402 G.S. Hansen and B. Wernerfelt capital budgeting policies, climate as measured climate across departments in the by employee response to questionnaires reflects zation, the departmental effects are much weaker the individual's per ceptions of that employe 41-42) organizational effects(Drexler, 1977 han ti bout the effect or presence or nature of certain organizational phenomena. Climate is not tructure-size,production processes, arrange Denison(1982), using the same climate instru ments, or number of levels. Structure may ment with substantially more firms, also demon influence human behavior, but it is not necessary strated that climate measures were more appro- to examine human behavior to describe an priate at the organizational level rather than at organization's structure. Additionally, the same the group or individual levels. Glick's(1985) structures in different organizations may produce review of the psychological and organizational very different climates (Springer and Gable, climate literature and the empirical corrections 980)as structure is only one of the many he makes to Drexler's work leads him to conclude factors that significantly infuence the worker's Thus, the concrete conclusion is that Drexler's Numerous studies have demonstrated how reliable measures of organizational clima.a- perceptions of his or her work environment aggregated perceptual measures are indee changes in organizational structures, systems and Given constraints on data access it was not practices have altered climate measures and possible to duplicate the above tests for this hence individual performance(Pritchard and study; nor was it deemed necessary, given these Karasick, 1973; Litwin and Stringer, 1968; For- prior tests of the same instrument shand and Gilmer, 1964). Lawler et al.(1974) Of course, there are many competing theories studied 117 research laboratories and demon- and concepts of firm-level performance and no strated that both organizational structure(span of single construct has emerged in the literature control, size, levels) and organizational processes We will interpret a positive association between (performance reviews, budgeting, collaboration) overall firm climate and profitability as support re more closely associated with climate meas- for one theory of organizational determinants of ures than with performance(both subjective and performance. It is possible to interpret the climate objective) measures, and that organizational scores in light of competing theories. That is climate was directly linked to performance. Other high climate scores may indicate that the key more clinical efforts have shown linkages between contingencies are satisfied, or that corporate managerial practices and attributes or dimensions culture is appropriate to the environment, etc of organization climate and firm performance (Denison, 1984). If one subscribes to such an ditional climate model of firm performance from our models are biased towards zero. We To empirically validate that climate was indeed use the climate data because they have some a firm-level construct, Drexler(1977)examined significant history in the literature 1256 work groups representing 6996 individuals many elements of organizational phenomena,are 21 organizations to test the strength of the appropriate for analysis at the firm level,are organizational climate construct at the organi- largely infuenced by managerial actions and are zational level rather than at a departmental available for a reasonable number of representa or some sub-organizational level. His findings tive firms strongly support the use of our measures of organizational climate for firm or organizational analvSIS DATA AND MEASURES The results reported in this study should encour- The sample includes 60 Fortune 1000 firms ge those researchers who consider organi representing both dominant and lesser members zational climate to be an organizational attribute A large share of the variance in measures of of the ese firms togetl limate that describe organization-wide cor comprise over 300 lines of business as determined at the four-digit SIC level. While the sample is While there are differences in organization not large, it is clearly representative of major