1.

BIBLIOGRAPHIC DETAILS AND (MY) INITIAL THOUGHTS

Author: Barney, J. | UCLA professor (competitive adv., strategic mgmt.) | PhD

Sociology, Yale
Title: Organizational Culture: Can It Be a Source of Sustained Competitive
Advantage?
Publisher: Academy of Management Review [AMR]
Year: 1986

Short paper on the enjoyment of sustained competitive advantage by a small number

of firms which have a valuable, rare, and imperfectly imitable organisational
culture.

2. FACTS AND EVIDENCE (AUTHOR)

◾ Key factual information + Evidence
◾ Source of the Evidence
- (1st): historical primary resources (primary ≈ direct)
- (2nd): recent critical texts within the discipline (≈ secondary sources)
- (SR): scientific research
- (EM): economics models
- (EXP): experiments / fieldwork
◾ N.B.: Note down the number of the page!

◾ Superior financial performance as a result of good organisational cultures

(1st: Deal & Kennedy, 1982; Peters & Waterman, 1982; Tichy, 1983) p.656
◾ Strong culture ⇔ excellent management
(1st: Peters & Waterman, 1982) p.656
◾ Culture describe company’s interaction with its key actors (employees,
customers, suppliers, others)
(Louis, 1983) p.657
◾ Organizational culture ≈ Strategy
(Tichy, 1983) p.657
◾ Superior financial performance cannot last forever (Hirshleifer, 1980). Some
firms replace old ways (Barney, 1985; Schumpeter, 1950) p.658
◾ Having a good organisational culture is only a necessary condition for a firm
to enjoy sustained competitive advantage benefits. However, it is not sufficient:
if a firm struggles with other strategically relevant functions, its financial
performance could be severely affected (Peters & Waterman, 1982) p.659
◾ Other factors contribute to superior financial performance (e.g. geographical
advantages and luck). Organizational culture is not a source of competitive
advantage for all firms [there may be firms which benefit from SCA without having
cultures with these characteristics].
(Martin, Feldman, Hatch, Sitkin, 1983; Tichy, 1983) p.659
◾ Several ways by which organizational culture offer advantages: valuing
employees, staying close to customers, etc… (Peters & Waterman, 1982; Porter 1980)
p.660
◾ There is little agreement on the rarity of good organizational cultures (Di
Maggio and Powell, 1983; Spender, 1983).
◾ Organizational cultures are idiosyncratic. They reflect the unique
personalities and experiences of the firm’s employees and founders, and the unique
circumstances of its growth (various contributors) (p.660)

3. ARGUMENTS AND CLAIMS (AUTHOR)

◾ What is the main overarching argument?
◾ What are the claims used to support his argument?
◾ A claim is not persuasive on its own. It can be: a definition, a
recommendation, a prediction, an opinion.
◾ An argument is a series of claims (substantiated with reasons and evidence)
which leads to a conclusion.
Example of an (Argument) advanced by Oscar Wilde:
- (Claim 1): ‘History’ is what historians write, but they do not write
it for all time.
- (Claim 2): We do not have to accept the judgements made by historians
of an earlier generation.
- (Conclusion): The one duty we owe to history is to rewrite it.
◾ N.B.: Note down the number of the page!

