How Corporate Cultures Coevolvewith the Business Environment: The Case ofFirm Growth Crises and Industry Evolution

This paper shows how cognitive human dispositions that take effect at the level of an individualfirm’s corporate culture have repercussions on an industry’s evolution. In our theory, the latter isattributable to evolving corporate cultures coupled with changes in a firm’s businessenvironment. With the help of a formal model of evolving corporate cultures, we demonstratehow firms can establish a cooperative cultural regime that yields competitive advantages in aninnovative, fast changing environment. Depending on within-firm social learning processes andcognitive constraints of human agents, organizations then reach a critical cognitive firm size intheir development beyond which the level of cooperation deteriorates rapidly – theysystematically face a growth crisis.[...]