Relationship between organizational culture and firm performance: A case study in Viet Nam

Hue University Journal of Science: Economics and Development 
pISSN 2588-1205; eISSN 2615-9716 
Vol. 130, No. 5B, 2021, pp. 5–15; DOI: 10.26459/hueunijed.v129i5A.5961 
* Corresponding: hung.hoang@hce.edu.vn 
Submitted: August 14, 2020; Revised: September 7, 2020; Accepted: April 17, 2021 
RELATIONSHIP BETWEEN ORGANIZATIONAL CULTURE 
AND FIRM PERFORMANCE: A CASE STUDY IN VIETNAM 
Nguyen Thị Thuy Hang1, Nguyen Hiep2, Nguyen Phuc Nguyen2, Hoang Trong Hung3,* 
 1 Pham Van Dong University, 509 Phan Dinh Phung St., Quang Ngai City, Quang Ngai, Vietnam 
2 The University of Da Nang, 41 Le Duan St., Hai Chau, Da Nang, Vietnam 
3 University of Economics, Hue University, 99 Ho Dac Di St., Hue, Vietnam 
Abstract. Literature on organizational culture constantly reinforces the notion that organizational culture is 
necessary for firm performance. Nevertheless, limited studies have been conducted in Vietnam. This study 
aims to examine the relationship between components of organizational culture and firm performance. 
Primary data were collected through questionnaires answered by 982 employees in Vietnamese enterprises. 
Multiple regression was used to test the proposed model. The results show that consistency and 
involvement are the highest influencing factors of firm performance, while adaptability is the lowest. Thus, 
managers and leaders are recommended to develop a strong culture in the organization to improve their 
firm performance. 
Keywords: organizational culture, firm performance, Vietnamese enterprises 
1 Introduction 
Organizational culture plays a crucial role in an organization’s daily operations as it is considered 
one of the key factors for stability and competitive advantage. Further, it can offer numerous 
advantages, such as cooperation, control, communication, and commitment [12]. Although 
culture is often conceived as intangible, difficult to understand, there has been significant 
research in the literature to explore the impact of organizational culture on firm performance [7, 
9, 19, 20]. Most of the research has applied Denison’s organizational model, and this model 
includes four dimensions, namely mission, involvement, adaptability, and consistency. This is 
because each of the four major cultural traits in Denison’s model promotes superior firm 
performance [19], its integrative nature, as well as its emphasis on both internal and external 
factors [20]. However, the majority of existing studies on organizational culture and performance 
have concentrated in developed countries. In Vietnam, there has been little research to explore 
this relationship [8, 16]. A few prior studies are carried out in a specific area, e.g., project 
management or a specific province, which can lead to the limitation in generalization. Therefore, 
this study aims to explore the relationship between organizational culture and firm performance 
in the context of Vietnam. 
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2 Literature review 
2.1 The concept of culture 
According to Schein, organizational culture is defined as “the pattern of basic beliefs and 
assumptions that a group has invented, discovered, or developed while it learns to cope with its 
problems of external adaptation and internal integration, and that has functioned so well to be 
considered valid, and consequently is taught to new members as the correct way of perceiving, 
thinking and feeling regarding those problems” [9]. Besides, the culture of an organization could 
be defined as the embodiment of its collective systems, beliefs, norms, ideologies, myths, and 
rituals [20]. An approach based on work practice defines project organization culture as “the set 
of behaviors or attitudes observed in perceptions of practices shared by project participants in 
particular ways that help explain or resolve the problems encountered during the course of a 
project” [8]. 
So far, the term ‘organizational culture’ has been proved to be difficult to define, but several 
researchers agree that organizational culture includes the norms, perspectives, values, 
assumptions, and beliefs, which are shared by organizational members. Even so, there is a 
considerable challenge for external researchers who want to assess the organizational culture 
because it is even difficult for members of an organization to describe their own culture. An 
organizational culture model developed by Denison [4], which includes four traits of 
organizational cultures: involvement, consistency, adaptability, and mission, represents 
underlying beliefs, values, and assumptions and has been used widely in the literature. Denison 
conceptualizes four major cultural traits as second-order, broader factors, and each of them 
composes three component indexes. Each of these component indexes is measured with five 
items. The four traits of organizational culture include: 
• Mission – the degree to which the company know ...  of the performance are adopted from [14]. The scale can be used fully or 
partially (selected dimensions), depending on the nature of each investigation [10]. In fact, the 
accounting-based measures can reflect the past performance of the company, while the market-
based indicators help to anticipate future performance [2]. Moreover, non-financial 
measurements are worth to be incorporated [7, 11]. Therefore, in this study, from the suggestion 
by [9], business performance and the organization’s effectiveness are used to measure 
performance. Each question uses the five-point Likert scale to score from “very disagreeable” to 
“very agreeable”. 
