Organizational Culture and Organizational Performance: The Role of Companies of a Developing Economy to the COVID-19 Pandemic

Abstract

The study sought to understand the relationship between organizational culture (OC) and organizational performance (OP) and included economic activity as a control variable in large and medium-sized companies in Ecuador. The authors collected data from 342 employees from different hierarchical levels and functional and operational areas of different economic activity through online surveys at two points in time. A descriptive analysis and structural equation modelling were applied. The results revealed that the culture of involvement, consistency and mission significantly explained OC. Of these, the mission was the most important. In addition, the research proposes another dimension called commitment. OP was significant for individual-level performance, group-level performance and job stability. In addition, individual-level performance and job stability were best related to business performance. When the type of economic activity is involved, the culture of involvement and consistency is more significant. The outcomes suggest that all the characteristics of OC and OP ensure the integration of strengthened principles into strategies, which, although unrelated to each other, are good predictors for improving corporate governance. Despite the popularity of studies on OC and OP, this research showed that it is still at an early stage of research in emerging economies. It provides managers with knowledge for effective management of the work environment.

Keywords

Corporate governance human resource management human resources management development organizational behaviour

Introduction

The measures taken to prevent infection by the COVID-19 pandemic changed the reality in many countries, both in social and economic terms (Kuckertz et al., 2020). Many companies closed down, and others have restricted their business activities (Pramono et al., 2021; World Health Organization, 2021). Also, the COVID-19 pandemic has a growing impact on the local and global economy (Durst & Henschel, 2021; Durst et al., 2021). Fears around the unpredictable effects of COVID-19 have already significantly influenced the world’s major economies (Kuckertz et al., 2020). The World Bank determined negative growth rates where Latin America will contract by 7.2% (The World Bank, 2020). Thus, the COVID-19 pandemic has threat business operations and performance (Durst et al., 2021; Williams et al., 2017).

Thus, when the labour market is undergoing a significant restructuring, and creating new paradigms is critical (Finstad et al., 2019), few studies have examined organizational culture (OC) and organizational performance (OP) during the COVID-19 pandemic. In addition, the consequences of the pandemic have also accelerated the trend towards digital and transformed traditional business models (Grözinger et al., 2021; Izzah et al., 2021). Historically, remote jobs have been less cyclical, attributable to their higher proportion of skilled workers (Shibata, 2021) In this way, new evidence is still needed to determine more solid contributions to the strategic management of companies. Therefore, the present work will contribute to closing this gap, filling it in the existing literature.

The COVID-19 pandemic has harmed firm performance, mainly in firms with high levels of organizational slack (Li, 2021), showing that the effects of COVID-19 are increasing the psychological burden at work and leading to changes in OC (Eun-Yi et al., 2021). Similarly, Quick’s (1992) study found that firms possessed a well-defined culture based on core values and basic assumptions, but with little evidence to suggest the extent to which the culture exists in the firm and the relationship between its performance.

In this study, the authors seek to provide empirical evidence that past research has attributed to a relationship between OC and OP. These two may differ in the face of challenges in new work environments. Therefore, while there is a large body of literature on the association between OC and OP (Fang & Yang, 2021; Maamari & Saheb, 2018; Rousseau, 1990), the COVID-19 pandemic is probably causing emerging companies not to see OC as a source of performance and can become more resilient to future environmental disruptions.

Unfortunately, few emerging companies have been prepared for the COVID-19 crisis. The effects of the pandemic require organizations to adapt to new business environments by changing their strategic orientations (Barbu et al., 2021; Chao & Tian, 2011), which motivates the development of this research. In general, specific characteristics of OC should enable firms to perform better. However, emerging firms do not always recognize the real threat posed by a potential crisis event (Herbane, 2010; Kuckertz et al., 2020) and operate under extreme uncertainty (Burke, 2017). Bhaduri (2019) determined that organizations must develop reflective practices that focus on a crisis-prone culture to cope with any event of this magnitude.

Several studies have demonstrated that OC and OP align strongly with the organization’s mission, goals, and objectives (Bhansing et al., 2016). Moreover, these studies highlight that OC and OP play a crucial role in fostering employee motivation (Schwartz et al., 2015), leading to increased commitment to the company (Rahmani et al., 2015). Recent contributions by Stoller et al. (2021) emphasize the importance of promoting internal motivation among employees, thereby avoiding reliance on external rewards or punishments. Additionally, Wahyuningsih et al. (2019) discovered that culture is a powerful tool, reflecting beliefs that can positively drive business performance, particularly in an international environment.

Therefore, the findings indicate a significant knowledge gap between OC and OP, mainly when OC establishes a competitive advantage in coping with change and overcoming crises (Nazariana et al., 2017; Rahmani et al., 2015; Taheri et al., 2015). Thus, it is known that strategic planning elements are employee behaviour, motivation, job satisfaction, creativity and innovation, decision-making and work engagement (Mirkamali et al., 2014). Furthermore, Amaro et al. (2021) established that some companies still need to improve specific characteristics inherent to OC. This research aligns with these studies and aims to enrich the evidence based on the general idea that culture in firms is associated with OP.

In that sense, this research uses Denison’s framework to (a) examine the OC of medium and large firms; (b) analyse their OP; (c) determine whether OC is related to firm performance and (d) establish whether firms’ economic activity would control the relationship between OC and OP.

As Latin American countries, in general, were the most affected during the pandemic recession (Bojorquez et al., 2021; Shibata, 2021), this research has studied large and medium-sized companies in Ecuador of manufacturing, services and commercialization economic activity. Ecuador is considered a benchmark country in Latin America. However, it has more inequalities in terms of economic growth, both within its territory and in comparison with other Latin American countries (Finstad et al., 2019). It is also an emerging economy in the first growth phase, which seeks to promote equal employment opportunities (SENPLADES, 2017). It faces economic challenges through lack of concrete and dynamic actions of social responsibility in welfare and employment (Nadzri & Hassan, 2019). Furthermore, research gaps exist due to a lack of data on this type of company that indicates the horizon of the study variables.

