Exploring the national and organizational culture mix in service firms

ORIGINAL EMPIRICAL RESEARCH

Exploring the national and organizational culture mixin service firms

Cynthia Webster & Allyn White

Received: 13 January 2009 /Accepted: 1 December 2009 /Published online: 22 December 2009# Academy of Marketing Science 2009

Abstract Using representative samples of U.S. and Japaneseretail service firms, this study explores whether one particulartype of organizational culture is the best with respect tobusiness outcomes (performance and customer satisfaction) orwhether the optimum culture depends on the national contextin which the firm is embedded. The findings suggest that thereis a significant interaction effect of organizational culture withnational culture on outcomes. Specifically, the relationshipsbetween the importance placed on the cultural values ofstability, people orientation, and detail orientation and out-comes are significantly greater for Japanese than for U.S.service retailers. On the other hand, the relationships betweenthe values of aggressiveness, innovation, and outcome orien-tation and outcomes are greater for U.S. retailers. Further, thefindings show that firms whose cultures match those of theirhome countries exhibit lower levels of outcomes when theyoperate in other countries with different cultural values. Impli-cations are given for how service retailers might be designedand managed for purposes of improving business outcomes.

Keywords National culture . Organizational culture .

Business performance . Customer satisfaction

Introduction

Organizational culture is becoming an increasingly impor-tant component of marketing strategy, especially in the

highly competitive and expanding dynamic internationalmarkets of the late 20th and early 21st centuries (Baird et al.2007). Both academicians and practitioners have givenconsiderable attention to organizational culture because ofits logical impact on business outcomes. However, much ofthe past research has been conceptual (e.g., Deshpandé andWebster 1989; Deshpandé and Farley 1998), domestic (e.g.,Deshpandé et al. 1993; Han et al. 1998; Homburg andPflesser 2000), and/or lacking in specificity. For instance,Marcoulides and Heck (1993) concluded that the valuesthat characterize an organization’s culture significantlyaffect performance, without actually specifying the identityof the values.

Further, past research has concentrated on goods-producing firms (e.g., Kitchell 1995). The lack of empiricalresearch on the organizational culture of service firms isunfortunate. Not only are services continuing to grow indomestic economies, but international trade in services isincreasing as well. The U.S., like some other developedcountries, has a trade surplus in services that helps offsetthe deficit in merchandise trade (Brady and Robertson2001; Lovelock and Yip 1996).

Also, it appears that many researchers and practitionershave assumed that a certain type of organizational culturewill lead to superior outcomes in any type of environment(e.g., Deshpandé and Farley 2004; Denison 1984; White etal. 2003), implying, for instance, that the characteristics ofan optimum organizational culture will remain constantacross national boundaries. Other than Newman andNollen’s (1996) investigation of the effects of the matchbetween corporate management practices and local nationalculture (using only Hofstede’s four cultural dimensions) onfinancial performance, past research has neglected toincorporate the possible moderating effects of nationalculture on the relationship between organizational culture

C. Webster (*) :A. WhiteDepartment of Marketing, College of Business,Mississippi State University,Box 9582, Starkville, MS 39762, USAe-mail: [email protected]

A. Whitee-mail: [email protected]

J. of the Acad. Mark. Sci. (2010) 38:691–703DOI 10.1007/s11747-009-0185-6

and outcomes. However, there is evidence that nationalculture influences organizational culture as well as cus-tomer values, preferences, and subsequent consumerbehavior (e.g., Briley and Aaker 2006; Monga andRoedder John 2007). That is, the values of both businessorganizations and individual consumers are partiallyshaped by the values of the nation or country in whichthey exist.

In light of the past research and what remains unknownabout the organizational culture and business outcomelinkage, a primary goal of the current study is to explorethe extent to which national culture moderates the relation-ship between the culture of a service firm or organizationand two key business outcomes: performance and customersatisfaction. Another key goal of this study is to explorewhether service firms should modify their culture whenthey expand internationally. In other words, the answer tothe following question will be sought: If a serviceorganization develops a subsidiary in another country,should it transfer its home country cultural values to thatsubsidiary or should it change its organizational culture tofit better with the culture of the host country? By meetingthese two goals, this study extends previous research inseveral ways. First, the nature of the relationships amongspecific organizational values of service firms and businessoutcomes will be empirically examined. This examinationwill allow service managers to focus on the culturalelements that are associated most with positive outcomes.Second, not only will the effect of service culture bedetermined on business performance, but on customersatisfaction as well. Although one published study hasinvestigated the linkage between organizational culture andsatisfaction (Conrad et al. 1997), the criterion was actually“attention to customer satisfaction” and not satisfaction, perse. Third, relative to past research (e.g., Appiah-Adu andSingh 1999; Gillespie et al. 2008), the sample of the currentstudy was drawn from a wider array of service industries,which enhances the extent to which generalizations can bemade to service providers. Fourth and in contrast withexisting literature, this study has a multinational componentin that it will determine whether a U.S. service firm needsto modify its culture when it develops a subsidiary in Japanand vice versa. Thus, this study addresses the importance ofunderstanding the effects of organizational culture onbusiness outcomes in an international context.

Background and hypotheses

This section will present the meaning of organizationalculture in general, the importance of service organizationalculture specifically, and the significance of considering the

possible moderating effects of national culture on therelationship between service organizational culture andbusiness outcomes.

