannot be an possibility that organizational cultures with these
explanation of sustained superior financial per- characteristics exist must be evaluated. Previ-
formance. ous research on organizational cultures suggests
A firm that has a valuable, rare, and imper- that at least some cultures of some firms have
fectly imitable culture enjoys a sustained com- these characteristics, and thus can be a source
petitive advantage that reflects that culture. Such of sustained competitive advantage. This re-
a firm will enjoy the positive economic conse- search also suggests that not all firms have cul-
quences of its culture. Relatively few other firms tures with these three attributes (Martin, Feldman,
will be able to obtain these same benefits, and Hatch, & Sitkin, 1983; Tichy, 1983), and thus
those firms that currently do not enjoy them can- organizational culture is not a source of competi-
not engage in activities that will make it possible tive advantage for all firms.
to obtain them. However, the overall financial
performance of a firm with such advantages can The Economic Value of Culture
be reduced to normal, or even below normal Much of the literature on organizational cul-
levels, if a firm fails to manage other strategically ture and the performance of a firm can be inter-
relevant functions successfully (Peters & Water- preted as suggesting that culture can have sig-
man, 1982). These other functions might include nificant positive economic value for a firm. Certain
both the financial and analytical characteristics organizational cultures apparently enable firms
of a firm's business. In addition, while a firm to do and be things for employees, customers,
with a valuable, rare, and imperfectly imitable suppliers, and others that could not be done, or
culture can obtain sustained superior financial could not be done as well, by firms without these
performance, other attributes of a firm, including, cultures (Deal & Kennedy, 1982; Ouchi, 1981).
perhaps, unique geographical advantages and Many of these activities have shown a positive
luck, also can lead to such performance (Barney, economic impact on firms.
1985a). Peters and Waterman (1982) give perhaps the
This analysis does not imply that firms cur- broadest description of the economic value of
rently enjoying culturally-based advantages will certain organizational cultures. Each of their
always enjoy these advantages, because a valu- eight characteristics of an excellent company
able culture today could, in different economic reflects strong values and beliefs in organiza-
or competitive conditions, become an economic tional cultures. Thus, for example, firms that are
liability. Moreover, because other attributes of a simultaneously loosely- and tightly-coupled
firm also can generate sustained above normal typically have an organizational culture with a
performance, it is possible that several firms in strong set of core values [one of which encour-
an industry all can obtain sustained superior ages creativity and innovativeness (Peters &

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Waterman, 1982, p. 319)]. Firms without such a able competitive advantages from its culture. In
culture may attempt to develop the attributes of addition, these cultural attributes must be rare.
a tight-loose system, but such attempts gener- The frequency with which valuable organiza-
ally are not as successful because the culture of tional cultures occur among firms is ultimately
the organization neither supports nor values such an empirical question. Previous research has
behavior. In a similar vein, firms that are suc- indicated that some organizational cultures, far
cessful at obtaining productivity through their from being rare, are likely to be quite common
people generally have an organizational culture among any given set of firms (DiMaggio & Powell,
that supports and values the worth of the em- 1983; Spender, 1983). Indeed, some have argued
ployee. Firms without such a supportive culture that although cultures may appear to be unique
generally do not succeed in maximizing their or specific to a given firm, they sometimes actu-
productivity through their people. Firms that stay ally reflect an underlying commonality and
close to their customers typically are obsessed function, and thus are not rare at all (Martin et
with customer service and satisfaction. This al., 1983).
obsession, once again, reflects some of the core Despite these findings, it must be admitted that
values of an organization's culture. some organizational cultures might exist in a rel-
Each of these cultural traits can result in posi- atively small number of firms, and thus hold the
tive economic gains for firms. Both Peters and potential for generating sustained superior finan-
Waterman (1982) and Porter (1980) note that cial performance. Numerous authors have noted
staying close to one's customer can result in that firms are idiosyncratic social inventions,
timely market information, joint product develop- reflecting the unique personalities and experi-
ment activities, and intense brand loyalties. ences of those who work there (Barley, 1983;
These benefits result in high sales and increased Polanyi, 1958). Firms are also historically bound,
margins, and thus have a direct positive finan- partially reflecting the unique circumstances of
cial impact on a firm. Innovativeness, productiv- their founding (Pettigrew, 1979; Selznick, 1957),
ity through people, and the other cultural factors the unique personalities of their founders (Schein,
cited by Peters and Waterman (1982) also have 1983; Zucker, 1977), and the unique circum-
positive economic consequences. stances of their growth (Chamberlin, 1933;Clark,
Simply because the cultures of certain firms 1970, 1972). Often, these unique experiences of a
enable them to engage in activities with positive firm are reflected in a firm's culture. Rare experi-
economic impact does not imply that all organi- ences can lead to a rare culture. If these cultures
zational cultures have such effects. Indeed, im- are also valuable, then they hold the potential
plicit in much of the organization cultures litera- for generating sustained competitive advan-
ture is the notion that an organization's culture tages.
can significantly reduce a firm's effectiveness, The assertion that the unique personalities and
disabling the firm from perceiving all its competi- history of a firm can lead to rare cultures is con-
tive/operational options and preventing it from sistent with the contingency view of culture dis-
choosing options consistent with competitive/ cussed by Smircich (1983). However, this does
operational necessities (Crozier, 1964; Porter, not necessarily imply that the cultures of these
1980; Riley, 1983; Tichy, 1983). firms will be unique as well (Martin et al., 1983).
Different organizational experiences may lead
Valuable and Rare Cultures
to similar cultural outcomes. Even among firms
That a firm's culture may enable it to behave with unique histories, cultures may not be rare,
in ways with positive economic impact does not and thus without potential for generating sus-
necessarily imply that a firm can obtain sustain- tained superior financial performance.