◾ Companies with poor organizational cultures are predestined to average

performances; only those with good cultures can maintain their advantages. The
imitators are not able to engage in managerial activities that will eventually
develop cultures that generate superior performances (p.657)
◾ Organizational culture described as a set of values, beliefs, assumptions,
symbols that define how business activities are operated, i.e. how a company
interacts with its key actors (again: employees, customers, suppliers, other)
(p.657)
◾ Superior financial performance can be either temporary or sustained. It can
be temporary because of imitation by other companies in the competitive market;
otherwise, it is sustained when good organisational culture is imperfectly
replicable, leaving leadings company with a competitive advantage (p.658)
◾ Business cycles can disrupt competitive advantage (p.658)
◾ For a Sustained Competitive Advantage (SCA), three conditions must be met:
- Culture must be valuable (leading to higher profits, to be sustainable)
- Culture must be rare (uncommon, otherwise there would be no advantage)
- Culture must be imperfectly imitable (‘follower’ companies which try to
replicate good cultures eventually cannot reap the same benefits). (p.658) +
Cultures are not easily replicable (in contrast with Peters & Waterman, 1982) (p.
659)
◾ Some organizational cultures exist in a relatively small number of firms (in
contrast with (Di Maggio and Powell, 1983; Spender, 1983)) (p. 660)
◾ (rarity) Unique histories are not a sufficient condition for developing a
rare culture. (p. 660)
◾ If firms without valuable cultures want to obtain competitive advantages,
they need to engage in activities which will modify their current culture ⇔ (which
means) organizational culture improvement is needed if a company wants to enjoy
economic advantages. (p. 662)
◾ By replicating a firm’s valuable culture, an imitator can, at most, equal the
performance of its target. The only way for these firms to reap the benefits of
sustained competitive advantage (fallacious) is to be one of the few which have the
ability to modify their own culture to enhance their value (p. 662)
◾ (fallacious) Only a few firms can succeed in this task. They do so (1) by
proving their superior understanding of the skills necessary to accomplish this
(managerial) change, and (2) by being more flexible than their older and larger
counterparts (according to (Tichy, 1983)). (p.662)
◾ There is a paradox which explains why this research is only applicable to
firms which already benefit from a superior competitive advantage. These firms must
have either specific culture management skills (valuable, rare, imperfectly
imitable) or, more broadly, a specific culture (flexible, rare, imperfectly
imitable). If firms missing these attributes manage to acquire them, then the
requirement of being imperfectly imitable is no longer valid. If it is possible to
replicate the valuable culture of successful firms, then no firm would have a
competitive advantage over its competitors in the long term. (p. 663)
◾ Firms who do not enjoy such an advantage are discouraged from sticking to
their current practices, as these will not bring any positive performance. Only
firms which do have a valuable, rare, and imperfectly imitable culture should
continue to nurture their current attributes and enhance their current activities
in order to sustain their competitive advantage (according to the notion of
“sticking to their knitting” advanced by Peters and Waterman, 1982). (p. 663)
◾ The assumption that firms’ culture is manageable implies the tendency for
firms to return to a normal economic performance in the long term. This is a
demonstration of the fact that companies cannot take advantage of a superior
economic performance in the long term. In other words, every firm is destined to
return to a standard economic performance, because of either the perfectioning of
imitation abilities by competing firms or the effect of external agents (e.g.
business cycles, technological innovation) which disrupts firms’ leadership. (p.
664)
◾ The culture of organizations, as well as the common sense of managers, is
difficult to describe, and it is even harder to change. (p. 664)

4. MY RESPONSE AS THE READER

◾ What is my opinion of this written work?
◾ Do I see any major flaws in the argument? (✘)
◾ Do I find any claim particularly compelling or original? (★) (✔)
◾ Is the evidence provided appropriate for these claims and arguments?
◾ Do I have any questions?

◾ If (by replicating a firm’s valuable culture) an imitator can only equal the
performance of its target, how can a firm without a valuable culture achieve a
condition whereby it enjoys the benefits of a sustained competitive advantage?
POSSIBLE ANSWERS:
- By revolutionising its own culture (how can this happen?)
◾ What are the unplanned ways by which a firm’s culture can change in such a
way to become imperfectly imitable and therefore leading the firm to a sustained
competitive advantage / superior economic performance?
◾ Barney leaves ground for other research on how firms which do not have a
valuable, rare, and imperfectly imitable structure can obtain a sustained
competitive advantage (because even if they manage to incorporate some valuable
attributes, they will only enjoy a temporary advantage).

BARNEY (1986)
◾ Culture as a means to sustained competitive advantage, provided that it
satisfies three conditions: valuable, rare, imperfectly imitable
◾ Culture cannot be changed voluntarily to gain a sustained competitive
advantage (paradox)
◾ Impossibility of firms which do not have a proper culture of enjoying
sustained competitive advantage (it will only be temporary, because their advantage
is not imperfectly imitable and so can be replicated sooner or later, in the long
term).
◾ Firms with no proper culture are discouraged from sticking with their current
practices, as they will bring them down to an inferior standard of performance.
Only firms with proper cultures are encouraged to keep nurturing their current
specific cultural attributes.