Organizational culture

Organizational culture refers to underlying, shared valuesthat provide employees with behavioral norms in the firm(Baird et al. 2007; Chatman and Jehn 1994; Deshpandé andWebster 1989; Narver and Slater 1998). Thus, organiza-tional culture is conceptualized and quantified in this studyin terms of widely shared and strongly held values of afirm’s employees.

Characterizing an organization’s culture in terms of itscentral values requires identifying the range of relevant valuesand then assessing how strongly held and widely shared theyare among an organization’s employees (Saffold 1988).O’Reilly et al. (1991) used an instrument they developed,the Organizational Culture Profile (OCP), with a sample ofU.S. firms and identified the following seven organizationalcultural values: innovative, stable, respecting of people,outcome oriented, detail oriented, team oriented, andaggressive. In a later, independent study, Chatman and Jehn(1994) found that the same seven values characterize firmsacross various industries. These cultural values are alsosimilar to Hofstede et al. (1990) practice values generatedfrom an international sample of firms. The OCP dimensionsalso resemble the types of cultural knowledge that Sackmann(1992) found generalized across a single organization. Forexample, “directory knowledge,” or what people do in anorganization, resembles “working long hours” and “payingattention to detail,” and “recipe knowledge” resembles normssuch as “respect for individuals’ rights” and “fitting in.”Further, the OCP values encompass the values in Cameronand Freeman’s (1991) model of organizational culture types(this model was used in the Deshpandé et al. 1993 research).For instance, the adhocracy cultural type encompassesinnovation, the clan type encompasses respect for peopleand team orientation, the hierarchy type encompassesstability and detail orientation, and the market type encom-passes aggressiveness and outcome orientation. Thus, thepresent study views organizational cultures, within andacross industries, as characterized by seven values: innova-tion, stability, people orientation, outcome orientation, detailorientation, team orientation, and aggressiveness.

Service organizational culture

Previous research has shown that the organizational cultureof goods-producing firms directs employee behavior, whichin turn is linked to business outcomes (Baird et al. 2007;Holmes andMarsden 1996; Schein 2004). The organizational

692 J. of the Acad. Mark. Sci. (2010) 38:691–703

culture of service firms is arguably even more importantbecause of the well-acknowledged characteristics of services.For instance, the heterogeneous and intangible nature ofservices creates difficulty for customers when evaluating theservices received because, in contrast with goods, limitedobjective criteria exist against which customers can compareoutcomes of their specific service transactions (Mosley2007). Thus, customers are likely to consider other compo-nents of the interaction, such as employee behaviors (whichgenerally stem from organizational culture), when evaluatingthe service encounter. Additionally, services are oftencharacterized by simultaneous production and consumption,which involves a close interaction between the customer andthe service employee during the service encounter (Mosley2007; van Dolen et al. 2002). These characteristics indicatethat service organizational culture may play a particularlyimportant role in shaping customer responses—and ulti-mately business outcomes—because of its heightenedvisibility to customers. Indeed, past research has found thatobserved employee behaviors during the service encountercan heavily shape customer evaluations of the servicereceived, the service firm, and related outcomes such assatisfaction, repeat patronage, and word-of-mouth communi-cations (e.g., Bitner et al. 1990; Blodgett et al. 2003;Maxham and Netemeyer 2003; Smith and Bolton 2002).The heightened interaction between the frontline serviceemployee and the customer suggests that the employee mayconstitute the face of the organization in the eyes of thecustomer (Bitner et al. 1990).

Because of the meshing or close connection between aservice organization’s culture, as channeled via employeebehavior, and its customers, service firms in particularshould logically develop and maintain cultures that areconsistent with the culture of their customers. That is, thelevel of harmony that exists between organizational culturalvalues and customers’ cultural values is particularly likelyto affect business outcomes of service firms. This logic waspartially tested and validated by Appiah-Adu and Singh(1999), who found that hotel firms in the United Kingdomwhose organizational values were more aligned withcustomers’ values resulted in higher levels of customersatisfaction than when disharmony existed between thehotel values and customer values.

The importance of harmony between a service organ-ization’s culture and the culture of its customers suggeststhat the optimum organizational culture in one nation maybe different from the optimum organizational culture inanother nation with different cultural values. This issue is ofconsiderable importance because many service organiza-tions, similar to their goods-producing counterparts, areexperiencing an increasing reliance on international subsid-iaries to remain profitable. Therefore, we now turn to the

importance of national culture when considering theoptimum service organizational culture with respect tocustomer satisfaction and business performance.

National culture, organizational culture, and outcomes

Considerable research shows that national culture deter-mines the very essence of organizational culture and theresulting behaviors of employees (e.g., Adair et al. 2001;DeVoe and Iyengar 2004; Rhody and Tang 1995; Tsui et al.2007; Yeh 1995). Indeed, studies have revealed thatnational culture affects an organization’s business strate-gies, tactics, and practices in the global marketplace (e.g.,DeFrank et al. 1985; Tse et al. 1988), explaining suchphenomena as communication process elements (Adair etal. 2001; Ross 1999), new product development (Nakataand Sivakumar 1996), and the performance of globalbranding strategies (Roth 1995).