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The Imitability of Culture tage-and history defies easy imitation. This con-
ception of culture is explored in Clark's (1970,
For a firm's culture to be a source of sustained 1972) notion of an organizational saga, that is,
competitive advantage, it must not only be valu- the embodiment of the values, symbols, and
able and rare, it also must be imperfectly imita- beliefs of a firm as expressed through its unique
ble. Without imperfect imitability, any competi- history. Selznick (1957), Stinchcombe (1965), and
tive advantage that a valuable and rare culture Zucker (1977) observed that the constellation of
might give will create strong incentives for imita- persistent symbols, beliefs, and values that char-
tion. acterize a firm's culture at least partially reflect
There is significant evidence which suggests the unique early history of the firm, including
that valuable and rare organizational cultures the pattern-setting influence of company found-
often may be very difficult, if not impossible, to ers. A firm with a history significantly different
imitate. First, it may not be possible for individu- from that of a firm whose culture it would like to
als observing a culture (let alone those experi- imitate may find an unbridgeable barrier to
encing a culture) to describe what about a parti- imitation. If this firm's culture is also valuable
cular organization's culture adds value to a firm and rare, then it may enjoy a sustainable com-
(Lippman & Rumelt, 1982). Values, symbols, petitive advantage.
beliefs, and the like are notoriously difficult to Finally, even if the economically relevant
describe and categorize (Barley, 1983; Gregory, aspects of a firm's culture can be described, and
1983). Moreover, the relationship between these even if they are not historically specific in char-
highly subjective organizational characteristics acter, conscious and successful cultural imita-
and a firm's competitive advantages also defies tion still may be imperfect. The components of
rigorous description and inspection. The valu- organizational culture (including values, sym-
able and rare aspects of an organization's cul- bols, and beliefs) are as difficult to purposefully
ture often become part of the unspoken, unper- change as they are to describe (Smircich, 1983).
ceived common sense of the firm. Many have The existence of multiple, possibly contradictory
argued that culture is a powerful force in explain- cultures within the same firm makes the man-
ing the behavior of individuals and groups within agement of culture all the more problematic
organizations precisely because it is unspoken (Gregory, 1983). Indeed, the data show that
and taken for granted (Berger & Luckman, 1967; attempts to modify such subtle and interdepen-
Goffman, 1959; Polanyi, 1958). If those attempt- dent aspects of organizations through organiza-
ing to observe a culture to imitate it cannot tional development methods have met with mixed
describe what is valuable, those aspects of that results at best (Porras & Berg, 1978a, 1978b). While
culture cannot be consciously imitated [although numerous authors have described ways in which
firms might accidentally successfully imitate a an organization's culture can be managed (Peters,
culture they cannot describe (Lippman & Rumelt, 1978; Quinn, 1980;Tichy, 1983), it must be admit-
1982; McKelvey, 1982)]. ted that at least some organizational cultures
Even if valuable and rare organizational cul- resist planned change. If a potential imitator can-
tures can be described by potential imitators, as not manage the change of its own culture to
is apparently sometimes possible (e.g., Ouchi, approximate the culture of a firm with a culturally-
1981; Peters & Waterman, 1982), it still may not based strategic advantage, then the latter may
be possible to imitate these cultures. The charac- be safe from imitation and its strategic advan-
teristics of organizational culture that may make tage may be sustained.
it rare may also make it difficult to imitate. Valu- It has been argued that the cultures of some
able organizational cultures may be intrinsically firms may be immune from planned imitation. If
bound up with a firm's unique history and heri- these cultures are valuable and rare, then they

