EFFECTS OF PSYCHOLOGICAL CONTRACT FULFILLMENT, PERCEIVED ORGANIZATIONAL SUPPORT, LEADER-MEMBER EXCHANGE, AND WORK

Transcription

1 EFFECTS OF PSYCHOLOGICAL CONTRACT FULFILLMENT, PERCEIVED ORGANIZATIONAL SUPPORT, LEADER-MEMBER EXCHANGE, AND WORK OUTCOMES: A TEST OF A MEDIATING MODEL Millissa F. Y. Cheung Department of Management and Marketing The Hong Kong Polytechnic University Hung Hom, Hong Kong Tel: (852) Fax: (852) millissa.cheung@polyu.edu.hk Warren C. K. Chiu Department of Management and Marketing The Hong Kong Polytechnic University Hung Hom, Hong Kong Tel: (852) Fax: (852) mschiuw@polyu.edu.hk *Correspondence regarding this manuscript may be addressed to Millissa F. Y. Cheung, Department of Management & Marketing, The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong. 1

2 Abstract Drawing on social exchange theory and the norm of reciprocity, this study proposed and tested how perceived organizational support (POS) and leader-member exchanges (LMX) mediated the effects of psychological contract fulfillment on the work attitudes and behavioral outcomes of employees. Three hundred and fifty-four supervisor-subordinate dyads working in a Chinese manufacturing firm participated in the study. The findings suggest that the extent of psychological contract fulfillment is positively related to employee attitudinal (affective commitment and attachment to supervisor) and behavioral outcomes (task and contextual performances). Both POS and LMX were found to fully mediate the relationship between perceived contract fulfillment and task performances. Besides, POS and LMX were reported to partially mediate the effects between perceived contract fulfillment and affective commitment as well as on attachment to supervisor. Turnover intentions were fully mediated by LMX but not mediated by POS. The implications of the results for theory and practice were discussed. Key Words: Psychological contract fulfillment, Leader-member exchanges, Perceived organizational support, Reciprocity, China 2

3 Downsizing, outsourcing, and the use of a contingent workforce have led to many changes in the employment relationship. These trends often keep people from getting what they expect from their employment relationship and lead them to feel violated (Johnson & O Leary-Kelly, 2003; Robinson, Kraatz & Rousseau, 1994). In studying these changes, researchers often rely upon a social exchange perspective. Social exchange theory (Blau, 1964) suggests that individuals not only expect economic but also social obligations from employers. Social exchanges have been widely adopted to explore different aspects of the employment relationship, such as the relationship that employees have with their employer (Dabos & Rousseau, 2004; Gakovic & Tetrick, 2003) and their supervisor (Wayne, Shore & Liden, 1997). The exchange of obligations is repeated in cycles of reciprocity where individuals may feel indebted to return the beneficiary actions to the provider. Past research has indicated that employees who believed that obligations to them were not met (Robinson & Morrison, 1995) display negative work outcomes, such as a reduction in the level of their work performances (e.g., Robinson, 1996; Robinson & Morrison, 1995; Robinson & Rousseau, 1994; Turnley & Feldman, 1999; Turnley & Feldman, 2000) and less positive work attitudes; for example, less job satisfaction (Turnley & Feldman, 1998), a lower level of organizational commitment (Guzzo, Noonan, & Elron, 1994), a lower level of trust in the organization (Robinson, 1996), and a greater tendency to want to leave the organization (Lo & Aryee, 2003). Among the studies that have focused on broken promises, a few have explored the issue of how employees may respond to situations when the norm of reciprocity is not honored (Coyle-Shapiro & Kessler, 2002; Dabos & Rousseau, 2004). Employees who receive more inducements than promised (Conway & Briner, 2002; Coyle-Shapiro & Kessler, 2002; Turnley & Feldman, 2000) may experience satisfaction with the inducements involved (Adams, 1965; Lawler, 1971; Locke, 1976). However, except for the work of Conway and Briner (2002) and Turnely et al. (2003), little is known about the 3

