Organizational Culture in China: An Analysis of Culture Dimensions and Culture Types
Anne S. Tsui, Hui Wang 1 and Katherine R. Xin 2
Arizona State University, USA, Hong Kong University of Science and Technology, China,1Peking University, China, and 2China Europe International Business School, China
ABSTRADCT The economic and market reforms in China have given rise to rms withthree distinct types of ownership: state-owned enterprises, private domestic enterprises,and foreign-invested rms. The three studies reported in this paper addressed thequestions of whether organizational culture varies among rms with different ownershipstructures and whether it relates to rm performance or employee attitudes as it hasbeen observed in US rms. The rst study employed an inductive approach to identifyculture dimensions and found ve common dimensions across these different types of rms. In the second study, we derived an empirical taxonomy of four organizationalculture types involving different congurations of the ve organizational culturedimensions, and found a systematic relationship between these culture types and a
measure of perceived rm performance. The third study conrmed the relationshipbetween organizational culture types and middle manager attitudes. Suggestions areoffered for future research building on the organizational culture dimensions and culturetypes introduced in these studies.
KEYWORDS Chinese context, organizational culture, organizational culture conguration,organizational culture type
INTRODUCTION
Organizational culture has long been regarded as a critical means for rms tointegrate internal processes and to adapt to external environmental conditions(Denison and Mishra, 1995; Schein, 1990). In the extant (primarily Western)management literature, it has been well accepted that organizational culture isrelated to important outcomes at both the organizational and individual levels (e.g.,Barney, 1986; Denison and Mishra, 1995; O’Reilly et al., 1991; Sheridan, 1992).The current study analysed organizational culture in China, a context where rms
exist with different ownership structures (Child, 2000; Tsui and Lau, 2002) andcorresponding differences in management systems, style and institutions. The
Management and Organization Review 2:3 345–376doi: 10.1111/j.1740-8784.2006.00050.x
purpose is to explore the nature of organizational culture across these three types of rms and to investigate the relationship between organizational culture and orga-nizational outcomes including rm performance and managerial work attitudes.
Xin et al. (2002) inductively dened the nature of organizational culture in a
sample of Chinese state-owned enterprises (SOEs). Using content analysis of open-ended surveys and two case studies, they discovered ten cultural dimensions thatrelated to the enterprises’ shared values to adapt externally and integrate internally(Schein, 1992). Some of these dimensions are similar to those in Western settings(e.g., O’Reilly et al., 1991), while others are unique to the Chinese context. Thecurrent study builds on this initial work by examining the organizational culture inthe private domestic and foreign-invested rms in mainland China. We conductedthree studies. In the rst study, we followed the same research procedure as that inXin et al. (2002) to dene inductively the nature and dimensions of organizational
culture in private domestic and foreign-invested rms. In the second study, wecompared the differences of the organizational culture in state-owned, privatedomestic and foreign-invested rms [1] using a set of common culture dimensions.We further identied distinct culture types by empirically clustering rms withsimilar congurations of the culture dimensions. We compared the empiricallyderived organizational culture types to the rms’ ownership structures in predicting perceived rm performance. The third study investigated the relationship of orga-nizational culture types to managerial attitudes. The four organizational culturetypes identied in study 2 and study 3 have systematic relationships to both rmperformance (subjectively measured) and middle manager attitudes. In addition,we found that organizational culture types within SOEs are not monolithic.Instead, there exist a variety of culture types among these state rms. This result isconsistent with recent observations of variance in rm structures in state-sectorrms (Meyer et al., 2002).
Overall, the contribution of the current study to the literature is in developing and validating a measure of organizational culture in the Chinese context. Thenew measure is grounded in existing literature but ‘localized’ to ensure local
relevance and validity. The three studies provide some evidence that the functionsof organizational culture for rm performance (albeit subjectively reported) andemployee attitude in rms operating in the Chinese context are similar to thosereported in the extant literature, based on Western rms.
RESEARCH CONTEXT AND CONCEPTUAL BACKGROUND
The transition from a centrally planned to a quasi-market economy has changedthe employment landscape in China. In many state-owned rms, the ‘iron rice
bowl’ is now broken and all workers are on annual contracts (Luk and Chiu, 1998).Merit-based rewards have been introduced, providing workers with the motivationto work harder than in the past because hard work and good results now bring
rewards and career benets. Parallel to these changes in state rms, China iswitnessing an unprecedented growth of private domestic rms, along with a con-tinuing inux of foreign-invested and managed rms. Together, these non-statesector rms (i.e., private domestic and foreign-invested rms) currently produce
nearly two-thirds of the total gross domestic product in China (China StatisticsPress, 2003). These changes have engendered much scholarly interest in describ-ing, explaining and understanding the nature of such corporate transformationsand their effects on rm behaviour and outcomes. Scholars have described themanagement structures, processes and managerial behaviour in state-owned rms(e.g., Boisot and Child, 1996; Liu, 2003; Walder, 1996), joint ventures (Luo, 1995;Peng and Heath, 1996), township enterprises (Luo, 1999) and privately ownedrms (Tsang, 1994; Tsui et al., 2006). The differences observed among these rmswere attributed to a variety of forces, including institutional environment, stage of
development and sources of management practices. With the exception of a fewstudies (e.g., Liu, 2003; Xin et al., 2002), there is a paucity of research on the natureof the organizational culture in these different types of rms. Organizationalculture is considered a means to organizational effectiveness (e.g., Schein, 1992),with empirical evidence supporting an association of rm culture with rm per-formance and employee attitudes (e.g., Cameron and Freeman, 1991; Denison andMishra, 1995). Is organizational culture a channel to organizational effectiveness inthe Chinese context also? The current study aims to provide some answers to thisquestion of interest to both scholars and managers.
Organizational culture is ‘holistic, historically determined, and socially con-structed, and it involves beliefs and behaviour; it exists at a variety of levels, andmanifests itself in a wide range of features of organizational life’ (Detert et al., 2000,p. 854). As a social construct, culture resides in the minds of the participants in asocial system (Ross, 2004). Using the perceptions of managers to report the mostimportant values, beliefs or attributes that described their company’s culture is atypical approach in past studies of organizational culture (e.g., Chatman and Jehn,1994; O’Reilly et al., 1991).
Past studies have attempted to explain the factors that would differentiate thecultures of rms. For example, Chatman and Jehn (1994) found that rms’ cultural values relate to the levels of industry technology and growth. Given the docu-mented differences in the institutional environment both inside and outside differ-ent types of rms in China (Walder, 2000), we also assume that the ownershipstructure of the rm (i.e., state-owned, private or foreign) is an antecedent of organizational culture.
Study 1: Identifying Organizational Culture Dimensions
O’Reilly et al. (1991) developed an organizational culture prole using the Q-sortmethod on 54 value statements obtained through an extensive literature review.
They identied seven dimensions of organizational culture, including innovation,outcome orientation, respect for people, team orientation, stability, aggressivenessand attention to detail. Denison and Mishra (1995) identied three dimensions of culture: adaptability of the organization, mission/goal orientation and employee
involvement and participation. In his extensive study of organizational culture,Hofstede (1991) reported six dimensions: process oriented vs. results oriented,employee oriented vs. job oriented, parochial vs. professional, open system vs.closed system, loose control vs. tight control, and normative vs. pragmatic.However, he did not relate these dimensions to either antecedents or consequencesof organizational culture.
Cheng (1990) examined organizational culture values in Taiwan. His interviewstudy revealed nine cultural dimensions, some being unique to the Taiwanesebusiness context. Comparing his ndings to Peters and Waterman’s (1982) nd-
ings, he considered these to be emic (unique to Taiwan) dimensions: uprightnessand honesty, social responsibility, performance orientation and neighbourhoodharmony. To compare the differences in values between two generations of workers, Liu (2003) developed a framework of cultural values (i.e., harmony,loyalty, bureaucracy, equality and security) based on interviews and surveys.