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can be a source of sustained strategic advantage. ture in question is less rare than it was before
This is not to suggest that a firm's culture stays imitation, which in turn implies the likely devel-
the same since it certainly does evolve over time opment of the competitive dynamics suggested
(Zucker, 1977; Selznick, 1957). This also does not previously [i.e., reduced margins due to com-
suggest that all attributes of all organizational petitive entry (Hirshleifer, 1980)]. Thus, the best
cultures are imperfectly imitable. Rather, previ- return that a firm can expect from imitating the
ous findings indicate that some organizational valuable culture of a competing firm is an ap-
cultures may be valuable, rare, and imperfectly proximately normal return.
imitable, and thus the source of sustained supe- The second reason is that if one firm can con-
rior financial performance. sciously manage its culture to modify it to en-
hance its value, then other firms also are likely
Normative Implications of to modify their cultures in this manner. Returns
to culture modifications depend not only on
Culture Research
improving the economic value of a firm's culture,
but also on the ability of other firms to make
Firms Without Valuable Cultures modifications in their cultures that result in sim-
For firms without valuable cultures, the nor- ilar cultures. If a large number of firms can suc-
mative implications of these analyses are some- cessfully manage this change, then these cul-
what limiting. Such firms cannot expect to obtain ture changes will not result in any one firm
even temporary competitive advantages on the enjoying a culture-based competitive advantage.
basis of their organizational culture. However, But, if only a few firms are able to modify their
because a firm's culture can have such a signifi- cultures appropriately, then these firms can enjoy
cant impact on the ways a firm conducts its a sustainable competitive advantage.
business, these firms often are forced to engage There are at least two reasons why modifying
in activities that modify their culture to include at a firm's culture in this manner might be possible
least some economically valuable attributes. for only a small number of firms. On the one
Thus, a firm facing a competitive environment hand, firms that are able to successfully modify
that requires low-cost production strategies with the economic value of their cultures may enjoy a
a culture that does not emphasize managerial superior understanding of the skills necessary to
efficiency often will engage in actions to try to accomplish this change. That is, they may have
develop the value of efficiency among its manag- superior culture management skills. Such skills,
ers. if they are understood by only a few firms (i.e., if
Suppose, through significant managerial ef- they are rare) and if those firms that do not have
forts expended over time, a firm is able to mod- these skills cannot obtain them (i.e., if they are
ify its culture. Could this modified culture, then, imperfectly imitable), can enable some firms to
be a source of sustained competitive advantage? make culture changes while other firms cannot.
Given our previous analysis, this seems unlikely On the other hand, some organizational cul-
for at least two reasons. First, if this firm is imitat- tures may be more susceptible to change than
ing the valuable culture of a competing firm, others. Young and small firms, for example, often
then even if this firm is successful at modifying have more flexible organizational cultures than
its culture, that modified culture will only enable older and larger firms (Tichy, 1983). If these
it to do the things that the firm it is imitating changeable cultures are characteristic of only a
already does. Such successful imitation does not small number of competing firms (i.e., rare), and
give a firm a competitive advantage, sustained if firms without changeable cultures cannot
or otherwise, in the area of organizational cul- develop change-facilitating attributes (i.e., these
ture. Rather, it suggests that the valuable cul- changeable cultures are imperfectly imitable),