4 impacts of fulfillment on the attitudinal and behavioral outcomes of employees. These studies have shown that when employees received more than they expected in terms of promises delivered, they tend to increase their task and contextual performances, experience job satisfaction, and exhibit continuous commitment to the organization. Studies on psychological contracts have been limited by the methods used to operationalize breaches of contract. A breach is often operationalized by subtracting what promises are expected from what are received from the employer; henceforth, the so-called the difference score (Coyle- Shapiro & Kessler, 2002; Guzzo, Noonan, & Elron, 1994; Porter, Pearce, Tripoli, & Lewis, 1998; Robinson, 1996). However, this method is criticized as being mathematically and methodologically flawed (Edwards, 1994; John, 1981; Lambert, Edwards, & Cable, 2003). In the studies that have been conducted on psychological breaches of contract, little has been done to provide a clear description of the process by which fulfilling the psychological contract affects work outcomes. The exception is the work of Robinson (1996), Turnley and Feldman (2000), and Johnson & O Leary-Kelly (2003). Robinson (1996) and Turnley and Feldman (2000) found that trust in the employer, job dissatisfaction, and unmet expectations fully mediated the relationship between breaches to the psychological contract and employee behavior (organizational citizenship behavior) and partially mediated breaches to the psychological contract and work attitudes (turnover intentions). Moreover, organizational cynicism was found to partially mediate the effects of breaches to the psychological contract on work attitudes (organizational commitment, job satisfaction, and emotional exhaustion) but not on behaviors (performance and absenteeism). However, few studies have attempted to systematically examine the impact of fulfillment on work attitudes and behavior. The effects of fulfillment on work outcomes may be subject to the perceptions and reactions of individuals on how promises are fulfilled or left unfulfilled. Employees may interact closely with employers and managers on a daily basis. As a result, employees may 4

5 have different responses to the promises made and delivered by employers and managers. Therefore, we believe that two levels of social exchange variables, namely both perceived organizational support (POS) and leader-member exchange (LMX) may potentially mediate the relationships between perceived contract fulfillment and employees work outcomes. In addition, most studies have focused on exchanges with employers (Coyle-Shapiro & Kessler, 2002; Dabos & Rousseau, 2004; Rousseau, 1989; De Vos, Buyens, Schalk, 2003), and paid relatively little attention to exchange with managers (Liden, Sparrowe & Wayne, 1997; Settoon, Bennett & Liden, 1996; Sparrowe & Liden, 1997; Uhl-Bien & Maslyn, 2003). There has been very little effort to compare the relative contributions of these two types of social exchanges with respect to the fulfillment of the psychological contract. The aim of study is to extend prior research on psychological contracts in two ways. First, most studies have ignored the dimensional nature of psychological contracts, instead making a more global assessment of psychological breaches of contract (Robinson, 1996; Robinson & Morrison, 1995; 2000; Turnley & Feldman, 1999). This research captures the full range of psychological contracts from those that have been under-fulfilled to those that have been over-fulfilled. Second, this study examines the process by which the fulfillment of the psychological contract influences work outcomes through POS and LMX. We then compare the relative contributions of POS and LMX in relation to the fulfillment of the psychological contract. We start with a brief summary of the literature on psychological contracts and develop hypotheses based on social exchange theory. We then examine the consequences of perceptions that the contract has been fulfilled and the affective and behavioral outcomes of employees. We then investigate how the norm of reciprocity operates and how fulfilling the 5

6 psychological contract affects work outcomes. Finally, hypotheses are developed and tested on our proposed model on mediation. THEORY AND HYPOTHESES The notion of psychological contract is grounded in the theory of social exchange (Aselage & Eisenberger, 2003; Blau, 1964; Van Dyne & Ang, 1998). Social exchange theory suggests that employees are motivated to increase their work outcomes when their employment relationship is based upon a fair social exchange (Blau, 1964; Moorman, 1991; Organ, 1988; 1990). A psychological contract contains the unwritten beliefs of one party in an employment relationship about the reciprocal contributions of the other party (Robinson & Morrison, 1995; Shore & Barksdale, 1998). These relationships are maintained by voluntary actions by which an individual will reciprocate the receipt of benefits in the future (Homans, 1961). Contrary to a relationship based on economic exchange, a relationship based on social exchange requires the parties to trust each other (Blau, 1958; Homans, 1961). Although obligations make up a relationship of exchange, the norm of reciprocity is the key mechanism that binds the parties to some sets of reciprocal obligations. The idea of reciprocation originates from Blau (1964), who suggested that the partners to the exchange will strive to maintain balanced relationships of social exchange. Employees will take action to restore negative imbalances (Robinson, 1996; Robinson, Kraatz & Rousseau, 1994; Rousseau, 1995). For example, several studies have reported that employees reciprocate the fulfillment of employer promises by adjusting the perceived employee obligations to employer (see for examples, Coyle-Shapiro & Kessler, 2002; Robinson, Kraatz & Rousseau, 1994; Robinson, 1996; Robinson & Morrison, 1995). Alternatively, employees may perceive that their organizations have provided them with more inducements than they expected (Conway & Briner, 2002; Coyle-Shapiro & Kessler, 2002; Turnley & Feldman, 2000), such as a better welfare package, better career 6

