Linking Organizational Culture
with Performance:
The Mediator and the
Moderator
Authors: ZHANG Mian, YANG Baiyin, & LI Hai
Reporter: LI Hai
2011-7-1, Budapest
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INTRODUCTION: Gap and Problem
Organizational Culture
?
Performance
2
The purpose of this study
• is to investigate the relationship between
organizational culture’s two functions (i.e.,
external adaptation and internal integration)
and firm performance
• while centering on possible mediator and
moderator.
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MODEL
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THEORIES
• Why?
• resource-based view (Barney 1986; 1996)
• dynamic capabilities theory (Teece et al.
1997; Teece 2007)
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resource-based view
• This view posits that an organization’s
sustained competitive advantage derives
from unique bundles of resources that are
valuable, rare, imperfectly imitable and not
substitutable (Barney 1991; 1996).
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• Internal integration comes from firmspecific bundles of cultural traits that are
difficult if not impossible to imitate.
• H1: Internal integration associates
positively with firm performance.
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dynamic capabilities theory
• dynamic capabilities theory proposes that
an organization’s ability to integrate, build
and reconfigure internal and external
competences is critical to achieve
congruence with the changing business
environment (Teece 2007).
8
• Organizations with adaptive culture can develop
their human resources capability through
absorbing new knowledge and experience from
external environment.
• In turn, the developed human resources
capability will ultimately enhance a firm’s
performance.
• H2: Human resource capability mediates the
positive association between external
adaptation and firm performance.
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The Moderating Role of
Environmental Uncertainty
• An organization with clear vision, mission and
values is more likely to focus on its core
resources and less distracted, thus usually has
superior performance compared to its rival.
• H3: Perceived environmental uncertainty
moderates the positive relationship between
internal integration and performance. The
relationship between internal integration and
performance in high level of environmental
uncertainty is stronger than that in low level
of environmental uncertainty.
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• In highly uncertain environment, an
organization’s adaptive culture is beneficial more
to attract and retain talents as well as motivate
its member.
• H4: Perceived environmental uncertainty
moderates the positive relationship between
external adaptation and human resource
capability. The relationship between external
adaptation and performance in high level of
environmental uncertainty is stronger than
that in low level of environmental uncertainty.
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METHOD: Sample
• top managers attending the courses of
Executive Development Program (EDP) in
a university located in a north metropolis,
China.
• 362 valid surveys
• a valid response rate of 86.2 percent.
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• Among 362 sample organizations
• the average number of employees was 5,430
(SD=16,999).
• The average length of company history was 25.5
years (SD=27.5) and the average annual sales
volume was 2.35 billion RMB (about 300 million
US dollars; SD=7.36 billion RMB).
• 52 percent were state-owned enterprises
(SOEs), 30 percent were private-owned
companies, and 15 percent were joint ventures
or foreign-invested companies.
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Measures
• Five variables (perceived financial
performance, human resource capability,
internal integration, external adaptation,
and perceived environmental uncertainty)
were measured with well-established
instruments.
• Respondents reported their subjective
perceptions for each of variables regarding
to their organizations.
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Testing Hypotheses
• We assessed the hypothesized model with
structural equation modeling technique
using Jöreskog and Sörbom’s (1999)
LISREL program.
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• We tested Hypotheses 1 and 2 with total sample.
And compared hypothesized model with three
alternative models.
• As for Hypotheses 3 and 4, we conducted twogroup comparisons with the SEM methodology
(Williams, Edward, & Vandenberg 2003;
Williams, Vandenberg, & Edwards 2009).
• We divided the whole sample into two groups
(high and low environmental uncertainty). Next,
we estimated and compared the path
coefficients in two groups.
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RESULTS
Means, standard deviations and simple correlations in the study
Variables
M
SD
1
2
1 Total employment
6.6
1.97
2 Company's history
26.6
27.49
0.32***
3 Ownership type: State-owned
0.5
0.50
0.23*** 0.38***
4 Ownership type: JV/foreign
invested
0.2
0.36
0.04
-0.16** -0.42***
5 Perceived environmental
uncertainty
3.6
1.25
-0.07
-0.12*
-0.16** 0.00
(0.86)
6 Internal integration
3.0
0.81
0.12*
0.02
0.06
0.19*** (0.87)
7 External adaptation
3.5
0.80
-0.14** -0.14*
8 Human resource capability
3.1
0.86
-0.11*
-0.15** -0.14** -0.09
0.09
0.37*** 0.56*** (0.85)
9 Perceived financial performance
3.2
0.94
0.02
-0.10
0.18**
0.26*** 0.41*** 0.57*** (0.86)
Reliability coefficient alphas are presented in diagonal in parentheses.
* p < 0.05; ** p < 0.01; *** p < 0.001
3
4
-0.06
-0.19*** -0.03
-0.09
-0.11*
5
6
7
8
9
0.35*** 0.40*** (0.83)
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Fit indices of structural models in the study
Structural models
Description
Hypothesized model
Figure 1
Alternative model 1
Alternative model 2
Alternative model 3
Figure 1 plus a path from
internal integration →
human resource capability
Figure 1 plus a path from
external adaptation →
performance
Figure 1 plus two paths:
internal integration →
human resource capability
and external adaptation →
performance
χ2
df
χ2/df
CFI
NFI
IFI
RMSEA
371.26
98
3.80
0.97
0.97
0.96
0.09
368.20
97
3.80
0.97
0.97
0.96
0.09
370.69
97
3.82
0.97
0.97
0.96
0.09
367.48
96
3.83
0.97
0.97
0.96
0.09
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Parameter estimates in structural model
Samples
Paths in Structural Model
Overall Sample
Low PEU
High PEU
Internal integration  Firm performance
0.14(3.01**)
0.08(.99)
0.29(4.57**)
External adaptation  Human resource capability
0.69(10.88**)
0.72(8.38***)
0.66(7.05***)
Human resource capability  Firm performance
0.64(9.85**)
0.55(5.62***)
0.66(7.61***)
0.52(11.67***)
0.61(11.16***)
0.45(6.26***)
Direct effects
Correlation b/w internal integration & external adaptation
Testing Moderator of Environmental Uncertainty
Internal integration  Performance
External adaptation  Human resource capability
c2(1) = 4.49**
c2(1) = 0.60 (n.s.)
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H3
H1
H4
H2
H2
•
H4 not supported
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Thanks
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