Employee reciprocation to psychological contract fulfilment : a mediating model focusing on multiple exchange perspectives

Abstract

Remaining financially viable in a climate of rapid technological change has resulted in many businesses downsizing and re-structuring. This has led to an increasing reliance on psychological contract as one of the effective ways to maintain a balance in the employment relationship between an employer and employees. On the basis of the existing literature review and in-depth case interviews, the components of psychological contract were confirmed and used to measure the extent to which employees perceived these components were fulfiled. Results suggested that psychological contract fulfilment does not need to be directly transacted into valuable work outcomes. Instead, the two levels of social exchange relationships, represented by perceived organizational support (POS) and leader-member exchange (LMX), facilitated mediating roles on psychological contract fulfilment and work outcomes. This mediating approach was validated in a large sample of matched 354 supervisor-subordinate dyads in two manufacturing firms in Southern China. Results of hierarchical regression analysis gave full support to psychological contract fulfilment which was a prime antecedent to POS and LMX, and POS (vertical exchange) fully mediated psychological contract fulfilment and task performance whereas LMX (vertical dyad exchange) fully mediated psychological contract fulfilment and turnover intentions and efforts made to a supervisor. This study contributes significantly to psychological contract theory by exploring the indirect process of reciprocation. Moreover, this study offers the first empirical integration of psychological contract with perceived organizational support, and leader-member exchange theory. At the same time, POS and LMX took the differentiated mediating role to transact employees' reciprocation of fulfiled psychological contract into valuable work outcomes. There are implications for management practices. Practitioners may need to notice the importance of realistic job previews in reducing the biases on extent of psychological contract fulfilment. Moreover, leaders may discourage from dominating in communications with subordinates or taking antagonistic attitudes in interactions with subordinates. Finally, practitioners may consider incorporating human resource management policies in creation of a supportive environment to meet the socio-emotional needs of employees.