Similarly, research has shown that national culture also hasa profound influence on consumers’ responses to andevaluations of a business organization’s actions. For instance,national culture affects consumers’ cognitive styles, whichthen affects their perceptions of the organizations from whichthey purchase and their interpretation of business ideologiesand practices (Harris and Moran 1987; Kwantes et al. 2007).In particular, past research has supported the contention thatmarked differences exist between Eastern and Westerncultures with respect to how consumers respond to organ-izations. For example, Eastern and Western samples havebeen found to respond differently to brand extensions(Monga and Roedder John 2007) and marketing communi-cations, especially in the form of advertising (Briley andAaker 2006; Briley and Wyer 2002; Zhang 2009). Further,sources of service dissatisfaction, as well as customerresponses to service failures, were found to differ betweenEastern and Western samples (Chan and Wan 2008).

In summary, the studies cited above provide empiricalevidence that both organizations and consumers derive theirvalues and behavior at least partially from the nationalculture in which they exist. With this evidence in mind, letus now turn to two specific Eastern and Western nations—Japan and the U.S.—and examine their cultural values andthe linkage between their values and business outcomes.

The fact that Eastern and Western nations—and morespecifically, Japan and the United States—have vastlydifferent cultural values is well acknowledged. For in-stance, the national culture of Japan has been heavilyinfluenced by Shinto, Buddhism, and Confucianism. As aresult, the Japanese tend to emphasize the virtues of hardwork and attention to detail (Lazer et al. 1985; Rhody andTang 1995; Song and Parry 1997). The detail orientationmanifests itself with control systems, such as elaborate

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forms of planning, extensive memo and report writing, andhigh reliance on experts and specialists, which areassociated with higher uncertainty avoidance (Hofstede1980; Nakata and Sivakumar 1996). Japan also has aconsensus-bonded, group-oriented culture that emphasizesharmony, uniformity, conflict avoidance, respect andconcern for people, and close, long-lasting relationshipswith others (DeFrank et al. 1985; Sandelands 1994). Inaddition, the Japanese have an extremely risk-averse society,one that emphasizes stability and tradition (Anterasian et al.1996; Hofstede 1991; Ralston et al. 1997). Further, theJapanese national culture is characterized by a peopleorientation and an emphasis on harmony and tolerance,which have led to humanistic management practices, workerloyalty, a noncompetitive workforce, lifetime employment,and slow evaluation and promotion (Gelfand et al. 2001;Burton 1989).

Therefore, of the seven values that comprise the OCP,Japanese organizations tend to hold salient the values ofstability, people orientation, detail orientation, and teamorientation. Because organizational culture has been shownto link to outcomes, we expect that these values will relatemore to business performance and customer satisfaction forJapanese firms than they will for firms in the U.S.Therefore,

H1: The relationships between the organizational culturalvalues of stability, people orientation, detail orienta-tion, and team orientation and outcomes (businessperformance and customer satisfaction) will begreater for Japanese than for U.S. service firms.

The national culture of the U.S., on the other hand, ischaracterized by values such as assertiveness, decisiveness,innovativeness (which has been empirically linked to lowerlevels of uncertainty avoidance (Hofstede 1980)), stimula-tion, hedonism, and risk-taking, which stem from itsfrontier-conquering history (Cho et al. 1999; DeFrank etal. 1985; Hall and Hall 1987; Ralston et al. 1997). The U.S.culture is also characterized by individualism (Cho et al.1999), and its emphasis on autonomy, self-determination,and competency-based rewards are well documented (e.g.,Pavett and Morris 1995; Yeh 1995). Further, the U.S.culture can be characterized by its emphasis on results orachievement (Ralston et al. 1997). Thus, of the OCP values,U.S. organizations are likely to have cultures characterizedby innovation, outcome orientation, and aggressiveness.Due to the organizational culture and outcome linkage,these three values should relate more to business perfor-mance and customer satisfaction for U.S. firms than forJapanese firms.

H2: The relationships between the organizational culturalvalues of innovation, outcome orientation, and ag-

gressiveness and outcomes (business performanceand customer satisfaction) will be greater for U.S.than for Japanese service firms.

Given the preceding discussion regarding the importanceof harmony between a service organization’s values and itscustomers’ values, we further expect that organizationswhose cultures match those of their home country willexperience lower outcome levels when they operate in othercountries with different cultural orientations. Thus, firmscharacterized by salient U.S. cultural values (innovation,outcome orientation, and aggressiveness) will garner lesspositive—or possibly negative—responses from Japanesecustomers, which may negatively influence business out-comes. In contrast, firms characterized by salient values inthe Japanese culture (stability and people, team, and detailorientations) will not be favored as highly by U.S.customers due to a lack of harmonious or shared values.Hence,

H3: Service firms whose cultures match those of theirhome country will exhibit lower levels of outcomes(business performance and customer satisfaction)when they operate in other countries with differentcultural orientations.

Method

Sample

The U.S. and Japanese sampling frames came from a listingof service retail firms publicly traded on the Dow Jones andNikkei stock exchanges, respectively. From each of theselists, firms were selected by using a random nth-observationtechnique until the sample contained 150 firms, represent-ing three major types (see Lovelock and Yip 1996): people-processing services (e.g., airlines, hotels, and restaurants),possession-processing services (e.g., car/machinery repair),and information-based services (e.g., consulting, legal, andfinancial).

