Connections between organisational culture and financial performance in Estonian service and production companies

PurposeThis paper elaborates on connections between organisational culture (OC) and financial performance in production and service companies in Estonia.Design/methodology/approachThis cross-sectional study analyses the organisational culture of 19 SMEs and large service and production companies wit...

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Veröffentlicht in:Baltic Journal of Management 2020-06, Vol.15 (3), p.375-393
Hauptverfasser: Reino, Anne, Rõigas, Kärt, Müürsepp, Merily
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Rõigas, Kärt
Müürsepp, Merily
description PurposeThis paper elaborates on connections between organisational culture (OC) and financial performance in production and service companies in Estonia.Design/methodology/approachThis cross-sectional study analyses the organisational culture of 19 SMEs and large service and production companies with 2,256 respondents. The questionnaire based on the Competing Values Framework (CVF) was used to map organisational culture. Six different performance indicators from annual reports in the Estonian Business Register database were used over a four-year period. A confirmatory factor analysis and non-parametric Spearman rank correlation were applied in the study.FindingsThe authors found that OC types are connected to each other and theoretical opposites in the CVF are not mutually exclusive. Strong correlations exit between Clan and Adhocracy cultures, also confirmed by previous studies. Surprisingly, Market and Hierarchy types correlated more strongly in our sample compared to previous studies. As expected, Clan–Adhocracy and Market types exhibited a strong positive correlation with financial indicators, but contrary to the authors’ hypothesis, the Hierarchy type also had positive connections to performance indicators. The Market culture was only significantly related to performance in years when the Hierarchy type was also positively correlated with performance. Correlations that were positive in some years under investigation became insignificant in other years.Originality/valueFirst, The authors use multiple objective financial performance indicators to reveal relationships between OC and performance. Second, this study did not only rely on the managers' opinion of OC, but the sample also consists of respondents from all levels of the organisational hierarchy. Third, the authors expand on existing research into the link between OC and performance by exploring a country from the former Soviet Union (FSU), where the number of similar studies is low, but where the specific context has an impact on connections between OC and financial performance of the firms.
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The questionnaire based on the Competing Values Framework (CVF) was used to map organisational culture. Six different performance indicators from annual reports in the Estonian Business Register database were used over a four-year period. A confirmatory factor analysis and non-parametric Spearman rank correlation were applied in the study.FindingsThe authors found that OC types are connected to each other and theoretical opposites in the CVF are not mutually exclusive. Strong correlations exit between Clan and Adhocracy cultures, also confirmed by previous studies. Surprisingly, Market and Hierarchy types correlated more strongly in our sample compared to previous studies. As expected, Clan–Adhocracy and Market types exhibited a strong positive correlation with financial indicators, but contrary to the authors’ hypothesis, the Hierarchy type also had positive connections to performance indicators. The Market culture was only significantly related to performance in years when the Hierarchy type was also positively correlated with performance. Correlations that were positive in some years under investigation became insignificant in other years.Originality/valueFirst, The authors use multiple objective financial performance indicators to reveal relationships between OC and performance. Second, this study did not only rely on the managers' opinion of OC, but the sample also consists of respondents from all levels of the organisational hierarchy. 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subjects Annual reports
Business metrics
Confirmatory factor analysis
Corporate culture
Correlation analysis
Culture
Employees
Factor analysis
Financial performance
Hypotheses
Indicators
Management reports
Market economies
Markets
Performance indicators
title Connections between organisational culture and financial performance in Estonian service and production companies
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