Schein dened organizational culture as ‘a pattern of basic assumptions that thegroup learned as it solved its problems of external adaptation and internal inte-gration, that has worked well enough to be considered solid and, therefore, to betaught to new members as the correct way to perceive, think, and feel in relationto those problems’ (Schein, 1992, p. 12). In accordance with this denition, valuesthat enhance the organization’s capacity for internal integration and externaladaptation should be useful for the rm, including rms in contexts undergoing restructuring and facing major changes in legal, social and economic institutions,such as those in China. Guided by Schein’s denition, Xin et al. (2002) identiedten attributes of organizational culture in Chinese SOEs. Six dimensions relate tothe internal integration function (employee development, harmony, leadership,pragmatism, employee contribution and fair rewards) and four dimensions to the
external adaptation function (outcome orientation, customer orientation, futureorientation and innovation).While the study by Xin et al. (2002) is informative in terms of organizational
culture in Chinese SOEs, it is unclear whether these dimensions are generalizableto foreign-invested companies and private domestic rms. According to institu-tional theory, in its growth and development, a rm will encounter both formal andinformal constraints (North, 1990; Peng and Heath, 1996). The formal constraintsinclude political rules, economic policies and contracts. Informal constraintsinclude codes of conduct, norms of behaviour and conventions. These constrains
are embedded in the institutional framework of a society. They serve to regulateeconomic activities while providing a stable structure enabling individuals andorganizations to make decisions (North, 1990). Therefore, we expect that different
institutions among the rms of the three types of ownership structures may resultin different corporate governance, leadership style, human resource managementsystem and even organizational culture.
Study 1: Sample and ProcedureParticipants in this study were managers enrolled in the executive MBA pro-gramme at leading Chinese universities in Shanghai and Beijing. Out of a total of 160 students, 89% voluntarily participated in the study ( N = 142). Seventy-nine of them were from private rms, while 63 were from foreign-invested companies. Thecompanies also varied in size (number of employees), developmental stage (estab-lished years) and industry.
We followed the same procedure of data collection and coding process as that inthe Xin et al. (2002) study. The class instructor asked the managers to respond toan open-ended question on a one-page survey. The question was ‘How would youdescribe the organizational culture of your company to other people?’ The man-agers could provide up to ve answers to the question. Afterwards, the instructordebriefed the participants when providing feedback to them on the summaryresults of this survey.
Study 1: Data Coding and Category Identication
Two Ph.D. students studying management sorted the statements. The coding process involved three steps. The rst step was to code the original text into majorthemes (or categories) guided by an initial general theoretical framework. Thesecond step was to identify subcategories in each theme. The third step was toconsolidate items in each subcategory and combine subcategories that might haveredundant or similar meanings.
Step 1: Coding of major categories.The 79 managers who worked for foreign-investedcompanies provided a total of 258 statements and the 63 managers who worked
for private domestic rms gave 350 statements. Using the denition of internalintegration and external adaptation in Schein’s (1992) framework, the two raterssorted the items into two categories consistent with the denitions of these twocultural functions. Agreement on the rst round of coding was 79% for the itemsfrom the managers in the foreign-invested companies and 83% in the privatecompanies. The two raters discussed the items on which they disagreed. After thediscussion, their agreement increased to 98% and 94%. Two authors of this paperreviewed the coding results and discussed the items with disagreements. Items thatcould not be agreed upon were discarded from further analysis.
Step 2: Coding of subcategories.The next step was to identify subcategories for eachmajor category (internal integration or external adaptation). The two raters
independently coded the statements in each major category into ve to eightsubcategories. The agreement in this second round of coding was 76% and 80%for the internal integration items with the data for the foreign-invested companiesand for the private domestic rms, respectively. Agreement was 74% and 81% for
the external adaptation dimensions for the two types of rms. After discussion,the agreement increased to above 90%. This nal result was seven categories of internal integration culture values and ve categories of external adaptation valuesfor the foreign-invested company sample, and seven and six subcategories forinternal integration and external adaptation, respectively, for the data pertaining toprivate rms.
Step 3: Category consolidation.In the third step, we consolidated subcategories toachieve parsimony and to reduce redundancy, using the criteria of frequency of
statements on the dimension and overlap of attributes of culture. After carefulexamination, seven subcategories of culture attributes of internal integrationremained unchanged in both the foreign-invested company and private domesticrm datasets. We consolidated two subcategories of external adaptation for both of the datasets. Table 1 summarizes the most frequently mentioned statements foreach of the subcategories for the foreign-invested companies. Table 2 summarizesthe results for the private domestic rms.
Study 1: Results
As shown in Table 1, for the foreign-invested companies, the dimensions withthe greatest number of statements were harmony for internal integration (42items) and results and quality for external adaptation (33 items). Dimensionswith the least number of statements were shared vision (6 items) for internalintegration and outcome orientation (11 items) for external adaptation. Forthe private rms (Table 2), the dimensions with the most statements wereharmony for internal integration (38 items) and innovation for externaladaptation (33 items). The dimension of shared vision for internal integrationhad nine items. All dimensions for external adaptation had more than 20items each. The common dimensions between these two types of rms (i.e.,private domestic, and foreign-owned and foreign-managed rms) for internalintegration were employee development, harmony, leadership, employeecontribution, shared vision and communication. Standardization was a uniquedimension to foreign companies, and professionalism was a unique dimensionto private companies. For external adaptation, the common dimensions were
customer orientation, outcome orientation, innovation, and results and quality.The dimension of entrepreneurship was unique to the private companysample.
Comparison to Cultural Values in State-owned Enterprises (SOEs)
Finally, we compare results from this study with those by Xin et al. (2002) on theorganizational culture of SOEs. Xin et al. (2002) identied six internal integrationdimensions and four external adaptation dimensions. They are listed in column 1
Table 1. Organizational cultural values in foreign-invested companies
I. Harmony (42 items, 26.6%) I. Results and quality (33 items, 41.2%)
1) Team work 18 1) Efciency 72) Working together 8 2) Results oriented 73) Trust in people 5 3) Standards 64) Helping each other with difculties 5 4) Quality 45) Others 6 5) Others 9
II. Standardization (26 items, 16.5%) II. Customer orientation (20 items, 24.4%)1) Standardization 6 1) Customer orientation 82) Performance evaluation 5 2) Satisfying customer needs 33) Discipline 4 3) Customer number one 24) Others 11 4) Others 7
III. Communication (23 items, 14.6%) III. Innovation (18 items, 22%)1) Effective communication 8 1) Encouraging innovation 122) Information sharing 4 2) Learning 43) Group activities 3 3) Others 24) Others 8
IV. Employee development (22 items,13.9%)
IV. Outcome orientation (11 items,13.4%)
1) Developing employee potential 8 1) Achieving excellence 62) Individual dignity respected 4 2) Serving society 33) Good working environment 4 3) Others 24) Others 6
V. Employee contribution (20 items,12.7%)1) Professional moral standards 92) Responsibility (conscientiousness) 43) Commitment 24) Others 5
of Table 3. Columns 2 and 3 list the culture dimensions for private domestic and
foreign-invested rms, respectively. Four internal integration dimensions arecommon across the three types of organizations: employee development, harmony,leadership and employee contribution. For external adaptation, the common
Table 2. Organizational cultural values in private domestic rms
IV. Professionalism (28 items, 15%) IV. Outcome orientation (26 items, 18.7%)1) Performance-based incentive system 4 1) Caring for development of society 72) Professionalism 5 2) Aiming at high performance 63) Discipline 5 3) Firm growth 34) Regulations 4 4) Others 105) Others 10
V. Employee contribution (24 items,12.8%)V. Customer orientation (25 items,18%)
dimensions are customer orientation, outcome orientation and innovation. Insummary, seven dimensions are common among the three types of organizations.They are employee development, harmony, leadership, employee contribution,customer orientation, outcome orientation and innovation.
Study 2: Identifying Organizational Culture Types or Congurations
In addition to exploring organizational culture dimensions, another importantapproach to the study of organizational culture is identifying organizational culture
types that involve different combinations of a set of culture values. For example,Denison and Mishra (1995) proposed a framework involving four types of organi-zational culture based on two factors: (i) the extent to which the competitiveenvironment requires exibility or stability; and (ii) the extent to which the strategicfocus and strength is internally oriented or externally oriented. The four culturetypes were adaptability, mission, involvement and consistency culture. By adapting the competing values framework (Quinn and Cameron, 1988) Cameron andFreeman (1991) divided 334 institutions into four types of organizational culture.The four types were clan culture, adhocracy culture, hierarchy culture and market
culture. They found that organizational culture types to be more important inaccounting for organizational performance than either the congruence or thestrength of organizational culture.