Each questionnaire response is captured onto a computer software program for analysis 
and control. Descriptive analysis, factor analysis, and regression analysis were used to determine 
the causal relationship between organizational culture and firm performance. 
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4 Results 
Reliability analysis 
Table 2 shows Cronbach’s alpha coefficients for all constructs. Overall, the constructs achieve 
high reliability because the coefficients are above 0.7. 
EFA analysis 
The results of the factor analysis are depicted in Table 3. The factor loadings of culture, calculated 
by using the Kaiser–Meyer–Olkin (KMO) measure of sampling adequacy and Bartlett’s test, show 
that the data are suitable for factor analysis. The KMO value is 0.905, which is above the suggested 
threshold of 0.6. The low significance of Bartlett’s test also satisfies the requirements (Chi-square 
= 5286.911). The factor loadings with the threshold greater than 0.5 are considered. The final factor 
loading matrix shows that the four culture components, which are initially extracted, account for 
73.135% of the total variance in the 12 cultural artifacts, with the eigenvalues greater than 1.0, 
which indicates that those extracted artifacts can help to explain the organizational culture. 
The factor analysis for firm performance indicates two factors solution with the 
eigenvalues greater than 1.0, and the two factor component explains 73.763% of the total variance. 
The KMO measure of sampling adequacy is 0.833, which is considered as sufficient inter-
correlation while the Bartlett’s test of sphericity is significant with Chi-square at 2454.519. After 
factor analysis, all items remain. The items are grouped together in the intended theoretical 
manner. Table 4 illustrates the details of the factors. 
Table 2. Constructs Cronbach's alpha coefficients 
Construct Number of items Cronbach's alpha 
Organizational culture (12 items) 
Involvement 3 0.826 
Consistency 3 0.804 
Adaptability 3 0.804 
Mission 3 0.801 
Firm performance (6 items) 
Business performance 3 0.827 
Organization effectiveness 3 0.797 
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Table 3. Factor loading of culture 
Variables 
Factor 1 Factor 2 Factor 3 Factor 4 
Invol Consi Miss Adap 
1. Decisions made where the best information. 0.792 
2. Relationship between job and the goals. 0.765 
3. Investment in the skills of employees. 0.789 
4. The leaders and managers “practice what they preach 0.738 
5. Agreement about the right way and the wrong way to do 
things. 
 0.813 
6. Alignment of goals across levels. 0.777 
7. Different parts cooperate to create change. 0.756 
8. Customer influences our decisions. 0.823 
9. The “right hand knows what the left hand is doing.” 0.760 
10. Strategy leads organizations to change the way compete 0.755 
11. Understand what needs to be done. 0.769 
12. Vision creates excitement and motivation. 0.811 
Approx. Chi-Square 5286.911 
KMO 0.905 
Bartlett's Test of Sphericity df 66 
Total Variance Explained 73.135%, 
Table 4. Factor loading of performance 
Variables 
Factor1 Factor2 
Business 
performance 
Organization 
effectiveness 
1. Image is better than that of the competitors. 0.842 
2. Attraction to professionals was 
higher than competitors. 
0.867 
3. Employee morale is higher than competitors. 0.755 
4. Innovative degree is higher than competitors 0.778 
5. Market share is higher than competitors. 0.736 
6. Staff turnover was lower than competitors 0.885 
Approx. Chi-Square 2454.519 
KMO 0.833 
Bartlett's Test of Sphericity df 15 
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Regression analysis 
Regression analysis between organizational culture and business performance 
The adjusted R2 is 0.424, which means that the predictor variables account for 42.4% of the 
variance in business performance. Further, F statistic is significant at 0.000, which shows the 
fitness of the model. The result of regression analysis is presented in Table 5. 
The standardized coefficients are positive and statistically significant at different levels 
(Invol (t (977) = 7.858, p = 0.000); Consi (t (977) = 7.058, p = 0.000); Adap (t (977) = 5.673, p = 0.000); 
and Miss (t (977) = 6.179, p = 0.000)). These four dimensions of organizational culture affect 
business performance. Of which involvement has the highest impact, and adaptability has the 
lowest impact on business performance. Further, the variance inflation factor (VIF) and the 
tolerance coefficient of the independent variables are less than 3 and greater than 0.1. This shows 
that the model does not contain multicollinearity. 
