Understanding locals' compensation fairness vis-à-vis foreign expatriates: the role of perceived equity

Abstract

We examined antecedents and consequences of compensation fairness vis-à-vis foreign expatriates as perceived by locals of multinationals in Kenya. We found that compensation disparity vis-à-vis expatriates negatively effected locals' perceived compensation fairness vis-à-vis expatriates but compensation advantage vis-à-vis other locals positively effected it. The effects of both disparity and advantage were mediated through perceived equity. Expatriate interpersonal sensitivity towards locals reduced the negative effect of disparity but enhanced the positive effect of advantage on compensation fairness vis-à-vis expatriates. Compensation fairness vis-à-vis expatriates was positively related to job satisfaction but negatively related to turnover intention. Theoretical and practical implications are discussed.

Keywords:

• Africa
• expatriate compensation
• equity
• Kenya
• local-expatriate compensation disparity

Acknowledgement

The development of this paper was partially supported by the Rutgers Research Resource Committee, and a previous version was presented at the Academy of International Business Annual Meeting 2008.