Table 3. Summary of culture dimensions in different types of organizations
Both Denison and Mishra (1995) and Cameron and Freeman (1991) proposed atheoretical typology based on a set of a priori dimensions. However, it is alsopossible to derive an empirical taxonomy of culture types. The idea of culture typesreects a conguration approach (Meyer et al., 1993) in that an organization’s
culture is a composite of values congured in specic ways derived either theo-retically or empirically. This is an important departure from the dimensionalapproach, which assumes that each dimension of culture inuences outcomesindependently and additively. The congurational approach takes a holistic view.It emphasizes simultaneity and interaction among multiple causes of any out-comes. As argued in Meyer et al. (1993) ‘congurations are characterized bydifferent relationships among their constituent variables’ and ‘congurations add value to organizational science both on an ideational plane and an empirical plane’(p. 1192). A meta-analytic study (Ketchen et al., 1997) denes organizational
congurations as groups of rms sharing a common prole of organizationalcharacteristics (Meyer et al., 1993; Miller et al., 1984). This meta-analytic studyfound organizational congurations to relate to performance partially. Cultureresearchers also share an assumption that different congurations of cultural valuesalso have different performance implications for rms. Cameron and Freeman(1991) provided evidence to support this assumed relationship of culture types andoutcomes.
The second purpose of this study, therefore, is to classify empirically a set of rmsinto clusters that share similar culture proles. Based on the assumption thatownership structure is a major institutional factor that inuences internal organi-zational processes, we would expect the empirical classication of rms based onthe culture dimensions to have some correspondence to the ownership structure of the rms. Below, we elaborate on the logic for why organizational culture patternswould be more similar among rms with the same ownership structure than among rms with different ownership structures.
Organizational Ownership Type and Organizational Culture Values
The fundamental characteristic of a planned economy is the comprehensive useof central economic planning and bureaucratic control. In China, under theCommunist regime, the central government develops a national plan and thenincrementally decomposes it into a set of targets and orders for specic rms. In thiskind of institutional framework, state-owned rms take orders from the planning regime in contrast to being an independent decision-making unit as seen in theWestern setting (Child, 1990). The central plan aims to curb opportunism andallocate resources through bureaucratic control. The state-owned rms in a
planned economy are less concerned with innovation, customers and outcomesthan meeting production quotas or adhering to the ‘plan’, since the governmentprovides technology, resources and market sales and even writes off debts. Even
though many state-owned rms have been ‘privatized’ or expected to be moreefcient since economic reform, the legacy of tradition makes it difcult for thesestate rms to adopt new practices (Ding et al., 2000). Such inertia is not surprising according to institutional theory (DiMaggio and Powell, 1983). Therefore, for
state-owned rms, we expect a low emphasis on external adaptation values such ascustomer orientation and innovation. Internal integration values such as employeedevelopment and harmony may also be low in the state rms due to the changesinduced by corporate restructuring associated with economic reform. Althoughmodern management practices have been introduced into Chinese enterprises,employees’ pay in state rms still is less commensurate with their contributionscompared with their counterparts in the foreign companies (Chen, 1995). Alsobecause of the major restructuring occurring in many state rms along withmassive layoffs (Walder, 2000), employee development is limited and harmony
is disrupted. In general, we expect a lower degree of emphasis on both internalintegration and external adaptation values in state-owned rms, relative to eitherforeign-invested companies or private domestic rms.
Meanwhile, there has been a dramatic increase of privately owned enterprises(including township enterprise) throughout China. Especially since 1997, the gov-ernment has focused on the development of new ownership structures as a keycomponent in the reform of ‘public sector’ enterprises (Child, 2000). In privaterms, owners or managers have the autonomy to control and restructure theirrms (Hsu, 1991). These enterprises have the right to organize their own produc-tion. They also assume responsibility for their own prot and loss, operation systemand management (Luo, 1999; Tsang, 1994). Thus, we would expect the culture of these private rms to be more externally focused, as the market determines theirsuccess. There should be a greater emphasis on external adaptation values relativeto state rms. Due to survival pressures and management systems in these newrms that are less developed, we expect less emphasis on internal integration values, especially relative to foreign-invested rms.
The foreign-invested rms face a highly uncertain environment in China in a
variety of areas. These rms not only have to compete in relatively unknownterrain, they also face changing institutional rules and ambiguous regulations(Child, 2000). Furthermore, they manage a workforce that differs from theirhome countries in many dimensions, including language, education, custom andtradition. Local and expatriate managers also differ in their experiences andperspectives in managing business and in their relationships inside and outsidethe rm. There is an added challenge of internal integration for smooth coor-dination and cooperation in these foreign rms. Therefore, we expect greaterattention to both external adaptation and internal integration values by foreign-
invested rms compared with state rms and a greater emphasis on internalintegration relative to private domestic rms. In summary, we expect the con-guration of organizational culture values to be different for the three types of
rms due to different institutional arrangements and pressures, summarized inthe following hypothesis.
Hypothesis 1a: The organizational culture prole of foreign-owned rms will show equal emphasis on both internal integration and external adaptation values.
Hypothesis 1b: The organizational culture prole of private domestic rms will emphasize more external adaptation than internal integration values.
Hypothesis 1c: The organizational culture prole of state-owned rms will have a low emphasis on both the internal integration and external adaptation values, relative to the two othertypes of rms.
Organizational Culture Type and Firm Outcomes
Based on the logic of Schein’s (1992) two functions of organizational culture, rmsthat emphasize values that relate to both external adaptation and integrationshould enjoy the best outcomes in terms of employee attitudes and rm perfor-mance. Internal integration focuses on establishing a common vision and shared values among employees or units, as well as on developing strong identicationwith the organization. These conditions should elicit strong employee commitmentto the employer. Committed employees in turn should contribute to rm perfor-mance through extraordinary performance. External adaptation focused on being responsive to external constituencies and environmental concerns. This shouldfacilitate rm performance. O’Reilly and Chatman (1996) argued convincinglythat organizational culture can provide high rm performance through gaining thecommitment of employees. Barney (1986) argued that organizational culture canprovide a competitive advantage for the rm through generating intangibleresources that are hard for other rms to imitate.
The results of empirical studies have consistently demonstrated a close relation-ship between organizational culture type and both types of outcomes, that is, rm
performance and employee attitudes. In a study of 334 academic institutions(Cameron and Freeman, 1991), the results showed that the clan culture had thehighest level of effectiveness in terms of employee morale and other human resourcesconcerns. The institutions with the adhocracy culture had good performance inmeeting external expectations and in academic quality. The market culture had thehighest score in the ability to acquire resources from the external environment.Finally, the hierarchy culture received low scores on all nine criteria of effectiveness.Similarly, in Calori and Sarnin’s (1991) study, cultural values and practices areassociated with the growth patterns of rms. Kotter and Heskett (1992) showed that
an adaptive culture relates to a high level of nancial performance of the rm.Gordon and DiTomaso (1992) illustrated the relationship between culture strengthand corporate performance, using an insurance industry sample.
Based on these research ndings, we investigated the generalizability of thelinkage between organizational culture type and organizational outcomes to theChinese context. This also would serve as a validation of our measure of organi-zational culture types. In this validation, the criteria are perceived rm perfor-
mance and middle managers’ attitudes towards the organization. Based on theabove discussion, we propose the following hypothesis.
Hypothesis 2: Organizational culture types will relate to rm outcomes of (a) perceived rm performance and (b) middle managers’ attitudes. Specically, both outcomes will be higher in rms with an organizational culture that emphasizes both internal integration and external adaptation values, relative to culture types with other congurations.
We tested the above two hypotheses in study 2 and study 3. Study 2 identied
the organizational culture types and tested the relationship of organizationalculture types to the rm’s ownership type (H1a to H1c) and a measure of perceivedrm performance (H2a). Study 3 replicated the organizational culture types andtested the relationship of the organizational culture types to the rm’s ownershiptype (H1a to H1c) and to the rm’s middle managers’ attitudes (H2b).
Study 2: Sample and Procedure
A sample of 542 managers taking MBA classes in two universities in a majormetropolis in north China participated in this study. The instructor who wasteaching a management course asked the respondents to complete an anonymoussurvey containing the measures in this study. Participation was voluntary, and thesurvey was completed outside the classroom. Respondents returned the completedsurvey to the instructor. The response rate was 90.3%.