Therefore, this research extends empirical evidence for decision-makers in emerging firms who wish to understand the impact of the performance of these firms through their OC. The main findings indicate that although OC is prevalent among workers in any corporation, it is still incipient for these economies and does not impact OP. Moreover, the COVID-19 pandemic is causing changes in the labour market, motivating companies to transform themselves to survive, and is constrained by the economic activity they carry out.

Consequently, the next section reviews the literature on the study variables. This is followed by the section that details the methodology applied, explaining the sample used, the instrument involved and the data collection. Then, the results of the research are presented. which is followed by the discussion section. Finally, the subsequent sections present the conclusions, implications, limitations and future research recommendations, respectively.

Literature Review and Hypothesis Development

Organizational Culture

OC is a by-product of social culture (Hofstede, 2011). It consists of the set of elements that differentiate an organization and describes workers’ identity (O’Reilly, 1983; Schein, 1988), that is, it refers to the set of shared values and rules that influence the behaviours and thoughts of the organization’s members (Madanchian & Taherdoost, 2016; Marulanda & López, 2018; Rahmani et al., 2015; Taheri et al., 2015). OC generates unity and cohesion by facilitating employee motivation and involvement in performance improvement (Cheung et al., 2012; Kinicki & Williams, 2018).

While the literature presents several theoretical models for measuring OC, the Denison model has been widely discussed as an acceptable framework (Bell et al., 2014; Mojibi et al., 2013; Rahmani et al., 2015) and remains a practical framework in recent research (Metz et al., 2020; Nanyonga et al., 2020; Tulcanaza-Prieto et al., 2021; Wahyuningsih et al., 2019). Denison’s OC model is composed of: (a) Involvement (team orientation, capability development and empowerment) ; (b) Adaptability (creating change, customer focus, organizational learning); (c) Mission (goals and objectives, vision, strategic direction and intention) and (d) Consistency (agreement, core values, coordination and integration).

Denison (1984) stated that managers’ cultural traits and behaviours are derived from the beliefs and assumptions of the firm and its environment. Besides, employee behaviour implicit in mission culture is essential for the achievement of business outcomes (Metz et al., 2020) and thus in leadership practices (inspire, challenge, enable and encourage) (Nanyonga et al., 2020). Jahanian and Amini (2015), in their research on Hamedan telecommunication centres, found that a relatively corporate solid culture emphasizes internal strategic focus, mainly on a mission and adaptive culture. Mirkamali et al. (2014), in their study in Chinese public hospitals, found that employees perceive the culture to be strongest in internal rules and regulations and weakest in empowerment. Furthermore, they stated that cultures strong on cost control are more profitable.

Thus, Denison (1990) demonstrated that OC is a vital instrument that allows leaders, stakeholders and key employees to understand its impact on organizational effectiveness as an indicator of performance and thus learn how to redirect their culture for the better. Tian et al. (2018) argued that the effects of corporate culture and national culture on innovation are complex and heterogeneous, further suggesting that should apply quantitative approaches.

Organizational Performance

The OP consists of (a) financial performance, which includes financial profitability, sales growth, profit growth and profit margin on sales (Pérez López et al., 2004) and (b) non-financial or subjective performance, that is, individual, group and OP (Moyano-Fuentes et al., 2018; Triguero et al., 2012), which is visible in market and innovation indicators (Slater et al., 2010). For Bhansing et al. (2016), OP represents how a firm uses its resources. To Suifan (2021), performance informs managers about which concerns need to be addressed and focuses on high-priority areas. Alinejad and Anvari (2019) mentioned that the increase in competitiveness should encourage companies to focus on a good performance and foster sustainable competitive advantages over time, which implies a balance between the financial and subjective. To this end, Barkat and Beh (2018) identified that performance could correspond to the intellectual capital of employees, which increases organizational value.

Other studies such as Zhu et al. (2021) have linked elements such as Big Data and Analytics to operational efficiency (in less dynamic and complex environments) and business value creation (in more dynamic, complex and generous environments) as a basis for OP. Kristoffersen et al. (2021) found that companies with solid business analytics capabilities have better OP mediated by resource availability and circular economy implementation. Furthermore, Hassan and Jaaron (2021) found a positive correlation between manufacturing and total quality management practices in improving OP. However, the assessment of OP remains complex because organizations generally work with multiple groups of people who may have different points of view, affecting performance perceptions. Therefore, firms must understand how organizational and stakeholder objectives and financial and subjective performance measures coexist (Bhansing et al., 2016; Suifan, 2021; Triguero et al., 2012).

Organizational Culture and Organizational Performance

OC impacts firm performance. It can affect all aspects of an organization, such as strategic planning, employee behaviour, motivation, job satisfaction, creativity and innovation, decision-making and work engagement (Mirkamali et al., 2014). According to Stoller et al. (2021), OC is the key to OP. Companies promote internal motivation in their workers and align it with the institutional mission to avoid seeking rewards or punishments.

Bhansing et al. (2016) discovered that OP effectively communicates and recognizes the firm’s goals and objectives. Similarly, Rahmani et al. (2015) identified that OC plays a crucial role in enhancing employees’ commitment to the accepted norms and values within the organization. In contrast, Low et al. (2020) conducted a study and found that customer orientation, which emphasizes external focus, emerges as the most dominant element of OC, while elements such as technology, innovation, and marketing are relatively less relevant. Consequently, it is widely believed that the culture’s norms, beliefs, and values shape individuals’ day-to-day behavior, thereby influencing the manifestation of organizational practices (Maamari & Saheb, 2018). However, Amaro et al. (2021) proposed that some firms still need to improve specific traits inherent in their OC. Consequently, further evidence is required to explore the relationship between OC culture and OP, particularly in the context of reward orientation and its potential impact on culture and performance.

Frame et al. (1989) identified an organizational transformation intervention based on changes in mission and values. However, they identified some uncertainties in their findings, suggesting little evidence to support a relationship between instilling a set of values in a workforce and improving OP. Rousseau (1990) found that OP was negatively related to normative beliefs of OC. Similarly, Maamari and Saheb (2018) identified that a bureaucratic culture negatively influences performance. Lim (1992) found that these dimensions correspond only in the long run when considering an adaptive culture. Yilmaz et al. (2005) said it should be supported with a strong culture.