7 advancement, and more support. From the perspective of employees, negative imbalances create inequalities in the employment relationship. If employees believe they have met their obligations to their employer, they are likely to feel indebted and increase their sense of obligation to the employer (Robinson & Rousseau, 1994; Turnley et al., 2003). As a result, employees are more likely to reciprocate positive imbalances by increasing the contribution they make to their organization (Homans, 1961; Wayne, Shore & Liden, 1997; Turnley, et al., 2002). A vast amount of research on psychological contracts has focused on how employees respond to cases in which they believe they have received fewer inducements than they expected. However, recent studies have begun to notice the over-fulfillment of psychological contracts can lead to increased benefits (Coyle-Shapiro & Kessler, 1998; Shore & Barksdale, 1998; Tsui, Pearce, Porter & Tripoli, 1997; Lester et al., 2002). As indicated in previous research, fulfillment creates feelings of being valued, increases trust, and leads to positive outcomes for the employee and the organization (Conway & Briner, 2002; Coyle-Shapiro & Kessler, 2002; Robinson & Morrison, 1995). One of the affective outcomes being extensively studied is the affective commitment of employees. This is an important construct because it reflects the desire of employees to remain with their organization that stems from feelings of involvement (Meyer & Allen, 1991), shared values (O Reilly & Chatman, 1986), and identification (Zangaro, 2001). Specifically, affective commitment is important because it increases the effectiveness of an organization (Angle & Perry, 1981). Employees whose psychological contracts are fulfilled have a higher propensity to believe that the organization can be trusted something that is fundamental to the employment experience (Robinson, 1996). Consistent with this view, previous studies have indicated that employees who received more inducements than they expected from an organization tend to positively evaluate that organization (Conway & Briner, 2001; Lambert, Edwards & Cable, 2003; 7

8 Turnley et al., 2003). As a result, if employees perceive that their employer has fulfilled his/her promises, they may feel more involved with the organization and identify more closely with its values. Hypothesis 1a. The fulfillment of the psychological contract is positively related to the affective commitment of employees. Apart from the employer, a manager is generally an important focus for an employee (Reichers, 1985). Very often, employees may become attached to supervisor because of the help and support they may have received from their supervisor. Attachment to a supervisor refers to the affective bond employees have developed with their supervisor (Chen, Tsui & Farh, 2002). According to Ainsworth, Blehar, Waters & Wall (1978), relationships with affective bonds may provide a sense of security and place, a source of companionship, and a sense of worth/competence. The attachment that employees feel towards a supervisor is also founded on the gratitude they feel for the individualized support provided by the supervisor and personal role obligations for the supervisor (Chen, et al., 2002). Attachment theory (Bowlby, 1969; 1973; 1980) is applied to explain the link between the perceptions that employees have of the fulfillment of the psychological contract and their attachment to their supervisor. Attachment theory states that social development involves the continual construction, revision, integration, and abstraction of mental models (Hazan & Shaver, 1987). This idea is similar to the notion of schema in social psychology (Fiske & Taylor, 1984), in which the relationship between an employee and a supervisor is based on the receipt of new information and on the interpretation of experiences. Employees expect supervisors to be supportive, sensitive, trustworthy, and responsive (Shaver & Hazan, 1994). If employees believe that their expectations of their leaders have been fulfilled, they may feel more secure and confident in their current and future interactions with their supervisor. Accordingly, 8

9 employees may respond to the fulfillment of promises by increasing the attachment they feel towards their supervisor. Hypothesis 1b. The fulfillment of the psychological contract is positively related to the attachment that employees feel towards their supervisor. The anticipation in fulfillment of employer obligations to employees may also influence how employees behave within the relationship of social exchange. Employees who perceive that what they have received exceed to what they have promised are more willing to remain in the organization. This is because employees feel the organization can be trusted to keep their inducements (Turnley & Feldman, 2000). Besides, by staying, they will continue to receive benefits from the organization (Robinson & Rousseau, 1994). The care and concern shown by the employer obligates employees to reciprocate with actions that promote the well-being of the employer (Lo & Aryee, 2003). The fulfillment of the psychological contract indicates the support and commitments of an employer to the employees. Equity theory (Adams, 1963; 1965) posits that when the psychological contract is fulfilled, employees may reciprocate by behaving positively in the employment relationship. Hence, employees who are satisfied with the inducements that have delivered by the employer may increase their reliance on the organization. This in turn will lead to less of an intention to leave the organization. Hypothesis 2a. The fulfillment of the psychological contract is negatively related to the intention of employees to leave the organization. Another proposed behavioral reaction to the fulfillment of the psychological contract is the task performances. Task performances have been defined as the activities that directly transform raw materials into goods and services produced by the organization or service that allow the organization to function efficiently (Kiker & Motowidlo, 1999; Motowidlo, Borman & Schmit, 1997). Expectancy theory (Vroom, 1964) is a useful framework for 9