The managers had an average of six years of post high school education, and63.8% of the respondents were male. The average age was 31 (SD = 4.43), andtheir average company tenure was eight years (SD = 4.87). Two hundred and forty
respondents (44.3%) were from state-owned rms, 125 respondents (23.3%) werefrom foreign-invested companies, and 81 respondents (14.9%) were from privaterms. The average rm age was 20 years (SD = 20.11). Ninety-three percent of therespondents held management titles (from rst line to executive level). The rela-tively high organizational level of these participants means that they were in a goodposition to perceive and describe their company’s emphasis on values relating tothe internal integration and external adaptation functions of the rm.
Study 2: Measures
Organizational culture.Study 1 identied seven common culture dimensions,including leadership and employee contribution. Because of the intertwined
relationship between organizational culture and leadership, it is understandablethat respondents reported leadership as a part of organizational culture. To beconsistent with the larger literature and for future theory development, we decidedto exclude leadership as part of the organizational culture. We also excluded the
dimension of employee contribution because it is a consequence of organizationalculture rather than a culture attribute. For each of the ve dimensions retained inthe analysis, we selected ve items that were most frequently mentioned in the itempool in study 1, resulting in a total of 25 items. The respondents indicated on ave-point scale the extent to which the item described the current culture of theirorganizations. The scale ranged from 1 (strongly disagree) to 5 (strongly agree).
Organizational ownership type and rm performance.The respondents indicated whethertheir organizations were state-owned, foreign-invested and managed, or privatedomestic. Due to the heterogeneous nature of the sample, it was not feasible tohave an objective performance measure that applied to all rms (not all the rmswere publicly listed, the companies had different accounting procedures and theywere in different industries). We measured rm performance with a subjective scaleused previously in China (Wang et al., 2003). Items included: (i) prot; (ii) salesgrowth; (iii) market share; (iv) competitive position in the industry; (v) overallamount of sales; (vi) morale of the employees; and (vii) growth of assets.Respondents evaluated their rm’s performance on each item in comparison withits competitors in the same industry. The response scale ranged from 1 (very low)
to 5 (very high). Wang et al. (2003) reported this subjective performance scalecorrelated signicantly with the objective measures of return on asset and return onequity.
Control variables.We controlled for several variables that might inuence ratings of rm performance, such as rm size, rm age and industry (Peng and Luo, 2000;Tan and Litschert, 1994; Wang et al., 2003). We also controlled for therespondent’s age, gender, education, position level and organizational tenureto eliminate any potential individual response bias. Position was measured by
an ordinal scale using ve categories, with 1 representing non-managementemployees, 2 for rst-level supervisors, 3 for middle managers, 4 for seniormanagers and 5 for chief executive ofcers. We identied 15 industries among the542 respondents’ companies but the ANOVA on the perceived rm performancemeasure using industry as the classication variable was non-signicant ( p 0.52).To conserve statistical power, we excluded industry as a control variable insubsequent analyses.
Study 2: Analyses
The 25 items of organizational culture values as well as the seven items for rmperformance were included in a conrmatory factor analysis (CFA). Based on the
modication indices, we deleted one item from each of two dimensions of organi-zational culture. Goodness-of-t indices for the 30 remaining items were accept-able. The c 2 of the model was 1065.54 with 390 degrees of freedom. The RMSEAwas 0.06, NNFI 0.97, CFI 0.97, and IFI 0.97. We compared the current model with
an alternative model with all 30 items specied to load on one factor. The c 2
of thisalternative model was 3108.93 with 405 degrees of freedom. The RMSEA was0.15, NNFI 0.88, CFI 0.89, and IFI 0.89. These results demonstrate that the veorganizational culture values have discriminant validity and that rm performanceand organizational culture are distinct constructs. Based on the items that load onthe factors, we renamed outcome orientation to social responsibility. The range of the loadings for the 30 items is from 0.55 to 0.91. The internal consistent reliabilitycoefcients for the ve dimensions of culture are 0.84, 0.82, 0.84, 0.90 and 0.80,respectively, for employee development, harmony, customer orientation, social
responsibility, and innovation. The coefcient for the rm performance measure is0.85. The factor structure and the loadings for the items are in Appendix I.
A cluster analysis, using the K-means procedure, was performed on the veorganizational culture dimensions. We examined the results of a three-cluster, afour-cluster, and a ve-cluster solution. The four-cluster solution was the mostinterpretable. The dimensions that dened each of the four clusters showed somesimilarity to the typology in Cameron and Freeman’s study (1991) and in Ouchi(1980). Our rst cluster has a high level of cultural values on both internal inte-gration and external adaptation values. This is similar to the ‘clan’ culture in theCameron and Freeman (1991) study. Our fourth cluster has low scores on allcultural values. It is similar to Cameron and Freeman’s hierarchy culture, which ishigh on rules, policies and formal procedures and, by implication, low on cultural values. The third cluster from our study is similar to their market culture, describedby Ouchi (1980). Based on these comparisons, we adapted these labels for our fourempirical clusters. Instead of the term ‘clan’, which implies an internal focus(Ouchi, 1980), we use the term highly integrative culture to describe a cultureprole characterized by high scores on both internal integration and external
adaptation (i.e., all ve cultural values). The market oriented culture describes theorganizations that emphasize customer orientation more than any other cultural value. The moderately integrative culture shows average scores on all ve culturedimensions. Lastly, the hierarchy culture is found in organizations that have a lowlevel on all cultural values.
We conducted an ANOVA using the four culture clusters as a grouping variableto ensure that there is within-cluster homogeneity and between-cluster heteroge-neity on the ve cultural dimensions. We included rm age and rm size to provideadditional information on the prole of rms with different organizational culture
proles.To test H1a to H1c, we compared the four culture clusters across the three types
of rm ownership structure using a c 2-test. To test H2a, we used regression analysis
using dummy variables for the organization culture type as the independent vari-able and perceived rm performance as the dependent variable.
Study 2: Results
The results of the ANOVA on the ve cultural values across the four culture typesare shown in Table 4. The results indicate that the four culture types differ on allof the cultural values. Of the 30 pair-wise comparisons (ve dimensions across fourtypes), only two means (between market oriented and moderate integrative type inthe dimension of innovation) are not signicantly different. The four culture typesdiffer in rm age but there is no systematic pattern between rm size and culturetype. The results on rm age suggest that rms with either the highly integrative orthe market oriented culture are younger than the rms with either the moderately
integrative or the hierarchy culture.To test hypothesis 1a (H1a) to hypothesis 1c (H1c), we compared the different
distribution of culture types across the three types of ownership structures witha c 2-test. The signicant c 2 (62.74, p 0.001) suggests that the distribution of organizational culture types under each ownership structures is different. Theinformation in Table 4 suggests partial support for H1a to H1c. Consistent withH1a and H1b, most of the private domestic (48%) and foreign-invested (46%) rmswere classied into the highly integrative culture type, emphasizing both internalintegration and external adaptation values. Also consistent with H1c, more of thestate-owned rm showed a hierarchy culture (27%), relative to the foreign (7%) andprivate rms (10%). Contrary to H1a and H1c, the private rms did not placemore emphasis on external adaptation values (i.e., market oriented culture type)than the state owned rm. The state-owned rms appeared to distribute equallyacross the four culture types, with 21% with the highly integrative culture type,22% with the market oriented culture type, approximately 30% with a moderatelyintegrative culture type.
