J Bus Psychol (2009) 24:165178 DOI 10.

1007/s10869-009-9097-1

The Interactive Effects of Procedural Justice and Equity Sensitivity in Predicting Responses to Psychological Contract Breach: An Interactionist Perspective
Simon Lloyd D. Restubog Prashant Bordia Sarbari Bordia

Published online: 1 March 2009 Springer Science+Business Media, LLC 2009

Abstract Purpose The purpose of the study was to examine the combined interactive effects of a situational variable (procedural justice) and a dispositional (equity sensitivity) variable on the relationship between breach and employee outcomes. Design/methodology/approach Data were obtained from 403 full-time employees representing a wide variety of business sectors in the Philippines. Supervisors were requested to provide an assessment of their subordinates civic virtue behavior. Findings Results showed that equity sensitivity and breach interacted in predicting affective commitment. The negative relationship between breach and affective commitment was stronger for employees with an input-focused approach to organizational relationships (referred to as benevolents) than for those with an outcome-focused approach (referred to as entitleds). Results also indicated a stronger negative relationship between contract breach and civic virtue behavior under conditions of high procedural justice. Finally, a three-way interaction was found between

contract breach, procedural justice and equity sensitivity in predicting affective commitment. Implications Our ndings provide a new insight suggesting that worse outcomes are to be anticipated especially if employees have an expectation that procedural justice can prevent any form of contract breach. In addition, although previous research has portrayed benevolents as more accepting of situations of u under-reward, this study has demonstrated that they too have their limits or threshold for under-reward situations. Originality/value This research suggests that the type and intensity of ones reactions to psychological contract breach is inuenced by interactive forces of the individuals disposition and the organizational procedures. Keywords Psychological contract breach Procedural justice Equity sensitivity Interactionist perspective

Introduction Psychological contract breach takes place when one party in a relationship perceives that the other party has neglected to fulll what has been committed or promised (Rousseau 1995). For example, employees may believe that the organization is obliged to give career growth opportunities. If the organization does not provide the career growth opportunities, it results in a contract breach. The effect of breach is explained by the social exchange theory (SET) which proposes that when one party provides something to another, it expects the other party to reciprocate by providing some contributions in return (Blau 1964). Previous research on psychological contracts has primarily focused on three areas. The rst line of research

A portion of this paper was presented at the 64th annual meeting of the academy of management meeting, New Orleans, USA, August, 2004. Received and reviewed by former editor, George Neuman. S. L. D. Restubog (&) School of Organisation and Management, Australian School of Business, The University of New South Wales, Sydney, NSW, Australia e-mail: simon.restubog@unsw.edu.au P. Bordia S. Bordia School of Management, The University of South Australia, Adelaide, SA, Australia

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has examined the consequences of psychological contract breach on a wide range of employee behaviors (e.g., job performance, citizenship behavior; Turnley et al. 2003; Restubog and Bordia 2006; Restubog et al. 2006; Robinson and Morrison 1995) and attitudes (e.g., commitment, satisfaction, and turn-over intentions; Kickul and Lester 2001; Restubog and Bordia 2006; Restubog et al. 2006; Turnley and Feldman 1999). These studies suggest that employees are likely to withdraw from performing discretionary behaviors and demonstrate negative attitudes as a way of responding to contract breach. Another line of research has investigated situational factors which are likely to inuence the relationship between breach and employee outcomes (e.g., Kickul et al. 2002). For example, procedural and interactional justice reduces the negative impact of psychological contract breach on employee behaviors (Kickul et al. 2002). Finally, an emerging line of research concerns the role of dispositional characteristics in the psychological contract process. As the formation and maintenance of psychological contracts emerge from an idiosyncratic belief (Rousseau 1995) and result from a cognitive appraisal (Morrison and Robinson 1997), dispositional characteristics are likely to be an important element in the contract-making dynamics. The present study builds upon previous research on psychological contracts in two ways. First, it systematically examines the combined-interactive effects of a situational variable (procedural justice) and a dispositional characteristic (equity sensitivity) on the breach-employee outcomes relationship. Most of the research undertaken in the area of psychological contracts has emphasized situational moderators (i.e., organizational justice), while emerging research focuses on the role of individual differences in predicting responses to breach (i.e., equity sensitivity). While researchers have noted that both situational and personal characteristics contribute to our understanding of work attitudes and behaviors (Schneider 1983; Terborg 1981), none of the studies in the psychological contracts literature empirically tested the moderating role of both situational and personal characteristics in a single study. The present study lls this gap by examining the possibility of a person through situation interaction simultaneously considering these two classes of variables. Our approach in examining how procedural justice (a situational variable) and equity sensitivity (a dispositional variable) inuence the breachoutcomes relationship is rmly embedded in an interactionist perspective (Schneider 1983; Terborg 1981) which incorporates the multi-directional interaction between person characteristics and situation characteristics (Terborg 1981, p. 569). Several researchers, in fact, have highlighted the need for an interactionist approach in psychological contract research (Coyle-Shapiro and Neuman 2004; Turnley and