10 understanding the relationship between the fulfillment of the psychological contract and the performance of tasks. This theory suggests that employees are motivated to increase the effort they put into their work to capture potential benefits. Employees who have received excessive inducements feel the obligation to return the favors that they have received. Thus, employees may respond by increasing the amount of effort they put into performing their tasks. By contrast, prior research has also indicated that those employees whose psychological contracts have not been fulfilled have a greater tendency to reduce the amount of effort they put into their work (e.g., Robinson, 1996; Turnley & Feldman, 1999). For example, Robinson (1996) suggested that psychological contracts that not fulfilled may led to lower performance of job duties prescribed as a part of their job. Turnley and Feldman (1999) have also reported that employees to whom promises have not been filled may neglect their duties. Social exchange theory (Blau, 1964) is used to help understand why employees are likely to alter the performance of their tasks based on the extent to which their psychological contracts are fulfilled. Based on the social exchange theory (Blau, 1964), employees who perceived that the promises made to them have been fulfilled may feel that the organization has treated them well. As a result, employees are motivated to reciprocate the positive actions of their employer by increasing the level at which they perform their tasks, as they perceive that their employment relationship is based on a fair social exchange (Moorman, 1991; Organ, 1988; 1990; Turnley et al., 2003). Based on the above arguments, it is expected that employees will increase the level at which they perform their tasks when they believe that the promises made to them have been fulfilled. Hypothesis 2b. The fulfillment of the psychological contract fulfillment is positively related to the level of task performances. Perceived Organizational Support 10

11 Perceived organizational support is developed by the favorable treatment an employee has received from an organization (Eisenberger, Huntington, Hutchison & Sowa, 1986; Shore & Shore, 1995; Rhoades & Eisenberger, 2002; Aselage & Eisenberger, 2003). Perceived organizational support is important to the maintenance of the employment relationship because it is a crucial element in helping employees execute their jobs effectively (Rhoades & Eisenberger, 2002; Eisenberger, Huntington, Hutchison & Sowa, 1986). Compared to the psychological contract, perceived organizational support involves no promises conveyed to employees by the makers of the contract, such as the manager s co-workers and recruiters. Previous studies have highlighted those employees who perceive to have organizational support stem from the favorable treatment they have received from the organization (Aselage & Eisenberger, 2003; Eisenberger, et al., 1986; Rhoades & Eisenberger, 2002; Shore & Shore, 1995). Previous studies have also identified a variety of rewards and favorable work conditions that are positively related to perceived organizational support, for example, allowing employees to develop their skills (Wayne, Shore & Liden, 1997), providing autonomy in the execution of jobs (Eisenberger, Rhoades & Cameron, 1999), and improving work conditions (Rhoades & Eisenberger, 2002). Promises of favorable work conditions are embedded in the psychological contract delivered to employees. If employees perceive that such work conditions have been provided, they may feel that the organization values and respects them (Shore & Shore, 1995). Consistent with this view, Coyle-Shapiro and Kessler (2002) have suggested that the employees have that the organization to fulfill their contractual obligations are related to the increase the perceived organizational support. As a result, employees who have received more inducements than promised may view this as a kind of favorable action on the part of the organization. Hypothesis 3. The fulfillment of the psychological contract is positively related to the perception that employees have of organizational support. 11