Results for H2a on the relationship between culture type and subjective rm
performance are summarized in Table 5. We used three dummy codes to representthe four culture types, the hierarchy culture being the omitted category. We alsocompared the effect of culture type to rm’s ownership type for rm performance.To avoid the order-of-entry effect of ownership and culture type, we used twoapproaches. In the rst approach, we entered ownership before culture types in theregression. In the second, the culture type variable was entered prior to rmownership. The results of both approaches are listed in Table 5 and they areconsistent. Culture type predicted rm performance much more signicantly thanthe rm’s ownership type. Specically, the beta coefcients suggest that the rating
of rm performance is the highest under the highly Integrative culture relativeto the other culture types, followed by rms with the moderately Integrativeand the market Oriented cultures. In addition, after the culture-type variables
T a b l e 4 . O r g a n i z a t i o n a l c u l t u r e v a l u e s a n
d r m o w n e r s h i p u n d e r
d i f f e r e n t o r g a n i z a t i o n a l c u l t u r e t y p e s
V a r i a b l e s
H i g h l y i n t e g r a t i v e c u l t u r e
M a r k e t o r i e n t e d c u l t u r e
M o d e r a t e l y i n t e g r a t i v e c u l t u r e
H i e r a r c h y c u l t u r e
F - t e s t
M e a n
S D
N
M e a n
S D
N
M e a n
S D
N
M e a n
S D
N
O r g a n i z a t i o n a l c u l t u r e d i m e n s i o n s
E m p l o y e e
d e v e l o p m e n t
3 . 7 2 a b c
0 . 4 6 1 7 9
2 . 6 3 d e
0 . 5 4 1 1 5
2 . 9 2 f
0 . 4 7
1 5 1
2 . 0 4
0 . 5 2
9 7 3 0 1 . 4 3 * * *
H a r m o n y
3 . 8 9 a b c
0 . 4 5 1 7 9
2 . 8 9 d e
0 . 6 1 1 1 5
3 . 1 2 f
0 . 5 3
1 5 1
2 . 1 0
0 . 4 9
9 7 2 8 0 . 4 2 * * *
C u s t o m e r o r i e n t a t i o n
4 . 2 5 a b c
0 . 4 8 1 7 9
4 . 0 4 d e
0 . 5 1 1 1 5
3 . 1 7 f
0 . 5 3
1 5 1
2 . 5 6
0 . 6 2
9 7 2 6 4 . 0 8 * * *
S o c i a l r e s p o n s i b i l i t y
3 . 7 1 a b c
0 . 5 8 1 7 9
2 . 4 9 d e
0 . 5 5 1 1 5
3 . 3 4 f
0 . 5 1
1 5 1
2 . 1 2
0 . 5 8
9 7 2 2 0 . 3 4 * * *
I n n o v a t i o n
4 . 0 3 a b c
0 . 5 3 1 7 9
3 . 1 5 e
0 . 6 0 1 1 5
3 . 3 3 f
0 . 6 1
1 5 1
2 . 3 1
0 . 6 4
9 7 1 8 2 . 1 0 * * *
F i r m a g e
1 4 . 6 b c
1 8 . 7
1 7 9
1 8 . 7 d
1 8 . 0
1 1 5
2 5 . 1
2 2 . 9
1 5 1
2 0 . 7
1 8 . 5
9 7
7 . 1 4 * * *
F i r m s i z e
1 3 7 6 . 9
2 5 3 3 . 1
1 7 9 1 3 6 2 . 8
2 5 6 1 . 6
1 1 5 1 7 9 2 . 6
2 9 3 6 . 9
1 5 1
1 7 2 8 . 7
2 9 6 1 . 8
9 7
0 . 8 6 7
O r g a n i z a t i o n a l o w n e r s h i p t y p e
N
%
N
%
N
%
N
%
T o t a l
S t a t e - o w n e d e n t e r p r i s e s
5 0
2 1
5 3
2 2
7 2
3 0
6 5
2 7
2 4 0
F o r e i g n - i n v e s t e d r m s
5 7
4 6
3 3
2 6
2 6
2 1
9
7
1 2 5
P r i v a t e d o m e s t i c r m s
3 9
4 8
1 6
2 0
1 8
2 2
8
1 0
8 1
N o t e s : * * * p 0 . 0 0 1 .
a D i f f e r e n c e b e t w e e n h i g h l y i n t e g r a t i v e c u l t u r e a n d m a r k e t o r i e n t e d c u l t u r e i s s i g n i c a n t .
b D i f f e r e n c e b e t w e e n h i g h l y i n t e g r a t i v e c u l t u r e a n d m o d e r a t e l y i n t e g r a t i v e c u l t u r e i s s i g n i c a n t .
c D i f f e r e n c e b e t w e e n h i g h l y i n t e g r a t i v e c u l t u r e a n d h i e r a r c h y c u l t u r e i s s i g n i c a n t .
d D i f f e r e n c e b e t w e e n m a r k e t o r i e n t e d c u l t u r e a n d m o d e r a t e l y i n t e g r a t i v e c u l t u r e i s s i g n i c a n t .
e D i f f e r e n c e b e t w e e n m a r k e t o r i e n t e d c u l t u r e a n d h i e r a r c h y c u l t u r e i s s i g n i c a n t .
fD
i f f e r e n c e b e t w e e n m o d e r a t e l y i n t e g r a t i v e c u l t u r e a n d h i e r a r c h y c u l t u r e i s s i g n i c a n t .
were entered into the regression, the ownership variables became essentiallynon-signicant.
Study 2: Summary
The results from study 2 provided partial support for H1a to H1c in that both theforeign and the private domestic rms have organizational cultures that emphasize
Table 5. Regression results of rm ownership, organizational culture type, and rm performance
Adjusted R-square - 0.003 0.03 0.26 - 0.003 0.23 0.26Overall F of model 0.86 1.97** 9.24*** 0.86 10.74*** 9.24***Standard error 0.75 0.74 0.65 0.75 0.66 0.65Degrees of freedom 7, 324 9, 322 12, 319 7, 324 10, 321 12, 319
Notes: State-owned rms and hierarchy culture are the omitted categories.* p 0.10; ** p 0.05; *** p 0.01. Approach 1: Control variables rst, followed by rm ownership, then organizational culture type. Approach 2: Control variables rst, followed by organizational culture type, then rm ownership.
both internal integration and external adaptation values. More state-owned rmshave a hierarchy culture, relative to the two other types of rms. However, ingeneral, state rms do not have a systematic pattern in terms of organizationalculture type. All four types were found among these rms. Study 2 supported H2a
in that rms with the highly integrative culture were associated with a higher levelof perceived rm performance.
Study 3: Organizational Culture Types and Employees’ Attitudes
There areseveral limitations in study 2. First, there is only one respondent from eachcompany. Since organizational culture is dened as ‘shared values’ (O’Reilly et al.,1991), we should have multiple employees from each company to describe theirorganization’s culture. Scholars agreed that shared understandings on a rm’s values might facilitate organizational survival. As argued by Selznick (1957), shared values maintain an organization as a bounded unit and provide it with a distinctidentity.Agreement among multiple organizational members would provide a moreaccurate measure of the rm’s culture. Secondly, only perceived rm performancewas used as a criterion variable. As discussed earlier, organizational culture shouldalso have implications for employee attitudes (O’Reilly and Chatman, 1996; Schein,1992). In fact, it has been argued that organizational culture inuences rmoutcomes by building strong employee commitment to the rm (O’Reilly and
Chatman, 1996). A rm with a strong integrated culture will make it easier for itsemployees to conform with the requirements and express a higher level of commit-ment to the organization than employees in a hierarchy culture due to shared valuesamong themselves. We expected that employees would express the strongest com-mitment, the highest level of perceived organizational support, and the strongestintent to stay in rms with a highly integrative culturerelative to the other three typesof culture (H2b). In study 3, we re-tested H1a to H1c on the relationship betweenorganizational culture and the ownership structure of the rm. Lastly, we collecteddata from multiple respondents from each rm to obtain a more valid measure of rm culture and avoid the common method variance problem.
Study 3: Sample and Procedure
The sample consisted of 739 middle managers in 105 rms. Students (most of whom were top managers) in an executive MBA class in a large city in easternChina were invited to participate in an organizational culture study. Each studentwas asked to invite six to eight middle managers in his or her company to complete
a questionnaire. The questionnaire included items measuring organizationalculture and the respondent’s attitude variables. A self-addressed, return envelopewas provided for each participant to mail the questionnaire directly to the
researcher at the university. An average of six middle managers from each rmreturned the questionnaires, for an 83.9% response rate of the original sample.
The average age of the middle managers was 33.7 (SD = 7.49 years) with anaverage of four years’ education after high school (SD = 2.64 years). They had ve
years of company tenure on average (SD = 5.81 years), and 483 of the middlemanagers in the sample (65.4%) were male. The middle managers’ companieswere in different industries, including telecommunications, information technol-ogy, chemical and pharmacy, banking and investing, manufacturing, real estate,trade and commerce, and service.