Metz et al. (2020) identified that goals and objectives are features of OC that are a good predictor of customer service effectiveness and its components. Likewise, Wahyuningsih et al. (2019) identified in their study of international hotel chains that OC improves competitiveness through internal programmes such as employee empowerment, team orientation, skills development and alignment of work values. However, studies relating OC to OP remain incipient in emerging economies. Thus, it is proposed the following hypothesis:

H₁: The OC is positively associated with OP.

Economic Activity as Control Variable

It is necessary to identify other elements that may influence OC and OP. Globally, almost all national economies have been highly affected due to the COVID-19 pandemic (Durst et al., 2021; Kuckertz et al., 2020; Williams et al., 2017), with catastrophic effects on businesses (The World Bank, 2020). Indeed, the economic impacts associated with COVID-19 are generating economic uncertainty (economies with incomplete markets and liquidity-constrained consumers). Business exit and job destruction may amplify the initial effect, aggravating the recession (Guerrieri et al., 2020).

Besides, Fang and Yang (2021) found in Chinese manufacturers that the enablers of mass customization (custom design, modular design and automated processes) were positively correlated with the internal dimensions of OC (work cooperation and relationship harmony). Furthermore, the results showed that labour cooperation improved OP, while relationship harmony did not impact OP. These tools were intermediate and limited and did not contribute to the overall performance of the whole firm.

Furthermore, Li (2021) identified that the COVID-19 pandemic hurt the performance of manufacturing firms and that organizational slack weakens the negative relationship between the COVID-19 pandemic and firm performance. Also, when there is a positive, aspirational performance gap, the negative relationship between the COVID-19 pandemic and OP in firms with high levels of organizational slack is further weakened. On the other hand, Tortorella et al. (2021) confirmed that the home office work environment positively mediated the relationship between organizational learning and operational performance in service organizations. It demonstrates that individuals’ behaviours and the work environment influence each other, even when individuals are outside the usual work environment, as observed during the pandemic. In their study of hotel companies, Eun-Yi et al. (2021) found that the management strategy in the face of COVID-19 increased the psychological workload of employees, requiring improvement of the OC due to the changes generated by COVID-19. Thus, there is still a lack of evidence in developing economies highlighting the relationship between OC and OP in emerging firms.

In addition, other factors can also influence OP, and economic activity has been included as a control variable to ensure that such factors did not unjustifiably influence the results. The literature addresses diverse scenarios when different industries are involved in the relationship between OC and OP. Recent research has demonstrated the importance of economic activity in explaining OC and OP (Metz et al., 2020; Sapta et al., 2021; Stoller et al., 2021; Wahyuningsih et al., 2019). Liu et al. (2021) identified that OC more significantly affects service companies’ financial performance and varies across industries. In addition, the relationship is more mature in IT-related service firms than in manufacturing firms.

In this way, this study considers that:

H₂: Economic activity controls the relationship between OC and OP.

Combining these frameworks, the conceptual model in Figure 1 illustrates the relationships between the analysis variables and presents the respective research hypotheses.

Figure 1.

Research Model.

Methodology

This research was quantitative with a correlational design. In Statistical Package for Social Sciences (SPSS) (IBM, 2021), 342 surveys were processed. Because a survey was designed to identify the OC effect on emerging Ecuadorian companies’ OP, developed an Exploratory Factor Analysis (EFA) (Iacobucci, 2009; Rennie, 1997). Subsequently, a Confirmatory Factor Analysis (CFA) (Iacobucci, 2010; Kline, 2011) and a Structural Equation Model (SEM) (Hair et al., 2014; Hoyle, 2015) were generated using software such as SPSS version 26.0 for windows and Analysis of Moment Structures were applied for data analysis. Economic activity was included as a control variable. In addition to the hypotheses advanced in this study, it explored the external validity of the early literature (Tulcanaza-Prieto et al., 2021) in this area. It was therefore chosen to conduct an employee’s survey.

Population and Sample

The population included employees of medium and large companies in Ecuador of manufacturing, services and commercialization economic activity. According to the classification of companies for Latin America (World Bank Group, 2014, 2020), it is considered: (a) medium-sized firms with more than 50 workers; and (b) large firms with more than 200. In addition, the Ecuadorian labour market was the most affected by the COVID-19 pandemic (Bojorquez et al., 2021). Despite being a country with economic growth inequality (Finstad et al., 2019), it is an emerging economy in the first phase of growth that promotes equal employment opportunities (SENPLADES, 2017) and is developing social responsibility actions (Nadzri & Hassan, 2019).

The sampling frame could not be determined due to the pandemic situation. A convenience sample was employed, recruited from electronic surveys. Convenience sampling frequently allows the investigator to use intact groups of subjects and collect a large amount of information from many people (Aguilar-Rodríguez et al., 2021; Pires et al., 2003). Convenience sampling was selected to get responses from the employees of the companies, medium and large, in Ecuador.

Due to the difficulty of access to the participants, eight hundred employees from an equal number of medium and large companies were invited. The researchers used a non-random approach with two main criteria to select the sample (Bollen, 1989). First, the respondents should be employees of the companies in 2020 and 2021, ensuring that they established the suitable OC and OP context. In addition, this criterion would mean that all employees would have a more holistic and systemic view of the organization, mitigating perceptions of the status quo. Second, due to the vast diversity of organizations, no restrictions related to sector, ownership (i.e., public or private) or type (i.e., manufacturing, services or commercialization). Three hundred forty-two valid samples were applied for the final analysis.

Instrumentation

An instrument was developed to gauge the relationship between OC and OP within companies emerging had three sections with questions on (a) demographic, (b) OC and (c) OP (see Appendix A).

The measurement of OC used the scale developed by Denison et al. (2006) from the constructs of: (a) involvement (team orientation, capability development, empowerment); (b) adaptability (creating change, customer focus, organizational learning); (c) consistency (agreement, coordination and integration, core values); and (d) mission (goals and objectives, vision, strategic direction and intention).

