Working Papers

Cultural Effects on Employee Loyalty in Japan and The U. S.

Individual- or Organization-Level?


This paper uses 1980’s 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 Blau’s 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 Benedict’s classic attribution of “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 American employees.