Each selected firm was contacted by phone for thepurposes of identifying two executives who perceived theywere very familiar with their firm’s organizational cultureand to gain compliance from these individuals to participatein the study. The first mailed packet included a personalizedletter, a questionnaire (both of these in English andJapanese for the Japanese sample), and a postage-paid,self-addressed envelope. Participating firms were guaran-teed anonymity. This incentive, as well as follow-up lettersand multiple phone calls and faxes, yielded an overallresponse rate of 74.3% (223/300). A comparison of theearly to late respondents did not indicate any problem withnonresponse bias.


Data from the samples described above were sufficientto test H1 and H2. For H3, additional steps were taken toobtain an appropriate set of participating firms. First, thefirms participating thus far were examined to determinewhich ones operate or have a wholly-owned subsidiary inthe other country. Of the 101 Japanese firms, 23 had awholly-owned subsidiary in the U.S.; of the 122 U.S. firms,28 had a wholly-owned subsidiary in Japan. To supplementthese two lists to a count of 75 each, additional firms wereselected by the same procedures described above fromappropriate directories (Directory of American FirmsOperating in Japan 2007; Directory of Japanese-AffiliatedCompanies in the U.S. 2007). The procedures (contactmethods, incentives, etc.) that were used with the firstsample were used with this sample. However, all firms inthis sample were prescreened to ensure centralized oper-ations (operations compartmentalized in the foreign sub-sidiary’s country), the top management’s composition offoreign nationals, and the transference and adherence of theHRM system/process by the international subsidiaries (eventhough approximately one-quarter of the positions were filledby inpatriates). The final second sample was comprised of 52(51.5%) Japanese firms in Japan and their subsidiaries in theU.S. and 72 (59.0%) U.S. firms in the U.S. and theirsubsidiaries in Japan (data were collected from executivesand customers in both home and subsidiary firms).

Following Deshpandé et al. (1993), each respondent wasasked to identify three important customers. After assem-bling the two lists, a customer was chosen at random. Twomajor buyers at the chosen customer firm were identified,contacted, and asked to report their level of satisfactionwith the vendor firm. All agreed and gave usable data.

Measures

Organizational culture To measure service firm culture, theOrganizational Culture Profile (OCP, O’Reilly et al. 1991)was used. The OCP contains 54 value statements thatemerged from a review of academic and practitioner-oriented writings on organizational values and severalscreenings. A number of tests have revealed that the OCPpossesses reliability and predictive, convergent and dis-criminant validity (e.g., see Chatman and Jehn 1994). Toavoid social desirability bias, O’Reilly and colleagues castthe OCP items in neutral terms, and comparisons to anempirically derived profile of social desirability revealedthat firm informants did not respond to the items in waysthat made their firms look favorable (Chatman 1991).Further, convergent validity has been established through thesignificant positive correlation between person-organizationfit assessed with the OCP and normative commitment definedas attachment to an organization based on value congruence(O’Reilly et al. 1991).

To assess service culture, a Q-sort process was under-taken (Block 1978).1 Respondents were asked to sort the 54values into nine categories ranging from “characteristic ofmy firm’s culture” to “most uncharacteristic of my firm’sculture.” Fewer items were allowed at the extreme ends andmore were allowed in the middle, creating more neutralcategories; the number of values to be placed in each of thenine categories was 2, 4, 6, 9, 12, 9, 6, 4, and 2.

To assess shared perceptions, or agreement between firmmembers about firm culture, the average pairwise correla-tion coefficient was computed across the two raters (eachdyad) within each firm. Across all firms, the correlationsranged from .71 to .96, indicating a high level of agreementin perceptions of organizational culture.

Business performance Performance was assessed by com-bining four self-evaluations of profitability, size, marketshare, and growth rate in comparison with those of thelargest competitor for that particular firm (α=.93). Thefirms were divided into good and poor performers by amedian split, with ties at the median assigned to the highperformance group. This manner of measuring performancehas been used by other organizational culture researchers inthe marketing field (e.g., Deshpandé et al. 1993).

Customer satisfaction The customer satisfaction measurewas developed from those used in other studies (e.g.,Cannon and Perreault 1999). The five-item scale (α=.96)measured respondents’ overall level of satisfaction with thevendor firm’s products and services and included suchitems as “Our firm is very pleased with what this supplierdoes for us” and “If I had to do it all over again, I wouldstill buy from this firm.”

1 There are three advantages of this semi-idiographic approach tomeasuring organizational culture: (1) since each item is implicitlycompared to every other item, the outcome of a Q-sort is a realisticprofile with items arranged in an order that reflects the relativeimportance of each item to each other item; (2) culture strength iscaptured by assessing the similarity of members’ perceptions oforganizational values (tested with reliability coefficients and interratercorrelations) and the intensity with which values are held (examiningthe most extreme items such as the top and bottom items); and (3)meaningful comparisons across profiles (individuals, firms, orindividuals and firms) are possible (Chatman 1989). On the otherhand, one possible drawback of using a Q-sort method to assessorganizational culture is that items are not strictly independent of oneanother. That is, raters are constrained in the number of discrim-inations they are allowed to make. But computing the number ofdifferent ways in which the 54 culture items can be arranged into thedesignated categories reveals that there are many different ways to sortthe items (3.1×1042). Thus, any two items are relatively independent(the intercorrelation of each item with each other item is approxi-mately− .02). Researchers who use the Q-sort method argue that itemanalysis, in a conventional rating scale, is therefore acceptable (Block,1978).


