Organizational culture refers to the shared values and norms that control how people interact within an organization and with external stakeholders. Values are beliefs about goals and appropriate behaviors, while norms prescribe appropriate behaviors in different situations. Culture is transmitted through stories, myths, and socialization as new employees learn the organization's values and norms. An organization's culture can be adaptive and encourage innovation or inert and discourage initiative from middle and lower managers. Social capital refers to how norms and values influence how people work together and treat one another. Strong cultures can profoundly impact performance, either positively or negatively.

1. Culture IX-A