Regarding OP, the scale by Triguero et al. (2012) was used with the constructs: (a) job stability; (b) individual-level performance and (c) group-level performance. This is because, the literature suggests that OP should be measured by combining financial and subjective indicators (Liu et al., 2021), such as individual, group, OP or innovation (Alinejad & Anvari, 2019; Antony & Bhattacharyya, 2010; Bhansing et al., 2016; Moyano-Fuentes et al., 2018), even more so when the companies studied have gone through a COVID-19 confinement scenario. These indicators are quite comprehensive and cover many dimensions. A seven-point response format was used (1 for strongly disagree and 7 for strongly agree).

Data Collection

Because there is a growing need for longitudinally examining OC and OP (Ahmed et al., 2021; Alharbi et al., 2019; Kim & Chang, 2019), a longitudinal study has been developed to explore the linkage over time to the COVID-19 pandemic. Furthermore, as Little (2013) noted, assessing the adequacy of the expected relations between the indicators, constructs and their consistency across time is vital. For data collection, electronic surveys with workers from medium and large Ecuador companies using the Microsoft Forms platform were conducted from January to May 2020, April to July 2021 and February to May 2022. A follow-up email was sent in early May 2022 to reinforce the invitation to respond to the survey. Sent no subsequent reminder emails because: (a) participants could feel overwhelmed, and responses could have been skewed; (b) it is a longitudinal study that allows monitoring of the same individuals over time; (c) the pandemic conditions motivated the participants to give immediate answers because they were working from home (Tortorella et al., 2021) and (d) in the structural equations methodology, samples between 50 and 100 observations (Iacobucci, 2009, 2010) retain the predictive and explanatory power of the model (Hair et al., 2014), thus not necessary to have such a large sample of employees.

After data analysis, it obtained a sample of 456 workers, which is considered optimal in longitudinal studies (Kim & Chang, 2019; Shazadi et al., 2017). The data were cleaned and screened through different analytical tests, such as missing values and univariate and multivariate outliers’ detection. Due to such reasons, 114 invalid (missing/outliers) questionnaires were excluded, and 342 valid samples were applied for the final analysis. Duplicate data and invalid responses were removed from the database, representing a response rate of 32% (higher than the 15% rate recommended by Hair et al. (2014)). The researchers checked for non-response bias in the dataset between respondents who responded in 2020 (early respondents; n1 = 50) and those who responded in 2021 and 2022 (late respondents; n2 = 63 and n3 = 43). Levene’s test for equality of variances and a t-test for equality of means (Armstrong & Overton, 1977) were applied. The results indicated no significant differences in means and variances between groups.

The age range of participants was from 30 to 50 years, with a mean equal to 35 years; the proportion of men (55%) surpassed that of women. In addition, 47% were married, and 43% were high school graduates, with the remaining 57% holding college degrees or more advanced qualifications. The average job tenure was eight years. Furthermore, 65% of the respondents identified themselves as nonmanagers and 35% as managers. Most respondents (more than 92%) came from Quito and Guayaquil. Table 1 presents the descriptive summary of the companies, where the highest frequency is represented by private commercialization and service companies (59.06%). Service companies prevailed with 16.95% for the public sector, and private sector companies were more representative with 70.76%.

Table 1.

Descriptive Summary of the Sample of Companies.

		Activity			Total Employees
		Manufacturing	Services	Commercialization	Total Employees
Company Sector	Public	25	58	17	100
	Public	7.31%	16.96%	4.97%	29.24%
	Private	40	81	121	242
	Private	11.70%	23.68%	35.38%	70.76%
Total		65	139	138	342
Total		19.01%	40.64%	40.35%	100.00%

Source: Data distribution by sample characteristics.

Results

Factor Analysis

The factor analysis can be either exploratory or confirmatory (Byrne, 2010; Whittaker, 2011). The purpose of factor analysis is to determine whether the observed elements can be described by fewer variables or unobserved components due to the correlation between questions (Wedel & Kamakura, 2000). As there were no previously defined dimensions, and because a survey was designed to detect the OC impact on emerging Ecuadorian companies’ OP, the EFA was used to uncover critical dimensions (Iacobucci, 2009; Rennie, 1997) in the OC and OP.

Specifically, the Promax rotation procedure was applied. An EFA was involved because having a set of variables could be linked. The EFA could determine how many factors exist, the relationship between the elements, and the variables associated with characteristics in an economic emerging (Ullman, 2006). In addition, the instrument used in the population analysis is different from that of similar studies (e.g., Tulcanaza-Prieto et al., 2021).

To identify common method variance (CMV) was used Harman’s single factor score (Hair et al., 2014; Podsakoff et al., 2003, 2012) because it is the most used post-hoc approach to managing CMV and can detect biasing levels in conditions commonly found in the survey based-research (Fuller et al., 2016). This technique is used to see if a single factor can explain most variance. The factor matrix was far less than 50% (variance explained 35%), so there is no threat affecting the data and the results.

Items with a loading ≥0.40 were eliminated because of lower internal consistency and discriminant validity (including the adaptability construct). The Kaiser–Meyer–Olkim was of six dimensions with Bartlett’s test of sphericity significance of 0.000 (Sig. 0.05), ensuring the reliability of the factor analysis and the adequacy of the sample used (Barbopoulos & Johansson, 2016). The items ‘empowerment’ and ‘team orientation’ were considered another Involvement construct, defined as INL. In addition, unified items from the Involvement and Consistency dimension into a factor categorized as COM. The resulting dimensions were: organizational performance (ORP) (7 items); mission (MIS) (11 items); involvement (INV) (5 items); INL (4 items); consistency (CON) (5 items); COM (3 items). Subsequently, item reliability analysis for each factor showed significant Cronbach’s Alphas (Sig. > 0.6) (Hair et al., 2010; Powell, 1992) for each factor: ORP = 0.905, MIS = 0.956, INV = 0.821, INL = 0.890, CON = 0.882 and COM = 0.890.