Following Deshpandé et al. (1993), an average of thetwo relevant responses within each quadrad (two sellers orexecutives and two buyers or customers constituting onequadrad)2 was calculated in each case to build the scales.This was done after detecting only minimal viewpointvariance. That is, there was a significant (p≤ .05) correlationon all measures within the dyad pairs.

Results

Before hypothesis testing, several tests were conducted todetermine: (1) the values that characterize Japan and the U.S.;(2) the dimensionality of organizational culture; (3) theorganizational cultural values associated with U.S. andJapanese service retailers; (4) whether the organizationalvalues that characterize a service firm in a particular society(e.g., the U.S.) also characterize a subsidiary of that firm in avastly different society (such as Japan); and (5) the relation-ships between each of the organizational cultural dimensionsand outcomes.

National culture

An assumption check was performed to determine thevalues that characterize Japan and the U.S. Twentyprofessors of anthropology in both Japan and the U.S.were asked to sort the 54 values into nine categoriesranging from “characteristic of my country’s culture” to“most uncharacteristic of my country’s culture.” Plannedcomparison tests were performed after averaging countryscores. Consistent with the literature (e.g., DeFrank et al.1985; Hofstede 1980; Rhody and Tang 1995), Japan wassignificantly higher than the U.S. on stability and people,detail, and team orientations (p=.02, .03, .03, and .04,respectively) and the U.S. was significantly higher thanJapan on innovation, outcome orientation, and aggressiveness(p = .02, .03, and .01, respectively).

Organizational culture dimensions

To determine the dimensionality of the culture of theservice firms, the culture profile responses from each of the

Japan and U.S. samples were factor analyzed with a principalcomponent analysis and a varimax rotation. From the twoscree tests, seven factors emerged with eigenvalues greaterthan one: (1) aggressiveness, (2) stability or a hesitancy tochange, (3) orientation toward results or outcomes, (4)innovation or a propensity toward taking risks, (5) attentionto detail and carefulness, (6) orientation toward collaborationor teamwork, and (7) orientation towards people. Followingthe procedures detailed in Rogers and Howard (1993) and thestandards set forth in Stegner et al. (1996), equivalencytesting of the Japan and U.S. factor structures was conducted.The relatively large p values resulted in the null hypothesesof non-equivalence being rejected. Hence the factor struc-tures appeared to be equivalent. The results of the combined,equivalent sample in Table 1 show the items that loaded .50or above on one of the seven factors.

These dimensions overlap considerably with thoseproposed by other researchers (e.g., Cameron and Freeman1991). In particular, the derived factor structure is similar tothat found in other research using an extensive sampling oforganizations (e.g., O’Reilly et al. 1991).

Canonical correlations were calculated to compare thefactor pattern of each firm to the group of all firms minusthe firm being compared. While the relative importance ofthe dimensions shifted across firms, the factor structure wasgenerally consistent. Further, when compared to the set oforganizations, each firm had a significant (p≤ .05) squaredcanonical correlation (ranging from .66 to .93). Thus, theculture of service firms can be characterized by thedimensions of aggressiveness, stability, outcome orienta-tion, innovation, detail orientation, team orientation, andpeople orientation.

National culture and organizational culture

To determine whether national culture (U.S. versus Japan) hasa significant effect on the relative importance of service firmculture dimensions, planned comparison tests were performedacross countries after averaging firm scores. As can be seen inthe first row in Table 2, U.S. firms are significantly higherthan the Japanese firms on innovation, outcome orientation,and aggressiveness, thus supporting past research (e.g., Halland Hall 1987). On the other hand, Japanese firms aresignificantly higher than the U.S. firms on people, detail, andteam orientations. These findings support past studies (e.g.,Rhody and Tang 1995). However, the findings revealed hereshow no significant difference between U.S. and Japaneseservice firms with respect to stability.

Country of operation and organizational culture

To assess if subsidiaries in a host country (such as Japan)maintain the same organizational culture of the home

2 The individual samples were comprised of the following quadrads:75 sets of two buyers from a Japanese vendor firm and two of itsbuyers; 75 sets of two sellers from a U.S. vendor firm and two of itsbuyers; 52 sets of two sellers from a Japanese vendor firm in Japanand two of its buyers and 52 sets of two sellers from a subsidiary ofthat firm located in the U.S. and two of its customers; 72 sets of twoexecutives form a U.S. vendor firm in the U.S. and two of itscustomers; and 72 sets of two executives from a subsidiary of that firmlocated in Japan and two of its customers.


country (such as the U.S.) or if they adopt the culturalvalues of the host country, planned comparison tests wereperformed across countries after averaging firm scores.These results are shown in the second and third rows inTable 2. The second row shows the organizational culturalvalues of U.S. firms operating in the U.S. and in Japan (theU.S. subsidiaries). The third row pertains to Japanese firmsoperating in Japan and the U.S. As can be seen in these two

rows, there are no significant differences between thecultural values of the home and subsidiary firms. Thus,foreign subsidiaries tend to maintain the organizationalcultures of their home culture firms.

