Economic theories suggest that a firm’s corporate
culture matters for its policy choices. We construct a
parent-spinoff firm panel dataset that allows us to
identify culture effects in firm policies from behavior
that is inherited by a spinoff firm from its parent
after the firms split up. We find positive and
significant relations between spinoff firms’ and their
parents’ choices of investment, financial, and
operational policies. Consistent with predictions from
economic theories of corporate culture, we find that the
culture effects are long-term and stronger for
internally grown business units and older firms. Our
evidence also suggests that firms preserve their
cultures by selecting managers who fit into their
cultures. Finally, we find a strong relation between
spinoff firms’ and their parents’ profitability,
suggesting that corporate culture ultimately also
affects economic performance. pdf