A CFA was then utilized for testing whether a single factor accounts for most of the variance in the variables, forcing the factor structure derived in the previous analysis, validating the scales and testing for convergent and discriminant validity (Iacobucci, 2010; Kline, 2011). Again, selected only items with an absolute value of 0.40-factor loading for a given factor, and any item loading significantly on more than one factor was deleted, it determined that two should remove items from two dimensions because of inconsistent loadings. Finally, goodness-of-fit indices established an acceptable model with CMIN (chi-square fit index)/DF (degrees of freedom) = 1,409 (Sig. < 5) (Schumacker & Lomax, 2010), CFI (Comparative Fit Index) = 0.931 (Sig. > 0.9) (Fan et al., 1999), TLI (Tucker-Lewis Index) = 0.922 (Sig. ≥ 0.9) (Hu & Bentler, 1999), RMSEA (root mean square error of approximation) = 0.060 (Sig. ≤ 0.08) (Browne & Cudeck, 1993). Figure 2 shows the standardized estimators of the model where all factor loadings are significant (Sig. < 1).

Figure 2.

Note: CFA, confirmatory factor analysis.

Table 2 presents the model’s discriminant validity and composite reliability (average variance extracted > 0.50 and critical region > 0.70). Low values in other coefficients do not affect the validity (Hu & Bentler, 1999), showing that the model has discriminant and convergent validity (Fornell & Larcker, 1981; Hair et al., 2010; Kline, 2011).

Table 2.

Model Validity Measures.

	CR	AVE	MSV	MaxR(H)	ORP	MIS	INV	INL	CON	COM
ORP	0.899	0.597	0.008	0.902	0.773
MIS	0.945	0.655	0.046	0.946	0.036	0.810
INV	0.887	0.662	0.147	0.890	0.016	0.215^*	0.814
INL	0.885	0.720	0.032	0.899	0.085	0.012	0.134	0.849
CON	0.878	0.705	0.032	0.879	-0.070	0.112	-0.038	0.179^†	0.840
COM	0.837	0.633	0.147	0.855	0.090	0.066	0.384^**	0.072	0.049	0.795

Notes: CR, critical region; AVE, average variance extracted; MSV, maximum shared variance; MaxR(H), maximum reliability; ORP, organizational performance; MIS, mission; INV-INL, involvement; CON, consistency; COM, commitment.

Significance of correlations: ^† < .100, ^* < .050, ^** < .010.

Bold values corresponds to critical region.

Structural Equation Model

The SEM presented adequate goodness-of-fit indicators (Hair et al., 2014; Hoyle, 2015) shown in Figure 3. The standardized factor loadings presented logical values (Sig. < 1). The authors improved the model by modifying the indices. In them, it was suggested to correlate some measurement errors related to the dimensions of Mission, Involvement and Consistency, which are some of the factors for measuring OC.

Figure 3.

Note: SEM, structural equation model; ORP, organizational performance; MIS, mission; INL, involvement; CON, consistency; COM, commitment.

Table 3 presents the regression weights. OP was found to be statistically significant with individual and group employee performance, as well as with Job stability (p value < .001). Mission-related dimensions (strategic direction and intention, goals and objectives, and vision) were found to be statistically significant at 99% (p value < .001). The same occurred for Team orientation and Capability development, which contribute to identifying Involvement in companies.

Table 3.

Regression Weights.

Factors			p Value	Results	Factors			p Value	Results
ORP	←	CON	.382	No supported	VSN11	←	MIS	^***	Supported
ORP	←	MIS	.684	No supported	GBJ10	←	MIS	^***	Supported
ORP	←	COM	.384	No supported	GBJ17	←	MIS	^***	Supported
ORP	←	INV	.868	No supported	SDI18	←	MIS	^***	Supported
ORP	←	INL	.362	No supported	TMO19	←	INV	^***	Supported
GLP4	←	ORP	^***	Supported	TMO20	←	INV	^***	Supported
JST3	←	ORP	^***	Supported	CIN9	←	CON	^***	Supported
GLP2	←	ORP	^***	Supported	CDP21	←	INV	^***	Supported
JST1	←	ORP	^***	Supported	CRV28	←	COM	^***	Supported
SDI15	←	MIS	^***	Supported	TMO24	←	INL	^***	Supported
GBJ14	←	MIS	^***	Supported	TMO25	←	INL	^***	Supported
SDI13	←	MIS	^***	Supported	AGR8	←	CON	^***	Supported
VSN12	←	MIS	^***	Supported	CDP27	←	COM	^***	Supported

Notes: ORP, organizational performance; MIS, mission; INV-INL, involvement; CON, consistency; COM, commitment.

p value ^*** < .001

Regarding Core values and Agreements that determine Consistency, significant relationships were identified at 99% (p value < .001). CON was significant at 99% for Coordination and integration, and Agreement. Additionally, coordination, integration, and agreement showed significant correlations with OC at a 99% confidence level (p value < .001). However, when considering the constructs of involvement, consistency, and mission, OC did not demonstrate statistical significance with OP. These findings suggest that there is insufficient evidence to support the notion that OC directly influences OP.

Control Variable

Subsequently, economic activity was included as a control variable, and a better model fit was obtained, as shown in Figure 4.

Figure 4.

Note: ORP, organizational performance; MIS, mission; INL, involvement; CON, consistency; COM, commitment; SEM, structural equation model.

The regression presented in Table 4 showed that firm activity affects OP (p value < .05) and that all dimensions of OC were significant at 99% (p value < .01).

Table 4.

Regression Weights with Control Variable.