12 Consequences of Perceived Organizational Support The obligation of employer to care for the employees may increase employees affective commitment to the organization (Rhoades & Eisenberger, 2002). Moreover, perceived organizational support may increase the employees level of affective commitment by fulfilling their socio-emotional needs, such as through the provision of an affiliation and emotional support (Armeli, Eisenberger, Fasolo & Lynch, 1998; Eisenberger, Huntington, Hutchison & Sowa, 1986). This enhances the employees affective commitment to the organization (Eisenberger, Armeli, Rexwinkel, Lynch & Rhoades, 2001; Eisenberger, Fasolo & Davis-LaMastro, 1990; Guzzo, Noona & Elron, 1994; Randall, Cropanzano, Bormann & Birjulin, 1999; Rhoades & Eisenberger, 2002; Settoon, Bennett & Liden, 1996; Shore & Tetrick, 1991; Shore & Wayne, 1993; Tetrick & Sinclair, 1994; Wayne, Shore & Liden, 1997). Similarly, employees who believe that their employer has provided little support may have a higher propensity to seek employment elsewhere (Aquino & Griffeth, 1999; Allen, Shore & Griffeth, 1999; Guzzo, Noonan & Elron, 1994; Wayne et al., 1997). On the other hand, employees who believe they have been well supported by the organization are more likely to reciprocate by performing better at their work than those who reported lower levels of perceived organizational support. As a result, perceived organizational support is positively related to the level of task performances (Wayne et al., 1997). Hypothesis 4. Perceived organizational support is positively related to employees (a) affective commitment, (b) task performances, and (c) turnover intentions. Mediating Role of Perceived Organizational Support 12

13 Employees who feel that their psychological contracts, in particular their socioemotional needs, have been fulfilled by the employer (Eisenberger et al., 1986), will have more of a perception that they have been favorably treated by their employer. This favorable treatment helps to facilitate a strong exchange ideology between employees and employer (Aselage & Eisenberger, 2003; Witt, 1992; Witt & Kacmar & Andrews, 2001). In line with this view, Eisenberger et al., (2001) noted that the relationship between perceived organizational support and felt obligations increased with the employees acceptance of the norm of reciprocity. In other words, employees are motivated to redress the feelings of indebtedness by increasing the amount of their perceived obligations. As a result, employees increase the level of their affective commitment to the organization, the level at which they perform the task performances and feel less inclined to leave the organization. Hypothesis 5. Perceived organizational support mediates the relationship between the fulfillment of the psychological contract and (a) affective commitment, (b) task performances, and (c) turnover intentions. Leader-member Exchanges Apart from interactions with their employer, employees also develop close interpersonal relationships with their managers (Graen & Cashman, 1975). According to Graen and Scandura (1987), each party must offer something the other sees as valuable and the exchanges must be reasonably equitable or fair. Based on the social exchange theory (Blau, 1964), it is argued that the greater the perceived value of both the tangible (rewards and provision of training) and intangible resources (e.g., feedback and respect) exchanged between supervisor and subordinate, the higher the quality of the leader-member exchange relationship. Feldman (1986: p. 174) also asserted that managers may devote more time, attention, feedback, and encouragement to employees for whom they have higher expectations. As suggested, liking has been found to be the significant predictor of the 13

14 exchange relationship with leaders (Byrne, 1971; Dockery & Steiner, 1990; Liden, Wayne & Stilwell, 1993; Wayne & Ferris, 1990; Wayne, Shore & Linden, 1997). This liking may, to a certain extent, affect an employee s evaluation of whether or not a manager has fulfilled his/her promises. For this reason, with the unique relationship they have with each of their subordinates, managers may act as one of the organizational agents in forming and administrating the organizations' obligations. If employees perceive that their supervisors have high expectations of them, giving them betters tasks, respect, and training, they are more likely to develop favorable feelings towards their supervisor. As a result, employees will more willing to develop close interpersonal relationships with their supervisor. Hypothesis 6. The fulfillment of the psychological contract is positively related to the quality of an employee s exchanges with his/her leader. Consequences of Leader-member Exchanges From the perspective of social exchange, a higher quality of leader-member exchange may create a sense of obligation on the part of subordinate to reciprocate in ways valued by the supervisor. Employees who have a high-quality exchange relationship with their leader are more likely to enjoy more benefits, such as receiving more feedback, and a higher degree of trust and support. As a result, such employees are more adhering to their supervisor and resulting in a higher level of attachment to their supervisor. In addition, employees who receive more autonomy, feedback, and care are less likely to search for alternative employment. (Gerstner & Day, 1997; Major, Kozlowski, Chao & Gardner, 1995; Sparrowe, 1994; Vcchio & Gobdel, 1984; Wilhelm, Herd & Steiner, 1993). Moreover, Consistent with this view, a high quality of exchange tends to be related to the employee s performance of his/her tasks. Previous studies have indicated that there is a link between leader-member exchanges and the work performance of employees (Durate, Goodson & Klich, 1994; Howell 14

