The moderating effect of power distance on employee responses to psychological contract breach

Abstract

Understanding how employees’ cultural values are related to their responses to promises broken by their organizations (i.e., psychological contract breach) is important given today’s global workplace. Although past research has found that psychological contract breach is positively associated with employee exit, voice and neglect and negatively associated with loyalty, we know little about the role that cultural values play in this process. We explore the role that power distance orientation—an employee’s acceptance of power differentials in society—plays in employee responses to breach. We argue that employees with high power distance orientations will be more likely to respond passively to breach (loyalty and neglect), whereas employees with low power distance orientations will be more likely to exhibit active responses to psychological contract breach (exit and voice). We tested our notions using a sample of 265 employees from different cultures across two points in time. Employees with high power distance orientations were less likely to respond to psychological contract breach with exit and voice than employees with low power distance orientations. However, power distance orientation did not significantly moderate the relationships between psychological contract breach and neglect or loyalty, respectively. We discuss theoretical and practical implications of our findings.

Keywords:

• Psychological contracts
• Culture
• Power distance
• Social exchange

This work was supported by a Summer Research Grant (Department of Management, Clemson University) awarded to the first author.

Notes

¹ Because employees were members of different cultural groups, we also tested our hypotheses in a multilevel framework using hierarchical linear modelling. The hierarchical linear modelling results were substantively the same as those reported in our single-level analyses.