Factors			p Value	Results	Factors			p Value	Results
ORP	←	CON	.300	No supported	VSN12	←	MIS	^***	Supported
ORP	←	MIS	.577	No supported	VSN11	←	MIS	^***	Supported
ORP	←	COM	.608	No supported	GBJ10	←	MIS	^***	Supported
ORP	←	INV	.894	No supported	GBJ17	←	MIS	^***	Supported
ORP	←	INL	.483	No supported	SDI18	←	MIS	^***	Supported
ORP	←	Activity	.017	Supported	TMO19	←	INV	^***	Supported
ILP5	←	ORP	^***	Supported	TMO20	←	INV	^***	Supported
GLP4	←	ORP	^***	Supported	CIN9	←	CON	^***	Supported
JST3	←	ORP	^***	Supported	CDP21	←	INV	^***	Supported
GLP2	←	ORP	^***	Supported	CRV28	←	COM	^***	Supported
JST1	←	ORP	^***	Supported	TMO24	←	INL	^***	Supported
SDI15	←	MIS	^***	Supported	TMO25	←	INL	^***	Supported
GBJ14	←	MIS	^***	Supported	AGR8	←	CON	^***	Supported
SDI13	←	MIS	^***	Supported	CDP27	←	COM	^***	Supported

Notes: ORP, organizational performance; MIS, mission; INV-INL, involvement; CON, consistency; COM, commitment.

p Value^*** < .001

Discussion

Contemporary organizations operate in an era of extreme uncertainty due to unpredictable conditions that make them more vulnerable (Burke, 2017). Since the outbreak of the COVID-19 pandemic, the global economy has been gradually paralysed (Durst & Henschel, 2021; Durst et al., 2021; Kuckertz et al., 2020). Economic activities were significantly disrupted as many countries imposed and enforced movement restrictions and social distancing policies to reduce the rate of virus transmission (Pramono et al., 2021; World Health Organization, 2021). Promoting social distancing measures induced organizations to change their operational processes. For example, employees were advised to adopt teleworking, stagger working hours and reduce close contact at work (Mujahid et al., 2020). In that way, the social transformation caused by COVID-19 brought about substantial changes in the organizational structure of companies.

The results of this study show that the social changes brought about by COVID-19 distinguish an OC in which the internal strategic focus prevails. This research highlights three of the four dimensions of the Denison model that are significant in explaining OC: (a) involvement (team orientation, capability development and empowerment); (b) mission (strategic direction and intention, vision and goals and objectives); (c) consistency (coordination and integration and aggregation). In addition, another dimension emerges, labelled commitment (core values and capability development), which integrates specific indicators of involvement and consistency. Organizations that achieve organizational consistency and adaptability can improve their commitment through a corporate culture that induces innovative behaviours (Choi, 2018; Visamitanan & Assarut, 2021).

In this way, it is proposed that firms evaluate (a) the involvement of staff and their leaders in day-to-day activities, as well as the environment where employee participation in decision-making and a sense of belonging are promoted; (b) the consistency of organizational procedures in the creation of internal systems based on consensual support, in addition to hierarchical relationships; (c) the organization’s mission and ability to define a meaningful long-term direction and share a common vision for the future and (d) the cultural values of the workforce and the motivation of managers to build capacity in their workforce. The research results support the findings of Low et al. (2020) in establishing that market (customer), change orientation and organizational learning are not relevant in start-ups.

The study also finds that only agreements, coordination and integration are required to explain consistency. Furthermore, ‘involvement’ is stronger for ‘team orientation’ and ‘capability development’ than for ‘empowerment’. Whereas ‘mission’, ‘strategic direction and intention’, ‘vision’ and ‘goals and objectives’ are required. Therefore, firms value employees making strategic decisions with merit towards the group rather than individual performance. ‘Empowering’ and ‘offering autonomy’ to its members is not common, implying that firms should encourage knowledge sharing and collaborative work, even more so when virtual environments are prevalent. Despite this, employees value that their work results are aligned with the institutional mission.

Also, the findings suggest, as explained by Maamari and Saheb (2018), the importance of workforce motivation in their commitment to the company and inviting managers to identify incentives to reinforce teamwork, especially when companies have abruptly adopted the home office mode. However, it has helped operational performance (Mujahid et al., 2020; Tortorella et al., 2021) and driven the digital trend (Grözinger et al., 2021; Izzah et al., 2021). This study demonstrates that the COVID-19 pandemic calls for other strategic orientations that highlight the OC of emerging firms, as OP requires a deeper look at workers’ individual and group performance and job stability. Otherwise, all efforts made by emerging firms would not impact OP. In addition, the study emphasizes that OC is more valued from the mission dimension and, therefore, is related to staff motivation through work incentives. For medium and large companies that have faced a global crisis due to the coronavirus, it has become relevant to instil an OC linked to emphasizing employee involvement and consistency, but, above all, to reinforce the corporate philosophy through the mission.

Furthermore, the increased culture scores on the mission dimension suggest that firms can potentially improve their strategic direction, objectives and corporate philosophy. The study by Frame et al. (1989) aligns with this finding when they found an organizational transformation intervention based on changes in mission and values. Also, Metz et al. (2020) determined that a well-defined mission provides a clear direction for actions, ensuring business stability. Thus, this research proposes to foster a mission culture, which reinforces the embodiment of organizational identity so that every employee identifies with the company. Besides, the employee behaviour implicit in the mission will be necessary to achieve business results.

The study revealed that OP was significant in ‘individual-level performance’, ‘group-level performance’ and ‘job stability’. Determines that resource efficiency prevails in the firms, mainly taking human capital as a competitive advantage, which is evident in the sustainability and recovery of the firms after the financial and social crisis generated by COVID-19. Bhansing et al. (2016) stated that organizations have competitive advantages that recognize goals and objectives. This research argues that such recognition goes further and is geared towards talent that needs to be retained and developed by employees.

Thus, the study reveals a subjective measure of performance and shows that companies can only realise their resources’ full potential and value when deployed complementarily with managerial capabilities. The findings show a significant relationship with non-financial performance because this research focused on employees of large and medium-sized companies at different hierarchical levels and in different functional areas. It suggests that in addition to the financial indicators evident in OP, firms must assess’ performance through intellectual capital. As such, the role of top management will be important in countering the concerns of their employees as strategic performance mechanisms and focusing their attention on high-priority areas.