To explore the nature of the relationship between each ofthe firm culture dimensions and outcomes and to test thehypotheses, several regression analyses were performedafter controlling for customer type (ultimate vs. industrial).

Table 1 Results of factor analysis

Culture item Aggressivefactor 1

Peopleorientedfactor 2

Stablefactor 3

Outcomeorientedfactor 4

Detailorientedfactor 5

Innovativefactor 6

Teamorientedfactor 7

Decisive .84

Aggressive .81

Taking initiative .78

Action-oriented .76

Competitive .65

Opportunistic .53

Low level of conflict −.51People-oriented .77

Tolerance .76

Respect individual’s rights .70

Praise for performance .68

Fair .61

Supportive .59

Predictable .62

Stable .57

Security .54

Rule-oriented .53

Adaptable −.73Flexible −.76Emphasis on quality .75

Results-oriented .70

Reward good performance .65

Achievement-oriented .60

Demanding .52

Detail-oriented .85

Precise .77

Analytical .75

Careful .72

Innovative .67

Experimenting .63

Risk-taking .55

Autonomy .54

Team-oriented .53

Collaborative .51

Fitting in .50

Sharing information freely −.55Percentage of variance explained 22.8 18.3 17.1 13.6 10.4 9.9 9.2


To test for the presence of multicollinearity, each predictorwas regressed on the other predictors. Since none of the R2sfor the relationships among the predictors exceeded .25(indeed, most clustered around .09), and none surpassed theR2 of the overall model, collinearity was not consideredproblematic (Mason and Perreault 1991). The standardizedregression coefficients are presented in Table 3.

Organizational culture and outcomes3

Section 1 of Table 3 shows that there is a significantrelationship between most of the culture dimensions and theoutcomes of business performance and customer satisfac-tion. Only team orientation does not significantly relate tooutcomes. As one might expect, the culture dimensions

predict a similar amount of variance in business perfor-mance (32%) and customer satisfaction (33%).

Hypothesis testing

Organizational culture × national culture The interactioneffects of organizational culture with national culture onoutcomes are shown in Section 2 of Table 3. The possibleeffects of customer satisfaction were controlled beforeHypotheses 1 and 2 were tested for business performance.The coding scheme (U.S., 0; Japan, 1) indicates that thecoefficients should be positive if the relationships betweenthe culture dimensions and outcomes are stronger for Japanthan the U.S. and negative if the opposite effect occurs.

Hypothesis 1 receives general support because therelationships between the cultural values of stability, peopleorientation, and detail orientation and outcomes aresignificantly greater for Japanese than for U.S. firms.Unlike hypothesized, however, the nonsignificant betacoefficients indicate that national culture does not moderatethe relationship between the importance placed on a teamorientation and outcomes. Examination of the negative betavalues in Section 2 reveals that the relationships betweenthe cultural values of innovation, outcome orientation, andaggressiveness and outcomes are significantly greater for U.S.than for Japanese firms. Thus, H2 also receives support.

Organizational culture × country of operation Hypothesis3 holds that service firms whose cultures match those oftheir home country will exhibit lower levels of outcomeswhen they operate in other countries with different culturalorientations. The interaction effects of organizationalculture with country of operation on outcomes are shownin the third section of Table 3. The coding scheme (U.S. orJapanese firms operating in a different country, i.e., aforeign subsidiary, 0; U.S. or Japanese firms operating intheir own country, 1) suggests that the coefficients should

Table 2 Mean factor scores by national culture and country of operationa

Innovation Stability People orientation Outcome orientation Detail orientation Team orientation Aggressiveness

U.S. 6.13* Japan 5.55* Japan 6.21* U.S. 5.85* Japan 6.01* Japan 6.15* U.S 6.07*

Japan 4.38** U.S. 5.50* U.S. 5.48** Japan 5.31** U.S. 5.56** U.S. 4.47** Japan 5.52**

U.S. Firms


Japan 4.64* U.S. 5.77* U.S. 5.52* Japan 5.66* U.S. 5.72* U.S. 4.56* Japan 5.99*

Japanese Firms


Japan 4.64* U.S. 5.72* U.S. 5.83* Japan 5.54* U.S. 5.67* U.S. 5.75* Japan 6.19*

aMeans with the same superscript are not significantly different at p<.05 by Newman-Keuls test

*p≤ .05**p≤ .10

3 Several steps were taken to discover the linkages among organiza-tional culture dimensions and employee behaviors. First, the commonbehavioral characteristics stemming from each cultural dimensionwere identified. Second, two randomly-selected employees (with atleast five years’ employment with their respective firms) from eachparticipating firm were asked to complete a questionnaire measuringthe extent to which each of the behaviors characterize their firms(a nine-point scale was used, ranging from 1 to 9 “(un)characteristic ofemployees’ behavior in my firm”). An average of the two responseswithin each firm was used to build the scales (there was a significantcorrelation (p≤ .05) on all measures within the dyad). The behaviorswere then regressed on the cultural dimensions, and all results weresignificant: aggressive and the behaviors of experimental, usesnonstandard approaches, and takes risks, R2=.84, p=.01; stable andthe behaviors of predictable, secure, unchanging, R2=.91, p=.00;people oriented and the behaviors of friendly and helpful, R2=.96,p=.00; outcome oriented and the behaviors of goal oriented anddemanding, R2=.90, p=.00; detail oriented and the behaviors ofprecise, analytical, careful, emphasize quality, R2=.89, p=.00; teamoriented and the behaviors of collaborative, shares information freely,and lengthy decision making, R2=.88, p=.00; and aggressive and thebehaviors of takes initiative, action oriented, decisive, opportunistic,conflictual, and impatient, R2=.94, p=.00. Thus, it appears that theorganizational culture items in the scale used here reflect the actualbehaviors of employees.


