Firms invest in communication to create common languages or codes that the members of the organization must share, in order to develop an organizational culture directed towards attaining the maximum potential for the generation of income. Therefore, the managers of a firm face a trade-off between spending resources to stimulate such a culture, and using these resources to accumulate inputs such as physical and human capital. The article analyzes this trade-off by assuming a dynamic scenario. Under an inter-temporal set-up, a long-term equilibrium point can be achieved, which describes the moment that is no longer worthwhile to continue to invest in organizational capital, since the gains in terms of language sharing cease after this point: The investment costs exceed the marginal productivity gains resulting from increased understanding. The steady state result is analyzed and the convergence conditions are derived here. The model also includes the possibility of an external changing environment that forces a firm to revise its concept of culture.

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Management Research Journal,Organizational Culture,Corporate Culture,Political Economy,Federal Reserve Bank,Dynamic Environment,Communication System,Communication Process,Convergence Dynamics,Hamiltonian Function,Interpersonal Communication