Study 3: Measures
Organizational culture.The 23-item organizational culture measure developed instudy 2 was used. The middle managers indicated on a ve-point scale the extentto which the item described the current culture of their organizations. The scaleranged from 1 (strongly disagree) to 5 (strongly agree). We conducted CFA on the23 items loading on the ve culture dimensions. Goodness-of-t indices wereacceptable. The c 2 of the model was 884.41 with 220 degrees of freedom. TheRMSEA was 0.07, NNFI 0.90, CFI 0.91, and IFI 0.92. We performed CFA on analternative model with all 23 items loading on a single factor. The c 2 of thealternative model was 1562.31 with 230 degrees of freedom. The RMSEA was0.12, NNFI 0.86, CFI 0.87, and IFI 0.87.
Employee attitudes.We used three attitude measures that focus on attitudes towardthe organization rather than the job or the supervisors. These are perceivedorganizational support, organizational commitment, and intent to stay with theorganization. All three measures have been used in prior studies using Chinesesamples. Nine items measured perceived organizational support (Eisenberger et al.,1997). The coefcient a in this study was 0.87. Chen et al. (2005) used it in a studyin Chinese organizations and reported an alpha of 0.91. Organizationalcommitment was measured by the scale developed by Mowday et al. (1982) and
has been used in a Chinese study (Chen et al., 2002). They used nine items andexcluded items with reverse wording. The coefcient a for this measure in thissample is 0.88. Intention to stay was measured using a four-item ‘Intent to Quit’scale developed by Bluedorn (1982) and later adapted by Wang et al. (2002). Thecoefcient a for this sample is 0.86.
All three attitude items were measured by a ve-point Likert scale ranging from1 (strongly disagree) to 5 (strongly agree). In order to conrm their structures, andespecially the distinction of these constructs from organizational culture, weconducted a CFA on all of the items of attitude and culture measures. The model
with the three factors of employee attitudes and the ve factors of culturedimensions showed good t with our data, with a c 2 value of 3108.43 with 874degrees of freedom. The RMSEA was 0.05, NNFI 0.98, CFI 0.98, and IFI 0.98.
To avoid common method variance bias, we used a split sample procedure(Ostroff et al., 2002). Prior to this procedure, we rst assessed within-groupagreement and intraclass correlations (R wg , ICC 1, and ICC 2 ) to evaluate the viability of aggregating individual-level variables to the rm level ( James et al.,
1984; Ostroff, 1992). The mean R wg values for the ve culture and the threeattitude measures across the 105 rms is 0.86, and the range is 0.30 to 1.00 (onlysix companies have an R wg of less than 0.50), indicating that intrarm varianceswere small. The values of ICC 1 for organizational culture and attitude variablesrange from 0.12 to 0.40 with an average of 0.26. The ICC 2 values range between0.54 and 0.82 with an average of 0.72. Overall, these results conrmed a high levelof agreement among the multiple respondents of the same company on thesemeasures, justifying the use of the split sample procedure. We then used the datafrom one-half of the managers in each company to compute the culture value
scores and the other half to compute the attitude scores. The managers’ scores wereaggregated to the rm level since the level of analysis for this study is at the rmlevel.
Control variables.Similar to study 2, we included several control variables that mayinuence employee attitude. Firm size was measured by the total number of employees in the company. Firm age was years since founding. Industry wasmeasured by categorical variables, and dummy codes were used. Similar to study2, we rst conducted an ANOVA on each of the managerial attitude measures
using industry as the classication variable, and did not nd a signicant F value(p 0.43). Industry was excluded as a control variable to conserve statisticalpower. In the analysis, we controlled the respondents’ average age, educationallevel, organizational tenure (measured in years), and gender (percent females).
Study 3: Analysis and Results
The rst step of the analysis was to replicate the four-cluster solution in study 2.
The cluster analysis, using the K-means procedure on the ve organizationalculture dimensions conrmed the four-cluster solution, which was the most inter-pretable. The means of each dimension of cultural values for each of the fourclusters as well as rm size and rm age are summarized in Table 6, along with the ANOVA test for each cultural value.
The results in Table 6 show that the four culture types differ on all of the cultural values. This is consistent with those in study 2. We found only ve means among the 30 pair-wise comparisons (ve dimensions across four types) that were notsignicantly different between any two clusters. The highly integrative culture has
high scores on all value dimensions. The market oriented culture has high scores oncustomer orientation but average on other values. The moderately integrativeculture has a similar level of emphasis on customer orientation but higher levels of
T a b l e 6 . O r g a n i z a t i o n a l c u l t u r e v a l u e s u n
d e r d i f f e r e n t o r g a n i z a t i o n a l c u l t u r e t y p e s
V a r i a b l e
H i g h l y i n t e g r a t i v e c u l t u r e
M a r k e t o r i e n t e d c u l t u r e
M o d e r a t e l y i n t e g r a t i v e c u l t u r e
H i e r a r c h y c u l t u r e
F - t e s t
M e a n
S D
N
M e a n
S D
N
M e a n
S D
N
M e a n
S D
N
O r g a n i z a t i o n a l c u l t u r e d i m e n s i o n s
E m p l o y e e
d e v e l o p m e n t
4 . 1 1 a b c
0 . 2 9
1 4
3 . 5 1 d e
0 . 2 1
3 4
3 . 8 8 f
0 . 1 7
3 0
3 . 1 5
0 . 3 0
2 7
7 1 . 4 3 *
H a r m o n y
4 . 2 2 a c
0 . 4 0
1 4
3 . 7 4 d e
0 . 2 2
3 4
4 . 1 2 f
0 . 2 1
3 0
3 . 3 2
0 . 3 0
2 7
5 5 . 7 8 *
C u s t o m e r o r i e n t a t i o n
4 . 5 1 a b c
0 . 2 8
1 4
4 . 2 2 e
0 . 2 4
3 4
4 . 2 2 f
0 . 2 6
3 0
3 . 5 5
0 . 3 2
2 7
5 0 . 2 2 *
S o c i a l r e s p o n s i b i l i t y
4 . 2 0 a b c
0 . 3 1
1 4
3 . 5 0 d e
0 . 2 4
3 4
3 . 7 6 f
0 . 3 3
3 0
3 . 2 3
0 . 3 2
2 7
3 7 . 5 6 *
I n n o v a t i o n
4 . 4 6 a b c
0 . 1 9
1 4
3 . 6 8
0 . 2 8
3 4
3 . 7 9
0 . 3 3
3 0
3 . 6 8
0 . 3 6
2 7
2 1 . 9 1 *
F i r m a g e
1 5 . 8 9
2 0 . 6 6
1 4
1 0 . 7 5
9 . 7 4
3 4
1 5 . 3 8
2 2 . 3 9
3 0
2 2 . 2 3
2 7 . 7 7
2 7
6 . 8 9 *
F i r m s i z e
2 1 6 3 . 5 0
4 7 6 4 . 0 7
1 4
4 2 1 0 . 5 0
1 0 9 5 . 2 3
3 4
5 0 6 7 . 9 0
2 0 0 9 . 7 9
3 0
7 9 3 8 . 0 4
3 1 1 2 . 7 4
2 6
2 1 . 6 8 *
O r g a n i z a t i o n a l o w n e r s h i p t y p e
N
%
N
%
N
%
N
%
T o t a l
S t a t e - o w n e d e n t e r p r i s e s
8
2 2
8
2 2
1 2
3 2
9
2 4
3 7
F o r e i g n - i n v e s t e d
r m s
1
3
1 4
4 2
1 1
3 3
7
2 1
3 3
P r i v a t e d o m e s t i c r m s
5
1 4
1 2
3 4
7
2 0
1 1
3 1
3 5
N o t e s : * p 0 . 0 0 1 .
a D i f f e r e n c e b e t w e e n h i g h l y i n t e g r a t i v e c u l t u r e a n d m a r k e t o r i e n t e d c u l t u r e i s s i g n i c a n t .
b D i f f e r e n c e b e t w e e n h i g h l y i n t e g r a t i v e c u l t u r e a n d m o d e r a t e l y i n t e g r a t i v e c u l t u r e i s s i g n i c a n t .
c D i f f e r e n c e b e t w e e n h i g h l y i n t e g r a t i v e c u l t u r e a n d h i e r a r c h y c u l t u r e i s s i g n i c a n t .
d D i f f e r e n c e b e t w e e n m a r k e t o r i e n t e d c u l t u r e a n d m o d e r a t e l y i n t e g r a t i v e c u l t u r e i s s i g n i c a n t .
e D i f f e r e n c e b e t w e e n m a r k e t o r i e n t e d c u l t u r e a n d h i e r a r c h y c u l t u r e i s s i g n i c a n t .
fD
i f f e r e n c e b e t w e e n m o d e r a t e l y i n t e g r a t i v e c u l t u r e a n d h i e r a r c h y c u l t u r e i s s i g n i c a n t .
emphasis on other values than the market oriented culture. The hierarchy culturehas low scores on all the culture values except innovation, which is not differentfrom the market oriented or moderately integrative cultures. Only the highlyintegrative culture has a higher level of innovation score than the other three types.