15 & Hall-Merenda, 1999; Liden & Graen, 1980; Scandura, Graen & Novak, 1986; Settoon et al., 1996; Vecchio & Gobdel, 1984; Wayne & Ferris, 1990; Wayne et al., 1997). Hypothesis 7. The quality of the leader-member exchange is positively related to the degree to which employees are (a) attached to their supervisor, (b) turnover intentions, and (c) task performances. Mediating Role of Leader-member Exchanges Employees believed their expectations on leader are fulfilled in the psychological contracts may give rise to the increased interpersonal trust that are fundamental to the employment experiences (Robinson, 1996). As a result, employees are more willing have a higher-quality exchange relationship with their leaders. Thus, employees may be more able to capture potential benefits if they interact closely with their leader (Graen, Uhl-Bien, 1995; Settoon, et al., 1996; Wayne et al., 1997). When employees perceive themselves to have been treated well, they may develop a strong need to reciprocate the benefits they have received from their supervisors. Consequently, employees may put more effort into their work (Witt, Kacmar & Andrews, 2001). They may also reciprocate by staying to work under their supervisor. This may be because such employees have higher level of attachment to their supervisor. Besides, the increased expectancy that their performance may be rewarded may also make employees more motivated to capture the benefits that may come from their supervisor, resulting in less of an intention to leave the organization. Hypothesis 8: The quality of the leader-member exchange mediates the attachment to the supervisor, the turnover intentions, and (c) the performance of tasks. Sample and Procedure METHODS 15

16 Three hundred and fifty-four supervisor-subordinate dyads were randomly selected from a large-scale manufacturing firm located in China. Of the subordinate sample 66.4% were females and 33.6% were males, with a mean age of 18 and an average organizational tenure of 1.2 years. The supervisor participants were 58.2% female and 41.8% male, with a mean age of 30 years and an average work tenure of 2 years. Participation was completely voluntary. The researcher participated throughout the whole process of data collection, which accounted for the 95.7% response rate from subordinates and the 100% response rate from supervisors. To facilitate the matching process, a code number was printed at the back of each questionnaire. In addition, supervisors and subordinates completed the questionnaires in different places and at different times to prevent them from communicating directly with each other. The study used surveys administrated in Mandarin. To guarantee consistency, the survey measures were independently translated back and forth by two translators from the original English version (Brislin, 1980) into Chinese. Minor discrepancies or ambiguities in meaning were cleared up by two independent researchers majoring in Organizational Behavior, who consulted with each other as they compared the two versions of the questionnaire. Variables Perceived fulfillment of the psychological contract. An 18-item measure covered different aspects of the employment relationship in an organization, such as pay, benefits, opportunities for advancement, job, resources support, and a good employment relationship. Lester et al., (2002) reported a Cronbach s alpha reliability of.89 for this 18-item scale. This dimension of psychological contract fulfillment was based on a study conducted by Robinson and Morrison (1995), who expanded Rousseaus original instrument on psychological contract. For each of the 18-items, respondents were instructed to assess the extent to which 16

17 the amount of the inducements they actually received from their organization was less or greater than the amount that the organization had promised them. The responses ranged from 1 received much less than promised to 5 received much more than promised. The higher the score, the greater employees perception of whether the psychological contract had been fulfilled (or over-fulfilled). The Cronbach s alpha for this scale was.85. Perceived organizational support (POS). An eight-item scale borrowed from Eisenberger, Cummings, Armeli & Lynch (1997) was applied to a five-point Likert scale (1 = strongly disagree ; 5 = strongly agree ). An example of an item is, My organization shows very little concern for me. The Cronbach s alpha value for this scale was.70. Leader-member exchanges (LMX). The seven-item scale appropriately captures the three important dimensions of leader-member exchanges, namely trust, respect, and obligation (Graen & Uhl-Bien, 1995). The LMX scores are based on a five-point Likert scale (1 = strongly disagree ; 5 = strongly agree ) and internal consistency ( =.75) was demonstrated. An example of an item is, I always know how satisfied my supervisor is with what I do. The Cronbach s alpha value for this scale was.75. Affective commitment to organization. An eight-item scale of loyalty to the organization on a five-point Likert scale (1 = strongly disagree ; 5 = strongly agree ) was borrowed from Allen and Meyer (1990). An example of an item is, I really feel that the problems faced by my organization are also my problems. The Cronbach s alpha value for this scale was.74. Attachment to supervisor. A 16-item scale of loyalty to the supervisor on a five-point Likert scale (1 = strongly disagree ; 5 = strongly agree ) was taken from Chen, Tsui, and Farh (2002). An example of an item is, Even if there may be better alternatives, I will remain to work under my supervisor. The Cronbach s alpha value for this scale was

