Culture as Organizational Capital in Economic Growth

Recent economic growth theory has suggested that wealth differences across nations must be due, at least in part, to the failure in many places to adopt existing production techniques. There are many potential reasons for the failure to adopt existing technology, including the political clout of those currently using or earning rents from inferior technologies. There are other reasons as well, and we explore one of them here that is based on a concept that we call basic culture. Basic culture is defined to be a learnable skill, just like other skills, but has value to its holder only if participating with a group of individuals who have acquired the same culture. Once this concept is formalized, we explore a number of implications including: (1) the possibility that individuals might choose to join a group (or firm) that uses an inferior technology because the members of that group have a more similar culture, (2) old members of a society might wish to impose cultural training on their young, training which is contrary to the long-term interests of the young, (3) a large group may choose to divide itself into distinct groups, even if the division requires the use of an inferior technology, and (4) technology adopted from a foreign firm can cause a cultural switch that harms the country