The distribution of ownership structure across culture types is somewhat differ-ent from that of study 2. The majority of the foreign rms have the market orientedor the moderately integrative culture rather than the highly integrative culture,which has only one foreign rm. Consistent with H1a, more of the private domesticrms (34%) than the state rms (22%) have a market oriented culture. Similar tostudy 2 but inconsistent with H1c, about a quarter of the state-owned rms wereclassied into each of the four culture types. The c 2-test yielded a c 2 value of 11.08(p 0.09). In general, these results provide weak support for H1a to H1c, sug-gesting no systematic pattern between organizational culture type and the rm’s
ownership structure.To compare the relationship of organizational culture type to managerial atti-
tudes (H2b), we conducted hierarchical regression analyses following the sameprocedure as in study 2. Given the small effect size of the ownership structure variable in study 2, we did not perform the reverse entry procedure. We used thesame dummy code approach to test the relative effects of culture types as in study2. The results are in Table 7 and they show that managerial attitudes relate morestrongly to the organizational culture types than to the ownership type of the rm. After the culture type variables were entered into the regression, the ownership variables explained no additional variance in managerial attitude. Culture typepredicted attitudes signicantly (R 2 change = 0.31, 0.27, and 0.11, for perceivedorganizational support, organizational commitment and intention to quit, respec-tively). Managerial attitudes in the rms with all three types of culture weresignicantly higher than that in rms with a hierarchy culture. Employees in rmswith the highly integrative culture and moderately integrative culture showed thehighest level of perceived organizational support and commitment to the organi-zation, and the lowest level of intention to quit. As a cross-validation, we also
performed the same analyses by reversing the independent and dependent vari-ables of the two subsamples. The pattern of results was highly similar to that inTable 7. H2b is fully supported in this study.
SUMMARY AND GENERAL DISCUSSION
In this study, we rst inductively explored the organizational culture values inforeign-invested companies and private domestic rms. Using ve common dimen-sions among the state-owned, foreign-invested and private domestic rms, we
identied four congurations of culture proles. Based on the average scores of theve culture values as described by the managers, and comparing with existing culture models (Cameron and Freeman, 1991; Ouchi, 1980; Ouchi and Wilkins,
T a b l e 7 . R e g r e s s i o n r e s u l t s o f r m o w n e r s h i p , o r g a n i z a t i o n a l c u l t u r e t y p e , a n d e m p l o y e e a t t i t u d e
V a r i a b l e s
P e r c e i v e d o r g a n i z a t i o n a l s u p p o r t
O r g a n i z a t i o n a l c o m m i t m e n t
I n t e n t i o n t o q u i t
M o d e l 1
M o d e l 2
M o d e l 3
M o d e l 1
M o d e l 2
M o d e l 3
M o d e l 1
M o d e l 2
M o d e l 3
S t e p 1
C o n t r o l v a r i a b l e s
F i r m s i z e
- 0 . 1 1
- 0 . 1 0
0 . 0 0
- 0 . 0 2
- 0 . 0 3
0 . 0 5
0 . 1 0
0 . 0 5
0 . 0 1
F i r m a g e
0 . 0 0
- 0 . 0 1
- 0 . 0 2
0 . 0 2
0 . 0 2
0 . 0 4
0 . 0 0
- 0 . 1 4
- 0 . 0 4
R e s p o n d e n t s ’ a g e
0 . 0 7
0 . 0 2
0 . 0 0
- 0 . 0 3
- 0 . 0 8
- 0 . 0 9
0 . 0 6
0 . 1 2
0 . 1 3
R e s p o n d e n t s ’ g e n d e r
0 . 0 2
0 . 0 2
0 . 0 2
- 0 . 0 2
- 0 . 0 0
- 0 . 0 2
0 . 0 2
0 . 0 4
0 . 0 7
R e s p o n d e n t s ’ e d u c a t i o n
0 . 0 9
0 . 0 6
0 . 0 3
0 . 1 7
0 . 1 5
0 . 1 0
- 0 . 0 2
0 . 0 4
0 . 0 8
R e s p o n d e n t s ’ t e n u r e
0 . 0 6
0 . 0 0
- 0 . 0 2
0 . 0 9
0 . 0 3
- 0 . 0 0
- 0 . 1 5
- 0 . 0 4
0 . 0 1
C h a n g e i n R - s q u a r e
0 . 0 2
0 . 0 3
0 . 0 2
S t e p 2
F o r e i g n
c o m p a n i e s
0 . 1 6
0 . 2 0 *
0 . 2 5 *
0 . 1 5
- 0 . 1 4
- 0 . 2 1 *
P r i v a t e r m s
- 0 . 0 7
0 . 0 0
0 . 0 1
0 . 0 7
0 . 2 7 * *
0 . 2 2 * *
C h a n g e i n R - s q u a r e
0 . 0 4
0 . 0 9
0 . 1 4
S t e p 3
H i g h l y I n t e g r a t i v e c u l t u r e
0 . 5 5 * * *
0 . 5 8 * * *
- 0 . 4 3 * * *
M a r k e t O r i e n t e d c u l t u r e
0 . 1 5 *
0 . 3 0 * * *
- 0 . 3 6 * * *
M o d e r a t e l y I n t e g r a t i v e
c u l t u r e
0 . 5 7 * * *
0 . 6 7 * * *
- 0 . 5 4 * * *
C h a n g e i n R - s q u a r e
0 . 3 6 * * *
0 . 4 1 * * *
0 . 2 3 * * *
A d j u s t e d R - s q u a r e
0 . 3 4
0 . 4 2
0 . 2 8
O v e r a l l F o f m o d e l
5 . 3 5 * * *
7 . 3 6 * * *
4 . 3 4 * * *
S t a n d a r d e r r o r
0 . 3 3
0 . 2 8
0 . 2 7
D e g r e e s o f f r e e d o m
1 2 , 9 5
1 2 , 9 5
1 2 , 9 5
N o t e s : * p 0 . 1 0 ; * * p 0 . 0 5 ; * * * p 0 . 0 1 .
S t a t e - o w n e d r m s a n d h i e r a r c h y c u l t u r e a r e t h e o m i t t e d c a t e g o r i e s .
1985), these four culture types were labelled ‘highly integrative’ culture, ‘marketoriented’ culture, ‘moderately integrative’ culture, and ‘hierarchy’ culture. Thefour culture types were found in all kinds of rms, even though they were moreevenly distributed in the state-owned rms. Furthermore, the outcomes of per-
ceived rm performance and managerial attitudes were more systematically asso-ciated with the empirically derived organizational culture types than with the rm’sownership structure.
The ve culture values that congure the four culture types relate to bothinternal integration and external adaptation functions of the rm. A company witha highly integrative culture devotes equally high levels of attention to employeedevelopment and harmony, which facilitates internal integration and a customerorientation, social responsibility and innovation, which are important for externaladaptation. This model of organizational culture is consistent with the framework
proposed by Schein (1992). Organizations that place a high emphasis on the valuesthat contribute to these two functions are more effective in terms of managers’perception of rm performance and organizational support, as well as commitmentto the organization.
