RIEB Discussion Paper Series No.2025-15

Title

Conformity and Leadership in Organizations

Abstract

Some organizations are characterized by a conformity culture, where followers are expected to conform to the leadership's behavior. In contrast, other organizations exhibit an anticonformity culture. What drives the variation in conformity culture across organizations? This paper develops a model of leadership and (anti)conformity culture in organizations with dispersed information. The optimal culture trades off coordination gains against informational losses. I show that with strategic complementarity, conformity is optimal; whereas with strategic substitutability, anticonformity is optimal. By showing how culture coordinates agents in organizations with dispersed knowledge–much like the price system coordinates agents in decentralized markets (Hayek, 1945)–I contribute to the theory of organizations centered on corporate culture (Kreps, 1990). Comparative statics of optimal culture sheds light on the origins of cultural variation across organizations from an informational perspective.

Keywords

Leadership; Corporate culture; Conformity; Coordination games

JEL Classification

D23, D82, M14, M21

Inquiries

Shunsuke MATSUNO*
Columbia Business School, Columbia University
Junior Research Fellow, RIEB, Kobe University

*This Discussion Paper won the Kanematsu Prize (FY 2024).