Regression analysis between organizational culture and organizational effectiveness 
 The adjusted R2 is 0.34, which indicates that the predictor variables account for 34% of the 
variance in organizational effectiveness. Further, the model fits well since F statistic is significant 
(p < 0.001). Table 6 presents result of regression analysis. 
 Table 5. Influence of organizational culture traits on business performance 
Model 
Unstandardized 
coefficients 
Standardized 
coefficients t Sig. 
Collinearity statistics 
B Std. Error Beta Tolerance VIF 
 (Constant) 0.977 0.353 2.770 0.006 
Invol 0.223 0.028 0.242 7.858 0.000 0.618 1.617 
Consi 0.247 0.035 0.218 7.058 0.000 0.617 1.620 
Adap 0.196 0.035 0.173 5.673 0.000 0.634 1.577 
Miss 0.213 0.034 0.191 6.179 0.000 0.612 1.634 
Table 6. Influence of organizational culture traits on organization effectiveness 
Model 
Unstandardized 
coefficients 
Standardized 
coefficients t Sig. 
Collinearity statistics 
B Std. Error Beta Tolerance VIF 
 (Constant) 2.885 0.323 80.938 0.000 
Invol 0.146 0.026 0.186 5.622 0.000 0.618 1.617 
Consi 0.212 0.032 0.219 6.620 0.000 0.617 1.620 
Adap 0.136 0.032 0.140 4.291 0.000 0.634 1.577 
Miss 0.179 0.032 0.189 5.674 0.000 0.612 1.634 
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The standardized coefficients are positive and statistically significant at different levels. 
The four dimensions of organizational culture affect organization effectiveness. Of which 
consistency has the highest impact, and adaptability has the lowest impact on organizational 
effectiveness. Further, the variance inflation factor and the tolerance coefficient of the 
independent variables are less than 3 and greater than 0.1. This shows that the model does not 
contain multicollinearity. 
In summary, the results in both Table 5 and Table 6 show that all relationships are 
statistically significant, and all the hypotheses are accepted. These results mean that 
organizational cultural dimensions have a significant influence on firm performance. 
5 Discussion and conclusion 
This study aims to identify the relationship between organizational culture and firm performance 
in the context of Vietnam. The paper demonstrates that all the four cultural traits adopted in the 
study have a significant positive influence on firm performance. Consistency and involvement 
are the most prominent of the four traits in terms of fostering firm performance. This result is 
consistent with that of the study of [8] that an effective organization should include the four 
organizational culture traits: involvement, consistency, adaptability, and mission. The analysis of 
these traits and their sub-dimensions can direct managers towards the appropriate actions 
necessary to create, develop, and change the culture [5]. This study further confirms the 
usefulness of Denison's model in measuring organizational culture. DOCS is a systemic 
description and a direct, comprehensive analysis of the organizational culture by means of the 
assessment of the behavior patterns associated with performance [9]. 
 Based on the results, we recommend that managers should consider developing a 
conducive organizational culture that requires a culture of consistency, involvement, mission, 
and adaptability. Firstly, consistency can provide everyone with a clear direction for their work. 
In particular, in the context of the 4.0 industrial revolution, businesses need to apply technology 
to build operational processes to ensure that work is coordinated and integrated to serve the 
organization as a whole and to achieve common goals. This issue helps to engender internal 
consistency. In addition, the organizations with clear missions emphasizing internal consistency 
are stable. Moreover, the involvement – the degree to which individuals at all levels in the 
company are engaged and committed to their organizational goals, has important implications 
in relation to day-to-day operations in enterprises. Employee involvement helps to serve the 
clients and continually seeks to meet the clients’ future needs and improve ways to satisfy clients’ 
expectations. Regarding this factor, the study recommends that the organizational culture in 
today's context cannot be created unconsciously, based on the values of leaders and managers. 
The organizational culture needs to be managed by leaders and managers according to its 
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relationship with employees and firm performance. To this end, the adaptability–ability of the 
company to know what customers want and the degree to which the company can respond to 
external forces and demands are also important. Managers should build an adaptability culture 
to improve satisfaction and firm performance [16]. 
 Although this research has successfully explored the relationship between the traits of 
organizational culture and firm performance, some limitations still exist. First, the sampling 
technique used is convenience sampling, so the generalization of research results is limited. 
Second, the scope of the study is limited to the employees. Future studies may also include all 
employees and management to avoid bias in the perceptions of each subject. 
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