be positive if the relationships between the culturedimensions and outcomes are stronger for firms operatingin their own country and negative for firms operating in avastly different culture. In the ultimate support of Hypoth-esis 3, business performance and customer satisfaction weresignificantly greater (p=.05 and .04, respectively) for bothJapanese and U.S. firms whose cultures match those of theirhome country than for their national counterpart firmsoperating in a host country with different cultural orienta-tions. All the coefficients in “Method” are both positive andsignificant.

Discussion

Although organizational culture has been considered animportant business issue for decades, researchers believe itwill become an increasingly critical aspect of businessstrategy in general and of marketing strategy specifically inthe near future because of the rapidly changing businessenvironment (e.g., Baird et al. 2007). Past research hasconcluded that organizational culture has a considerableimpact on business outcomes. However, much of thatresearch has been conceptual, goods- and domestically-

oriented, and nonspecific with respect to organizationalcultural value identity.

To enhance our understanding of the organizationalculture–business outcome linkage, the current researchsought to determine the extent to which national culturemoderates the relationship between the organizationalculture of service firms and financial performance andcustomer satisfaction by utilizing an empirical approach,representative samples of major Japanese and U.S. servicefirms, and the identification of specific, rather than generalreference thereto, organizational cultural values. This studyresulted in findings which have several implications formarketing scholars, strategists, and practitioners.

First, a consensus was found among Japanese and U.S.anthropologists regarding the current cultural values of bothnational cultures. Although approximately fourteen years,with their many culture-blending changes, have passedsince related published studies, this research revealed thatthe Japanese culture remains to be characterized by stabilityand people, team, and detail orientations and the U.S. byinnovativeness, outcome orientation, and aggressiveness.

Second, both Japanese and U.S. service firms werefound to be characterized by their respective levels of thefollowing organizational cultural values: aggressiveness,

Independent variables Dependent variables

1. Organizational culture Business performance Customer satisfaction

Innovative .28* .23*

Stable −.16* −.19*People oriented .20* .26*

Outcome oriented .37** .31*

Detail oriented .43 .47**

Team oriented .05 .08

Aggressive .24* .33*

Total R2 .32* .33*

2. Organizational culture × National culture

Innovative × National Culture −.48** −.33*Stable × National culture .33* .18*

People oriented × National culture .24* .30*

Outcome oriented × National culture −.29* −.38**Detail oriented × National culture .26 .32*

Team oriented × National culture .15 .06

Aggressive × National culture −.42** −.21*3. Organizational culture × Country of operation

Innovative × Country of operation .23* .34*

Stable × Country of operation .40** .40**

People oriented × Country of operation .40** .52**

Outcome oriented × Country of operation .29* .33*

Detail oriented × Country of operation .36** .47**

Team oriented × Country of operation .18* .22*

Aggressive × Country of operation .34* .20*

Table 3 Regression results

*p≤ .05**p≤ .10


stability or hesitancy to change, orientation toward resultsor outcomes, innovativeness or a propensity toward takingrisks, attention to detail and carefulness, orientation towardcollaboration or teamwork, and an orientation towardspeople. Identical values also surfaced in studies by Chat-man and Jehn (1994); thus, this study further supports theseseven values as indeed the underlying structure of organi-zational culture. This result has some potentially importantimplications for how service retailers might be designedand managed for purposes of improving financial perfor-mance and customer satisfaction. For instance, service firmmanagers might use this set of seven organizational culturalvalues to aid in determining which cultural values shouldbe emphasized, to ascertain the extent to which the firm’scultural values are shared and held across firm members (byinterviewing employees from top management to opera-tional level), to measure service firm culture change overtime, and to facilitate new employee-firm fit.

Third, supporting the past research of Hall and Hall(1987) and Rhody and Tang (1995), this study found that,like their national culture, Japanese service firms, ascompared to U.S. service firms, are characterized bypeople, detail, and team orientations. And, like theirnational culture, U.S. service firms, as compared to theirJapanese counterparts, are characterized by innovation,outcome orientation, and aggressiveness. This study foundthat even the foreign subsidiaries have a tendency tomaintain the fundamental organizational culture (as perthe OCP values) of their home culture. While organization-al culture is not completely independent of the nationalculture in which it exists, perhaps some firms transfer theirbasic values to foreign subsidiaries because those valueshad historically been linked to their corporate identity andto success. Further, this study found no significantdifference between Japanese and U.S. service firms withrespect to stability, possibly because of the desire ofmarketing managers from both cultures to implementstrategies that convey consistent, predictable service qualityto their customers.