Similarly, the study shows that OP is more significant when related to ‘individual-level performance’ and ‘job stability’, which suggests establishing strategies by top management that emphasize employee motivation. Presumably, the risk of being laid off increases the firm’s chances of having better OP (Davis et al., 2020; Le et al., 2021; Luu, 2022; Pramono et al., 2021). Furthermore, this reduces employee dependency and creates a skilled, motivated and flexible workforce. The findings point to fostering an organizational climate in which employees develop a shared understanding of the behaviours valued, rewarded and expected to understand how to contribute to OP without fear of dismissal. The logic behind these findings is that firms should emphasize risk-taking and challenge their work environment, especially in adapting to crucial situations such as COVID-19 that are changing traditional business models and thus shifting from passive to more active employee participation.

On the other hand, studies address a negative association between OC and OP due to COVID-19 (Li, 2021; Maamari & Saheb, 2018). However, the results of this study manifest that OC is not related to OP because COVID-19 has generated increasingly fundamental challenges for emerging firms, prioritizing other criteria in the organization. For example, the firms have experimented profits and loss (Durst & Henschel, 2021; Durst et al., 2021; Guerrieri et al., 2020; Kuckertz et al., 2020; Pramono et al., 2021), determining that economic success depends more on the roles and responsibilities in their product life cycle, neglecting the importance of OC.

All these have meant that companies do not consider OC as a source of OP. While the study shows that companies have worked independently on OC culture and OP, it has yet to be woven into strategic management. Consequently, while culture helps employees overcome adversity at work and fosters their commitment to their jobs, the COVID-19 pandemic has become a threat to the functioning and performance of companies (Durst et al., 2021; Williams et al., 2017).

In line with a study by Liu et al. (2021), economic activity controls the impact of personnel skills on production/service. This impact increases when employees belong to different industries. The dimensions of OP and OC are more significant when they depend on economic activity. Furthermore, the study shows that the company’s activity impacts the commitment dimension, specifically ‘capability development’ and ‘core value.’ These items show another dimension of OC that suggests that companies should seek to develop employees’ capabilities and reinforce corporate values as critical elements of a strengthened OC.

The results also explain the importance of working on OC and OP in developing countries, emphasizing human capital. Thus, workforce behaviours can have a meaningful impact on workers’ attitudes because only focusing on individual practices can overlook the significant system effects on OP that a more macro view capture.

Conclusions

The OC and OP of medium and large firms in Ecuador are examined. The results broaden the understanding of these firms and confirm that, although OC is the predominant pattern of behaviour among people in any corporation, it is still incipient in emerging economies because it has not been seen as a source of OP. The COVID-19 pandemic has caused the labour market to undergo a profound restructuring. As a result, companies require rapid changes to survive as uncertainty and financial insecurity increase, which has not been focused on developing a solid OC geared towards achieving sustainable OP.

OC was significantly related to involvement, consistency and mission. Mission was important for employees. In addition, the dimension commitment was identified that integrates the involvement and consistency items. On the other hand, OP was related to the workforce through individual-level performance, group-level performance and job stability, but OP was more significant with individual-level performance and job stability. Also, when economic activity intervenes in this relationship, OC and OP become more relevant. Thus, OC is more robust in core values and capability development. It is established that the economic activity of firms predicts an increase in the importance of OC and OP, which could be due to the influence of the firm’s industry environment.

In this sense, it is necessary to introduce strategic planning to diagnose both the internal factors of the firm and the dynamics of externalities as primary drivers of employment and value creation of firms. These can occur through management commitment, alignment with strategy, planning and redesign of corporate values, achievable goals in the medium and long term, innovation, redesign of services, selection of human resources committed to the OC, and promotion of the collaborative economy between companies in emerging and developed economies.

The findings, therefore, recommend that decision-makers focus more on strengthening OC as a first step, then work on subjective performance indicators that influence rewarding and motivating workers who meet their goals and finally focus on teamwork to achieve the desired objectives. Top management can see such components as the primary regulators of individual and collective performance. Henceforth, large and medium-sized companies must take the necessary steps to allow for organizational change, appreciate those who achieve goals and be alerted to changing environments such as the COVID-19 pandemic. Teamwork is emphasized as an element that strengthens work ethics and organizational practices; this will lead to a better appreciation of the norms, values and beliefs that members of the organization hold. These findings could be a starting point for implementing a national innovation system based on OC.

Research Implications

Theoretical Implications

This study contributes to the current literature by providing further empirical evidence in the following manner. First, it demonstrates that the Denison model remains an essential instrument for measuring OC, where involvement, consistency and mission are crucial elements of OC in emerging firms. However, the mission is the most dominant; thus, emerging firms emphasize organizational values development of workers’ capabilities. In addition, the research result establishes that OP is given by arrangement at the individual level and job stability.

Second, the study establishes that OP does not depend on OC. Therefore, this provides evidence to researchers that external events such as the COVID-19 pandemic can impact the strategic decisions of start-ups and emerging companies.

Third, the study shows that the economic activity of companies controls both the OC and OP (Liu et al., 2021), suggesting improving employees’ capabilities and reinforcing corporate values.

Therefore, the present study’s findings break multiple paths through significant results, especially in the context of emerging economies. The results of this research can also be used to recognize other OCs and performance and the influence of economic activity. The present study contributes to the previously available literature on OC and OP and provides insight for future researchers to examine their relationships and impact in developing countries.

Managerial Implications

Some practical implications can be derived from this study for emerging companies’ leaders, managers and decision-makers. First, it demonstrates that OC is essential within organizations; thus, these companies are encouraged to design work environments that support OC, specifically in the involvement, consistency and mission.

Second, the study demonstrated that non-financial performance is more important in OP. Proposes to design programmes emphasizing individual/group-level performance and job stability to improve OP over time. Though the risk of the employees being laid off increases the firm’s chances of having better OP, it also generates that employee acquires professional new learning. In addition, the firms should focus on the organization’s strategic position and fostering a corporate climate with a skilled, motivated and flexible workforce.

Third, despite the far-reaching impact of COVID-19, especially on the economy and the business sector, OC and OP are essential, but it is integrating independently into business strategies. In the study, OC lacks evidence that influences the OP of emerging firms such as Ecuador. Therefore, managers, leaders and decision-makers must consider the worth of CO and OP for improving employee outcomes in organizations. The organization’s management must promote and encourage CO and OP to increase employee and organizational effectiveness.

