OBJECTIVE: This study examines the relationships among organizational culture, quality improvement processes and selected outcomes for a sample of up to 61 U. S. hospitals. DATA SOURCES AND STUDY SETTING: Primary data were collected from 61 U. S. hospitals (located primarily in the midwest and the west) on measures related to continuous quality improvement/total quality management (CQI/TQM), organizational culture, implementation approaches, and degree of quality improvement implementation based on the Baldrige Award criteria. These data were combined with independently collected data on perceived impact and objective measures of clinical efficiency (i.e., charges and length of stay) for six clinical conditions. STUDY DESIGN: The study involved cross-sectional examination of the named relationships. DATA COLLECTION/EXTRACTION METHODS: Reliable and valid scales for the organizational culture and quality improvement implementation measures were developed based on responses from over 7,000 individuals across the 61 hospitals with an overall completion rate of 72 percent. Independent data on perceived impact were collected from a national survey and independent data on clinical efficiency from a companion study of managed care. PRINCIPAL FINDINGS: A participative, flexible, risk-taking organizational culture was significantly related to quality improvement implementation. Quality improvement implementation, in turn, was positively associated with greater perceived patient outcomes and human resource development. Larger-size hospitals experienced lower clinical efficiency with regard to higher charges and higher length of stay, due in part to having more bureaucratic and hierarchical cultures that serve as a barrier to quality improvement implementation. CONCLUSIONS: What really matters is whether or not a hospital has a culture that supports quality improvement work and an approach that encourages flexible implementation. Larger-size hospitals face more difficult challenges in this regard.