Fourth, the study reported here found significantrelationships between the six service firm cultural valuesof innovativeness, stability, people orientation, outcomeorientation, detail orientation, and aggressiveness and boththe business outcomes of performance and customersatisfaction. These twelve significant relationships implythat service marketers should develop objectives andemploy tactics to ensure the optimum existence of eachvalue. Further, managers of a service firm should make surethat all of its employees, particularly those who are in directcontact with customers, exhibit behaviors that mirror thedesired organizational values. Importantly, the results ofthis study are based on a representative sample of threedifferent categories of service firms: people-processing

services (e.g., hotels), possession-processing services (e.g.,car repair), and information-based services (e.g., legalconsulting). The comprehensive nature of the serviceprovider sample allows for a certain level of generalizabil-ity regarding the current findings. Specifically, organiza-tional culture appears to be an important driver of businessperformance and customer satisfaction regardless of thetype of service being performed. Thus all service providersshould pay close attention to the level of harmony thatexists between the organizational culture of the firm and thecultural values of the customer.

Fifth, this study found that the relationships between theorganizational cultural values of stability, people orienta-tion, and detail orientation and outcomes are significantlygreater for Japanese than for U.S. firms. Likewise, therelationships between the organizational cultural values ofinnovation, outcome orientation, and aggressiveness andoutcomes are significantly greater for U.S. than forJapanese firms. These findings support two importantnotions. First, national culture impacts organizationalculture and consequently employees’ behavior, and alsoinfluences customers’ expectations and consequently theirbehavior. Second, customer satisfaction, and hence businessperformance, increases when congruence exists betweencustomers’ values (and expectations) and organizationalvalues. Further, while financial performance is an importantindicator of business outcomes, the long-term profitabilityof a company can be largely determined by the repeatpatronage of satisfied customers. The results of this studysuggest that national culture exerts significant influence onthe relationship between organizational culture and indi-vidual customer satisfaction. Therefore, enhancing thisrelationship is critical for service firm profitability from along-term standpoint as well as in terms of current financialperformance.

Interestingly, no significant relationship was foundbetween the organizational cultural value of team orienta-tion and business outcomes. And, the findings revealed thatnational culture does not significantly moderate the rela-tionship between the importance placed on a teamorientation and outcomes. These unexpected findings maybe due to the close interaction between the serviceemployee and customer. That is, where a team orientationmight be particularly important in goods-producing firms,customers in service interactions seek individual attentionfrom an employee that connotes care, concern, andpersonalization.

Finally, this research found that service firms whosecultures match those of their home country will exhibitlower levels of outcomes when they operate in othercountries with different cultural orientations. Businessperformance and customer satisfaction were significantlygreater for both Japanese and U.S. firms whose cultures


match those of their home country than their nationalcounterpart firms operating in a host country with differentcultural orientations. These findings suggest that servicemanagers should not assume that one particular type oforganizational culture is necessarily the best. Rather, interms of market performance and customer satisfaction, theoptimum organizational culture appears to depend on thenational context in which the firm is embedded. Firmswhose cultures more explicitly emphasize factors related tothe demands placed on them by national culture should bebetter performers in their industries.

Although the differences in business outcomes betweenfirms operating in their own countries and those operatingin foreign countries appear to be due to the extent ofharmony between a firm’s values and its customers’ values,they may possibly be due to other values outside of theOCP (such as patriotism). Also, the firms operating in theirown countries may have a better understanding of theircustomers and thus are able to provide superior servicesthan the firms operating in foreign countries.4 Futureresearch is needed to investigate these possible confound-ing effects.

Some limitations of this study serve as additional sourcesof productive avenues for future research. First, a moreformal examination needs to be made of the actualemployee behaviors intervening between service firmculture and outcomes. The identification of these behaviorswill facilitate the management of a firm’s culture. In otherwords, such research could suggest which behaviors needto be enhanced and which need to be extinguished toincrease the chances of having an optimum culture. Aresearch endeavor such as this will particularly aid a foreignsubsidiary that desires a better fit with its host country’sculture.

Second, this study drew samples only from the U.S. andJapan, as representations of Western and Eastern cultures.Future research might contrast other Western and Easterncountries to determine whether the parameters of themoderating effects remain virtually the same. In addition,potentially beneficial future research would determine theextent to which the organizational culture of multinationalfirms significantly impacts business outcomes.

Third, this study was an initial step toward determiningthe moderating effects on the relationship between servicefirm culture and outcomes. There are obviously otherfactors—internal and external to a firm and its industry—that are likely to affect organizational culture. Such factorsas employee layoffs, employee mobility, strategic competitivepositioning (e.g., a follower versus a market leader), and stagein the life cycle (e.g., introduction versus maturity), might beinvestigated. Particularly, future research might examine the

moderating effects of type of service firm (e.g., people-processing or information-based) on the relationship betweena firm’s culture and outcomes. Perhaps the linkage betweenorganizational culture and customer satisfaction will bestronger for people-processing service firms because theelements of their culture are more visible to customers thanthose of information-based firms. Future studies such as thesewill enhance our understanding of how organizational cultureshould be designed and managed so that business perfor-mance and customer satisfaction can reach optimum levels.

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Exploring the national and organizational culture mix in service firms