18 Employees intention to leave the organization. This is based on a five-point Likert scale ranging from 1 = strongly disagree to 5 = strongly agree. Two items are taken from Cammann, Fichman, Jenkins, and Klesh (1979) cited in Cook, Hepworth, Wall, and Warr (1981). An example of an item is I intend to keep working at this company for at least the next three years. The Cronbach s alpha value for this scale was.75. Task performances. An 11-item list of supervisor-rated tasks was adopted from Tsui, Pearce, Porter, and Tripoli (1997) and rated using a five-point Likert scale (1 = strongly disagree ; 5 = strongly agree ). An example of an item is, The employee accurately performs core job tasks. The Cronbach s alpha value for this scale was.81. Controls. Work tenure in the organization, work tenure under the existing supervisor, and negative affectivity were employed as controls. The subordinates completed the four items from Watson, Clark, and Tellegen (1988) on the measurement of negative affectivity. An example of an item is, I usually feel enthusiastic about my job. Options for a response ranged from 1 not at all to 5 extremely. Analysis We used multiple regressions to test Hypotheses 1-4 and Hypotheses 6 and 7. We tested Hypothesis 5 and 8 following the steps outlined in Baron and Kenny (1986). We first explored the zero-order correlation among perceived contract fulfillment, POS, LMX, affective commitment, turnover intentions, task performances, and attachment to supervisor. To test Hypothesis 5, we then regressed perceived contract fulfillment on employee work outcomes (step 1), POS (step 2), and POS and employee work outcomes (affective commitment, task performances, and turnover intentions) (step 3) with the perceived contract fulfillment included in the equation. To test Hypothesis 8, we regressed perceived contract fulfillment on the employees work outcomes (attachment to the supervisor, task performances, and turnover intentions) (step 1), LMX (step 2), and LMX and employees 18

19 work outcomes (turnover intentions, task performances, and attachment to the supervisor) (step 3) with the perceived contract fulfillment included in the equation. If the first three conditions hold, at least partial mediation is present. If perceived contract fulfillment has nonsignificant beta weights in the third step, then full mediation is present. RESULTS Table 1 reports the means and standard deviations of all of the variables. The findings showed that perceived contract fulfillment was positively related to POS (r =.26, p <.01), LMX (r =.25, p <.01), affective commitment to the organization (r =.28, p <.01), turnover intentions (r = -.16, p <.01), task performances (r =.22, p <.01), and attachment to supervisor (r =.28, p <.01). Insert Table 1 about here Table 2 shows the results of the regression. With work tenure in the organization, work tenure under the supervisor, and negative affectivity controlled for, perceived contract fulfillment was positively related to affective commitment to the organization (β=.25, p <.001), and attachment to the supervisor (β=.25, p <.001), task performances (β=.15, p <.01); and negatively related to the turnover intentions (β= -.13, p <.05). Thus, Hypotheses 1a, 1b, 2a and 2b were supported. In addition, perceived contract fulfillment was found to be positively related to both POS (β=.25, p <.001) and LMX (β=.24, p <.001). As a result, Hypothesis 3 and Hypothesis are supported. Insert Table 2 about here The findings in Table 3 reveal the results of mediation. POS was found to be positively related to affective commitment to the organization (β=.18, p <.001) and task performances (β=.14, p <.01); and negatively related to turnover intentions (β= -.10, n.s.). Moreover, 19

20 LMX was positively associated with attachment to the supervisor (β=.25, p <.001) and task performances (β=.14, p <.01); and negatively associated with the turnover intentions (β= -.16, p <.01). Hence, Hypothesis 4 was partially supported and Hypothesis 7 was supported. By adopting a three-step approach, the findings in Table 3 revealed that perceived contract fulfillment can fully mediate the relationship between POS and task performances; and partially mediate affective commitment. Unexpectedly, POS failed to mediate the employees turnover intentions. As a result, Hypothesis 5 was partially supported. On the other hand, LMX fully mediated each of the relationships between perceived contract fulfillment and task performances and turnover intentions. However, partial mediation was found for employees attachment to their supervisor. As a result, Hypothesis 8 was supported. Insert Table 3 about here DISCUSSION The major purpose of this study was to understand the extent to which the link between perceived contract fulfillment and employees work outcomes could be attenuated by the degree to which employees had social exchanges with their employer and manager. The findings of this study will be highlighted and discussed. First, our findings revealed that the fulfillment of the psychological contract affects the attitudinal and behavioral outcomes of employees because it strengthens the employees relationship of social exchange with their employer and manager (Robinson, 1996; Lo & Aryee, 2003). Consistent with previous studies, our study implies that employees who perceive that their contracts are being fulfilled may increase their level of affective commitment (Conway & Briner, 2002), task performances, and their level of attachment to their supervisor; and decrease their level of turnover intentions (Conway & Briner, 2002). 20