Fourthly, according to economic activity, OP and OC are stronger within companies. Thus, economic activity could stimulate an OP through the OC that focuses on acquiring and exploiting knowledge with various learning mechanisms and channels in the employees of medium and large companies.

Finally, considering the significant findings, together with large and medium-sized companies, other organizations, such as SMEs, will learn the importance of OC and OP as critical fundamentals for employees.

Limitations

The study had four limitations. First, the sample of companies was the most representative industries of Ecuador, manufacturing, services and commercialization, so care must be in when generalizing the results to all industries. Second, the study collected data from workers at all hierarchical levels and economic activities for industries for manufacturing, services and commercialization, which could lead to personal biases in the responses and skew the interpretation of the results, mainly because the answers could have been concentrated in one industry. Third, the increase in unemployment, the inexplicable fear, wavering emotions and stress caused by the COVID-19 pandemic may have changed employees’ perceptions. Fourth, the decline in consumer demand due to business closures may have led to changes in OP indicators and OC in the companies assessed.

Suggestions for Future Research

Although the study focused on manufacturing, service and commercialization companies, other research could be extended to distinct strategic sectors and other economic activities from public sector work environments since these companies present different ways of carrying out OC and OP. It would also be beneficial to replicate this research in different countries with developing economies. In addition, it would be an indicator of analysis of control variables such as the age and gender of employees, as there are likely differences in how they were affected during the pandemic recession. Further research should separately assess the impact of each element of OC on OP and include other variables of interest such as organizational climate and job satisfaction.

Another recommendation would be to carry out a comparative analysis of the findings of the public and private sectors and the economic activity of the industries. Furthermore, an investigation of the effect of OP and leadership on the growth strategies of SMEs would complement the present research work.

Appendix A

This study aims to determine the trait-related information on the organizational culture and performance of Ecuadorian large and medium-sized emerging firms.

This survey is divided into three sections. In the first section, you will answer the identification questions, such as gender, education, marital status, age, city, sector, economic activity, job tenure, and position. The second section will have statements about organizational culture that will measure on a scale of 1 to 7, where one means that you disagree and seven means that you are in full agreement. Finally, the third section will have organizational performance on a scale of 1 to 7, equivalent to ones disagree and seven as strongly agree. The development of this survey will take approximately ten (10) minutes of your time.

First Section

By each category, please mark the most appropriate answer whit an ‘x’:

Gender: Male ___ Female: ___

Marital status: Single ___ Married ___Divorced ___ Widowed ___

Education: Less than high school ___ Bachelor’s degree ___ High school ___ Master’s degree ___

Doctoral degree ___

Age: ___

City: ___

Job tenure: ___

Sector: Public ___ Private ___

Economic activity: Manufacturing ___ Services ___ Commercialisation ___

Second Section

Please specify your agreement or disagreement with the following statements by marking the appropriate response where 1 = strongly disagree, 2 = slightly disagree, 3 = disagree, 4 is interpreted as a neutral response, 5 = slightly agree, 6 = agree and 7 = strongly agree.

Organizational Culture	1	2	3	4	5	6	7
1. Most employees are highly involved in their work.
2. Information is widely shared so everyone can get the information they need when needed.
3. Business planning is ongoing and involves everyone in the process.
4. Work is organised so everyone can see the relationship between their job and the organization’s goals.
5. Teamwork is used to get work done rather than hierarchy.
6. Teams are our primary building blocks.
7. Authority is delegated so that people can act on their own.
8. People work like they are part of a team.
9. Cooperation across different parts of the organization is actively encouraged.
10. The ‘bench strength’ (capability of people) is constantly improving.
11. Problems often arise because we do not have the skills necessary to do the job.
12. There is continuous investment in the skills of employees.
13. The way things are done is very flexible and easy to change.
14. Customer comments and recommendations often lead to changes.
15. Innovation and risk-taking are encouraged and rewarded.
16. Customer input directly influences our decisions.
17. It is easy to reach a consensus, even on complex issues.
18. A characteristic management style and a distinct set of management practices exist.
19. An ethical code guides our behaviour and tells us right from wrong.
20. When disagreements occur, we work hard to achieve ‘win-win’ solutions.
21. Ignoring core values will get you in trouble.
22. Leaders and managers practice what they preach.
23. People from different parts of the organization share a common perspective.
24. The approach to doing business is very consistent and predictable.
25. A clear mission gives meaning and direction to our work.
26. There is a clear strategy for the future.
27. There is a long-term purpose and direction.
28. The strategy leads other organizations to change how they compete in the industry.
29. The strategic direction is unclear.
30. We continuously track our progress against our stated goals.
31. There is widespread agreement about goals.
32. The leadership has ‘gone on record’ about the objectives we are trying to meet.
33. People understand what needs to be done for us to succeed in the long run.
34. Leaders have a long-term viewpoint.
35. The vision creates excitement and motivation for the employees.
36. We have a shared vision of what the organization will be.
37. We can meet short-term demands without compromising our long-term vision.

Third Section

Organizational Performance	1	2	3	4	5	6	7
38. Vacancies that require experience are filled by internal promotion.
39. The organization regularly allows internal promotion.
40. The firm is committed to securing job stability.
41. Employees are often made redundant.
42. Employees are satisfied working in the organization.
43. Employees are happy working in the organization.
44. Employees are satisfied with their performance.
45. The employee group makes a solid contribution to the organization.
46. The employee group performs well as a team.
47. The employee group meets its performance targets.

Footnotes

Acknowledgement

The authors are grateful to the anonymous referees of the journal for their extremely useful suggestions to improve the quality of the article. Usual disclaimers apply.

Declaration of Conflicting Interests

The authors declared no potential conflicts of interest with respect to the research, authorship and/or publication of this article.

Funding

The authors received no financial support for the research, authorship and/or publication of this article.

ORCID iD

Iliana E. Aguilar-Rodríguez

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