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then firms with these types of cultures can obtain firms, the normative implications of our argu-
sustainable advantages. However, if a large ments are clear. These firms should attempt to
number of competing firms have equally flexible understand what it is about their cultures that
cultures, or if firms without such cultures can gives them competitive advantages, and then to
engage in activities to increase the changeabil- nurture and develop these cultural attributes,
ity of their cultures, then these cultural traits can- thereby increasing the likelihood that their com-
not be a source of sustained competitive ad- petitive advantage will not be dissipated through
vantage. mismanagement (Lenz, 1980; Stevenson, 1976).
There is a paradox central to this discussion. From another point of view, the injunction that
For an organization's culture to be the source of firms should study their culture to nurture its
sustained superior performance, it must be valu- strengths is a reaffirmation of the now popular
able, rare, and imperfectly imitable. To obtain notion that firms should "stick to their knitting"
sustained superior performance from modifying (Peters & Waterman, 1982). The analysis sug-
its culture, a firm must have either valuable, rare, gests that this recommendation only applies to
and imperfectly imitable culture management those firms that have valuable, rare, and imper-
skills, or it must have a valuable, that is, flexible, fectly imitable cultures. For firms without valu-
rare, and imperfectly imitable culture. Firms able cultures, sticking to what they know best
either have these attributes, in which case they cannot generate even normal economic returns.
endow a firm with sustained superior perfor- Such activities will jeopardize a firm's survival.
mance, or they do not have them. If they do not Even if firms have valuable cultures, if those cul-
have these attributes, but are successful in acquir- tures are not rare or imperfectly imitable, they
ing them, then these attributes are not imper- cannot be expected to lead to sustained superior
fectly imitable, and thus cannot be the source of performance. Only if a firm's culture is valuable,
sustained superior performance. If it was possi- rare, and imperfectly imitable will "sticking to
ble to tell a large number of firms how to modify one's knitting" generate sustained superior finan-
their cultures to include economically valuable cial performance.
attributes, then culture would cease to give any
one firm a competitive advantage, and could Conclusion
not be the source of sustained superior perfor-
A firm's culture can be a source of sustainable
mance. Thus, the normative implications of cul-
competitive advantage if that culture is valuable,
ture research are limited to assisting firms that
rare, and imperfectly imitable. The sustained
already possess valuable, rare, and imperfectly
superior performance of firms like IBM, Hewlett-
imitable cultures and culture management skills
Packard, Proctor and Gamble, and McDonald's
in recognizing and nurturing these organiza-
may be, at least partly, a reflection of their
tional characteristics to obtain sustained above
organizational cultures (Peters & Waterman,
normal performance. Such research, and the
1982). Firms with valuable, rare, and imperfectly
consulting it implies, cannot be used to help firms
imitable cultures should nurture these cultures.
without valuable, rare, or imperfectly imitable
Firms without valuable, rare, or imperfectly imi-
cultures or culture management skills to obtain
table cultures cannot expect their cultures to be
such performance, for such efforts are, in princi-
the source of sustained competitive advantages.
ple, imitable.
Nor can such firms expect that efforts to change
their cultures, though they may successfully
Firms with Valuable Cultures
incorporate new valuable attributes, will gener-
From our brief review of findings on organiza- ate sustained superior performance. For such
tional culture, at least some firms have valuable, efforts are typically imitable, and thus, at best,
rare, and imperfectly imitable cultures. For such only the source of temporary superior perfor-

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mance. These firms must look elsewhere if they business strategies (Schwartz & Davis, 1981;
are to find ways to generate expected sustained Tichy, 1983) deny the possibility that culture can
superior financial performance. be a source of sustained superior performance,
The analysis presented here has important while those who argue that culture is not readily
implications for current debates concerning the manipulatable (Smircich, 1983) uphold the possi-
ability to manage a firm's culture to improve fi- bility that culture can be a source of sustained
nancial performance (Smircich, 1983; Tichy, superior financial performance for some firms.
1983). This reasoning suggests that if firms can A firm's culture is one of several attributes that
modify their cultures to improve their financial differentiate firms one from another (Alchian,
performance, then such modifications can, in the 1950; Alchian & Demsetz, 1972). It is in these sus-
long run, only generate normal economic returns. tainable differences between firms that explana-
For if one firm is able to modify its culture, then it tions of sustained superior financial performance
is likely that others can as well. In this case, the must be sought (Chamberlin, 1933). As Demsetz
advantages associated with this culture are (1973, p. 2) once observed, it is often not easy to
imitable, and thus only a source of normal eco- describe what it is about some firms that makes
nomic performance. Only when it is not possible them more successful than others. Precisely
to manage a firm's culture in a planned way because an organization's culture is hard to
does that culture have the potential of generat- describe; because the common sense of manag-
ing expected sustained superior financial perfor- ers is taken for granted; and because even if the
mance. Thus, those who argue that culture is culture can be described, it is difficult to change;
simply another in a series of manipulatable tools a firm's culture can hold promise for sustained
available to managers for the implementation of superior financial performance for some firms.

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Jay B. Barney is Assistant Professor of Management in


the Graduate School of Management, University of
California, Los Angeles.

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