Our inductive study, along with the ndings by Xin et al. (2002), also revealssome unique cultural values among rms with different ownership structures. Forexample, as state-owned rms transitioned from planned bureaucracy to self-managing units to compete in the market economy, they needed to be moreforwards looking than they did in the past. Future orientation emerged as arelevant dimension of these rms’ cultures. Many private rms were family owned.Managing the transition from a family-owned rm to a professional rm was amajor challenge (Tsang, 1994). Professionalism, along with entrepreneurship,emerged as a meaningful cultural value for these rms. For both private domesticand foreign-invested rms, which share some characteristics with Western rms,shared vision and communication were relevant dimensions of their companycultures. We included only the ve common dimensions in our validation study of the culture measure to ensure that all the values are meaningful for all the rms and
for a preliminary test of differences across different types of rms. Future studiescould include these additional values to examine other substantive issues. A most interesting nding is that state-owned rms did not demonstrate a
monolithic organizational culture. Instead, both samples of state rms in the twostudies displayed a uniform distribution across the four types of organizationalculture. This pattern suggests that ownership may not be a meaningful variablein analysing Chinese rms, especially those that are state owned. Future studiesshould focus on the rms’ dening characteristics, such as culture, rather thanownership structure.
We used cluster analysis on ve cultural values to identify an empirical tax-onomy of organizational culture types. This taxonomy seems to correspond wellto several theoretical typologies of organizational culture advanced by earlier
researchers (e.g., Cameron and Freeman, 1991; Deal and Kennedy, 1982; Kotterand Heskett, 1992; Ouchi, 1980). For example, the merit of a highly integrativeculture and the weakness of a hierarchy culture have been discussed by Deal andKennedy (1982). Kotter and Heskett (1992) described the high adaptive culture,
which has a strong emphasis on being responsive to customers, stockholders andemployees. The performance of organizations with a market oriented culture,however, can only be second to organizations with a highly integrative culture,because such rms do not pay equal attention to internal integration values. Thesecongurations were replicated in two different samples, increasing our condencethat the empirically derived typology of organizational culture appears to be validand stable, at least for rms operating in the Chinese context.
Directions for Future Research
Most scholars would not argue that organizational culture is a source of competi-tive advantage for rms (Barney, 1986; Kotter and Heskett, 1992; Schein, 1992).The ndings of the current studies offer concurring evidence in China. The nextstage of theoretical development is to understand the sources of its variation, thatis, its antecedents. What forces may inuence the development of an integrativeculture? What is the role of leadership? According to Schein (1992), the essence of executive leadership is the development and maintenance of an organizationalculture. If organizational culture is leader dependent, can an organization sustainan integrative culture over the long term? Can culture, or at least some dimensionsof culture, be institutionalized so that it can withstand the test of time and changein leadership? Do the factors and processes that inuence culture developmentdiffer between the Chinese domestic and the foreign-invested and foreign-managed rms?
Study 2 showed that about 21% of state-owned rms were described by theiremployees as having a highly integrative culture. Additional analyses found thatthe average age of state rms with a highly integrative culture was 22 years and
signicantly younger than the state rms with a hierarchy culture, which was about36 years. The average age of hierarchy culture rms in the entire sample was only21 years in study 2 and 23 years in study 3. Future studies should explore how some20-year-old state-owned rms were able to develop a highly integrative culturewhile other state-owned rms could not. Why were some rms able to shed thelegacy of tradition and change while others could not?
The cluster analytic approach identied rms with different forms of culture.Future studies could examine outcomes of different culture forms. What are thecomparative advantages of a highly integrative culture relative to a culture that
places more emphasis on customers than employees? Presumably, an integrativeculture requires intense attention and investment by the leader and the rm.Is there efciency to be gained with a market oriented culture? The third study
provided preliminary insight into possible employee attitudinal responses to differ-ent types of organizational culture. These ndings are consistent with the theory of organizational culture developed in the West (O’Reilly and Chatman, 1996) that amajor outcome of culture is employee commitment. The results of the two studies
in combination offer evidence that is consistent with organizational culture theoriesand studies in the extant literature based on a Western sample. Perhaps thefunctions of organizational culture transcend the boundaries of societal culture.This could be an interesting avenue for future theory development and empiricalresearch.
Limitations
We acknowledge several limitations of this study. First, we used subjective reports
of managers to describe organizational culture. Future studies should use objectiveindicators of culture such as stories, myths, rites and slogans from differentrms. Until a better methodology is available to provide global measures of arm’s culture, managers’ subjective descriptions may be an acceptable approach(Chatman and Jehn, 1994; O’Reilly et al., 1991). The second limitation is that thecommon method or attribution biases may account for the association betweenorganizational culture, perceived rm performance, and employee attitudes. Itcould be that respondents from high-performing rms and ‘happy’ employees (forother reasons) reported higher scores on cultural values. Although we could notrule out the possibility of reverse causality or attribution biases among culture,performance and attitudes, by using cluster analysis and the split sample approachin study 3, we avoided directly correlating scores on culture with scores on perfor-mance or attitudes.
The third limitation is that we could not rule out the possible reverse causalityfrom rm performance and employee attitudes to organizational culture types. Alongitudinal study will be necessary to explore the linkage between organizationalculture type and rm outcomes. The last limitation is that we only used the
common culture values among the three types of rms. The dimension of ‘entre-preneurship’ is very important to privately owned rms, but we did not include itin the common culture values. Future studies on private rms might include theseadditional values in deriving a comprehensive cultural prole and analysing theeffects of these proles on performance or survival outcomes.
Managerial Implications
The major implication of our study for managers is that an emphasis on any
cultural values would be better than no emphasis at all as represented bythe hierarchy culture. However, an emphasis on all ve cultural values may pro-duce the best results in terms of potential managerial commitment and rm
performance. Developing and sustaining culture takes dedication and persistence.The results of the current study suggest that attention to organisational culture maybe a worthwhile focus to motivate employees and develop effective rms.
CONCLUSION
In this study, we began with the assumption that organizational culture is ameaningful phenomenon in transition economies such as China, as it is in thedeveloped Western context. Through one inductive and two survey studies, weidentied a set of cultural values and an empirical taxonomy of four culture typesthat seem to correspond to previous theoretical typologies of organizational culturein the extant (Western) literature. Similar to theorization as well as empiricalevidence from the studies in the Western samples, we found a functional relation-ship between organizational culture types and the organizational outcomes of perceived rm performance and managerial attitudes. Finally, beyond providing some insight into the nature of organizational culture in the Chinese context, thestudy also offers a research approach and a measure that could be used to guidefuture studies on organizational culture inside China as well as comparative analy-sis of organizational culture across national contexts.
NOTES
This research is supported by a grant from the Hong Kong Research Grants Council (RGC numberHKUST6218/00H) and a China Business and Management Area of Excellence grant from theHong Kong University of Science and Technology.[1] Foreign-invested rms include Sino-foreign joint ventures and wholly owned subsidiaries of
foreign multinational rms.
APPENDIX I
Conrmatory Factor Analysis on Items for Organizational Culture Values and Firm Performance
Firm performanceProt 0.77Growth of sales 0.75Market shares 0.73
Competitive positioning 0.71Morale of employees 0.69Overall sales 0.68Growth of assets 0.67
Alpha coefcients 0.82 0.84 0.82 0.90 0.80 0.85
Note: This conrmatory factor analysis is based on data from study 2 involving 542 middle managers.The Chinese version of the scales is available on the MOR website: www.iacmr.org an d also from the rst authorof this article.
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Anne S. Tsui (anne. [email protected]) is Motorola Professor of InternationalManagement at Arizona State University, Professor of the Hong Kong University of Science and Technology and Distinguished Visiting Professor at
Peking University. She was the 14th editor of the Academy of Management Journal, a Fellow of the Academy, and Founding President of theInternational Association for Chinese Management Research( www.iacmr.or g). Her research interests include organizational demography,employment relationships, executive leadership and organizational culture,especially in the Chinese context. She taught previously at Duke Universityand the University of California, Irvine.
Hui Wang ( [email protected]) is an associate professor of organizational management at the Guanghua School of Management, Peking
University. He received his Ph.D. in management of organizations fromHong Kong University of Science and Technology. His research interestsinclude leadership behaviour, organizational culture and rm performance,especially in the context of Chinese organizations.
Katherine Xin (Katherine. [email protected]) is a Professor of Leadership andOrganizational Behaviour at IMD, Lausanne, Switzerland. She received herPh.D. from University of California, Irvine. Her research interests focus onleadership, organizational culture, performance and performancemanagement. Recently, her research focuses on how Chinese rms createorganizational capabilities through leadership and strategic HR levers.
Manuscript received: January 27, 2006Final version accepted: June 29, 2006 Accepted by: Cynthia Lee
