eScholarship provides open access, scholarly publishing services to the University of California and delivers a dynamic research platform to scholars worldwide. Institute for Research on Labor and Employment UC Berkeley Title: Cultural Effects on Employee Loyalty in Japan and The U. S.: Individual- or Organization-Level? An Analysis of Plant and Employee Survey Data from the 80s Author: Lincoln, James R., University of California, Berkeley Doerr, Bernadette, University of California, Berkeley Publication Date: 01-04-2012 Series: Working Paper Series Publication Info: Working Paper Series, Institute for Research on Labor and Employment, UC Berkeley Permalink: http:/escholarship.org/uc/item/8sc9k91b Keywords: Employee Loyalty, Japan, United States Abstract: This paper uses 1980s survey data on large samples of American and Japanese factories and their employees to examine how organization (factory) cultures then differed between Japan and the U. S. and how they affected employee loyalty intention to leave or stay. Central to the analysis is the idea, taken from Blaus seminal 1962 paper, that cultural effects may operate at the individual-level through the values, beliefs, and norms employees accept and “internalize” but also at the group- (including organization-) level through the mechanism of social pressure aimed at inducing conformity. Following Benedicts classic attribution of a “shame” culture to Japan and “guilt” culture to the U. S., we predict and find that cultural dimensions pertaining to company paternalism/familism and group work shape employee loyalty chiefly at the organization-level in Japan and chiefly at the individual-level in the U. S. This conclusion is qualified, however, by the finding that in both countries the “strength” (within-plant variance) of the culture conditions the size of the cultural effects. They are larger when the culture is stronger. Apart from question of the level at which cultural effects operate, we find, consistent with most expectations, that Japanese employees are more loyal (that is, less inclined to quit) in the presence of organization cultures favoring paternalism/familism, groupism, and vertical cohesion (close/frequent supervision). The reverse is in general true of the American employees. CULTURAL EFFECTS ON EMPLOYEE LOYALTY IN JAPAN AND THE U. S.: INDIVIDUAL- OR ORGANIZATION-LEVEL? An Analysis of Plant and Employee Survey Data from the 80s James R. Lincoln (lincolnhaas.berkeley.edu) Bernadette Doerr (bernadette.doerrhaas.berkeley.edu) Walter A. Haas School of Business University of California, Berkeley 1 January, 2012 2 CULTURAL EFFECTS ON EMPLOYEE LOYALTY IN JAPAN AND THE U. S.: INDIVIDUAL- OR ORGANIZATION-LEVEL? An Analysis of Plant and Employee Survey Data from the 80s ABSTRACT This paper uses 1980s survey data on large samples of American and Japanese factories and their employees to examine how organization (factory) cultures then differed between Japan and the U. S. and how they affected employee loyalty intention to leave or stay. Central to the analysis is the idea, taken from Blaus seminal 1962 paper, that cultural effects may operate at the individual-level through the values, beliefs, and norms employees accept and “internalize” but also at the group- (including organization-) level through the mechanism of social pressure aimed at inducing conformity. Following Benedicts classic attribution of a “shame” culture to Japan and “guilt” culture to the U. S., we predict and find that cultural dimensions pertaining to company paternalism/familism and group work shape employee loyalty chiefly at the organization-level in Japan and chiefly at the individual-level in the U. S. This conclusion is qualified, however, by the finding that in both countries the “strength” (within-plant variance) of the culture conditions the size of the cultural effects. They are larger when the culture is stronger. Apart from question of the level at which cultural effects operate, we find, consistent with most expectations, that Japanese employees are more loyal (that is, less inclined to quit) in the presence of organization cultures favoring 3 paternalism/familism, groupism, and vertical cohesion (close/frequent supervision). The reverse is in general true of the American employees. 4 INTRODUCTION Culture values, beliefs, normsthat emerge spontaneously within a group or community and ideologiessimilar forms but consciously devised by one group or stratum for the purpose of influencing the thinking and actions of othersshape the attitudes and behaviors of individuals within those groups and communities in two ways. First, individuals accept as their own, presumably through a socialization and identification process (which may be anticipatory of actual entry or selection into the group), the cultural content of the group. This process of individual acceptance and internalization of cultural elements can come about through two broad mechanisms. One is a