I've contracted for many huge corporations where where this culture of fear was prevalent. On the surface it appears as a great tool for motivating an organization to meet or exceed unrealistic metrics.
It is utilized by short-sighted management driven by what is perceived as the quickest path to maximum compensation in the form of bonuses.
The reality is a culture of blame deflection and unnecessary stress. It actually impedes productivity as you spend a great deal of time waiting for replies or approvals in writing (e-mail, never verbal) to proceed with any action that may expose you to castigation. Cover-your-ass is a game you learn to master in such environments. I estimate that an average of 40% of my billable time was spent on just CYA. This is the only way you last.
Culture of fear and high employee turnover go hand-in-hand. Having to constantly re-train employees doesn't improve productivity in any way.
The other side of the coin is all this unnecessary stress leads to employees developing health problems - calling out sick frequently, which greatly impedes productivity. Dependence on alcohol or drugs (prescription or otherwise) - The human psyche is like a tea kettle. Once it reaches its boiling point all that pressure has to be released somewhere.
In my case, I became indifferent and view all those evangelists of this fear culture with pure contempt. The most defective humans I've ever had the displeasure of meeting were prophets of fear. I am sure this opinion is shared by anyone who has spent any significant time in this environment.
Beer icon because it's Friday and the pub is stress release central.