21 The fulfillment of the psychological contract gives employees enough confidence to be willing to invest in present and future relationships of exchange with their employer and manager. Employees who perceive that the organization has exceeded the terms of the psychological contract by providing more inducements than expected are more likely to reciprocate with increased contributions intended to make the organization more effective. Second, our study provides empirical support for the view that the perception by employees that the contract has been fulfilled is positively related to the quality of the relationship of exchange that they have with their employer and manager. The integration of the psychological contract, POS, and LMX provides a comprehensive understanding of the maintenance of manager-employee and employer-employee relationships. Our integrative model contributes fulfilled promises of favorable work conditions as a major source of POS. The underlying reason is that the fulfillment of promised favorable work conditions (e.g., a better welfare package and career development opportunities) is perceived as an indication of an organization s positive valuation of its employees. This exerts a strong influence on the level of POS. Similarly, the fulfillment of promised favorable treatment from a manager (e.g., autonomy and respect) would also be perceived as a sign by employees that the manager values and respects them. Third, the results of the analyses on mediation revealed that the positive consequences of perceived contract fulfillment can be explained by different degrees of reciprocation with regard to the employer and manager. Our results indicated that POS could partially mediate the relationship between perceived contract fulfillment and affective commitment and the task performances. This finding suggests that employees may regard the fulfillment of promises specified in the psychological contract as one of the primary sources of information to evaluate the amount of their felt obligations to the organization. However, POS failed to mediate the relationship between perceived contract fulfillment and employees turnover 21

22 intentions. An alternative explanation for this result is that other factors may affect an employee s motivation to stay in the organization. These factors may include perceived fairness in work (Lo & Aryee, 2003) and work motives (Van Dyne & Ang, 1998). Overall, our results suggested that POS and LMX explain equal variance in the task performances of employees. However, LMX seems to explain more contributions to the turnover intentions of employees than that of the POS. On the other hand, LMX fully mediated the relationship between perceived contract fulfillment and task performances and turnover intentions, but partially mediated its relationship to attachment to supervisor. One alternative explanation for this is that employees are more likely to favor resource-based forms of support such as career opportunities and feedback than emotion-based forms of support such as respect and trust. As a result, they are prone to reciprocate with immediate and comparable returns (turnover intentions and task performances) than with indefinite returns, such as altruistic concern for the leader (attachment to their supervisor) (Sparrowe & Liden, 1997). Practical Implications It is recommended that managers be aware of the amount of actual rather than expected inducements to employees because this may affect the obligations that employees feel towards their employer and manager. Second, managers should note the differences in importance between the employer-employee and leader-employee exchange relationships that indirectly affect the work outcomes of employees. Finally, managers are encouraged to pay attention to the work expectations of employees, such as the welfare package, support in terms of resources, and work conditions (March & Simon, 1958). This is because employees may base their determination of how much they owe to their employer and manager on whether or not the promises made to them have been fulfilled. Limitations, Strengths of the Study, and Suggestions for Future Research 22

23 This study has a number of limitations. The cross-sectional design limits the extent to which the relations between cause and effect can be inferred from the findings. These limitations are balanced by the strengths of the study. First, this study adopts an integrative approach to examining the process of the fulfillment of the psychological contract. It assesses the work outcomes when a contract is fulfilled and examines how the social exchange relationships with employer and manager indirectly contribute to these outcomes. Second, it expands the examination of the process by which the psychological contract fulfilled beyond its traditionally Western context (Conway & Briner, 2002; Turnley et al., 2003). This is in response to the view of Rousseau and Schalk (2000) that more research needs to be done to test the generalizability of the psychological contract. A future study can use a heterogeneous population to determine the extent to which the findings can be generalized to other settings and people. In addition, our study provides a clear picture of how each of POS and LMX indirectly affects the link between perceived contract fulfillment and attitudinal and behavioral outcomes. We suggest that future research can test the impact of dispositional and contextual factors such as organizational structure (centralized vs. decentralized) and culture (individualism vs. collectivism) on perceptions that the contract has been fulfilled. Finally, assessments of psychological contracts from both the perspective of the employer and that of the employee can be obtained to compare the different effects of perceived contract fulfillment on the work outcomes of employees. 23

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