Feldman 1999). In the organizational justice literature, Cropanzano noted that justice rests in the eyes of the beholder (in Coyle-Shapiro and Neuman 2004, p. 153). In other words, perceptions of justice may be inuenced by individual dispositions or personality traits. Thus, in order to gain a better understanding of the psychological contract dynamics, researchers are also encouraged to consider what individuals bring into the situation. Second, most previous research on psychological contract breach has been conducted in western countries (with the exception of Hui et al. 2004) where cultures are typically individualist and low in power distance (Hofstede 1997). As a result of this, limited attention has been given to the generalizability of the psychological contract framework in cultures with a more collectivistic orientation or high-power distance. Rousseau and Schalk (2000) pointed out that little is known about how culture affects the meanings and interpretations ascribed to psychological contracts and how employees and organizations from different societies evaluate the extent to which the psychological contract has been met or violated. There is also a tendency in research to judge all collectivist and high-power distant cultures as similar to each other (Kim and Leung 2007). While several Asian cultures are collectivist and have high-power distance, individual national cultures display other cultural elements in the workplace. In Philippines, along with the prevalence of high-power distance (Hofstede 1997), workplace familism is also an important part of the organizational culture (Restubog and Bordia 2006, 2007). In contexts marked by high workplace familism, employees see the organization as a symbolic representation of a family and expect nurturance, loyalty and compassion from the organization. Therefore, a subordinatesupervisor relationship will be seen as a parallel of a parentchild relationship (Hofstede 1997; Restubog and Bordia 2007). Workplace familism is also related to the notion of high-power distance. As in a parent child relationship, the supervisorsubordinate relationship constitutes a difference in power status (even when the relationship is a positive one). Considering that not all Asian cultures are similar, this study allows an investigation of the consequences of psychological contract breach specically in the Philippines context. We begin by reviewing the literature on consequences of contract breach and develop hypotheses on the impact of breach on affective commitment and civic virtue behavior. Next, we present procedural justice and equity sensitivity as moderators inuencing the relationship between breach and these employee outcomes. Organizational Commitment Organizational commitment reects the psychological bond between employees and their organization (Allen and Meyer 1990). The dimension of commitment, we consider

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most relevant in this research is affective commitment which refers to an emotional response and orientation that links the individual to the organization (Allen and Meyer 1990). From a social exchange perspective (Blau 1964), it can be argued that when the organization is perceived to inadequately fulll its commitments, employees will view their social exchange with the organization as less valuable. As a result, employees will reciprocate by decreasing their affective commitment to the organization (e.g., Bunderson 2001; Turnley and Feldman 1999). We expect that fulllment of the psychological contract-related obligations will be reciprocated by employees in the form of commitment to the organization. Previous studies suggest that the extent to which an employees psychological contract has been fullled has a signicant bearing on affective commitment (Bunderson 2001). In contrast, in the case of a psychological contract breach, employees perceiving the organization to not meet its obligations may choose to rectify the imbalance by lowering their sense of commitment towards the organization (Rousseau 1995). Conway and Briner (2002) found that the effect of breach on employees affective commitment is similar regardless of their work status (full- or part-time). Based on the consistency in ndings regarding the relationship between breach and affective commitment, we predict that psychological contract breach will reduce employees affective commitment. Hypothesis 1 Psychological contract breach will be negatively related to affective commitment. Organizational Citizenship Behaviors Organizational citizenship behaviors (OCBs) relate to employee behaviors that are not part of the core job description but facilitate the overall effectiveness of the organization (Podsakoff et al. 2000). Therefore, OCBs comprises of actions that individuals may take, at their own discretion, to create a psychologically and socially supportive environment in the workplace (Blakely et al. 2003, 2005). OCBs have been conceptualized as comprising of ve key dimensions: altruism, civic virtue, conscientiousness, courtesy, and sportsmanship (Podsakoff et al. 2000). In the current study, we focus on civic virtue behaviors as it is clearly directed towards the organization and is more affected compared to OCBs directed towards co-workers whenever, there is a perceived contract breach (Robinson and Morrison 1995; Turnley et al. 2003). Civic virtue behavior is demonstrated in active participation in organizational activities, keeping up with the changes affecting the organization, and being concerned with the welfare of the organization and its members (Podsakoff et al. 2000). These behaviors reect a general interest, responsible

involvement, and consideration in the affairs of the organization. Previous research suggests that OCBs can be negatively inuenced by failure on the part of the organization to adequately fulll the psychological contract of its employees. For example, employees whose psychological contracts were not fullled by their employers were less likely to demonstrate civic virtue behaviors (Restubog and Bordia 2006; Robinson and Morrison 1995). A large majority of research supports the relationship between breach and OCBs (Robinson and Morrison 1995; Turnley et al. 2003). Drawing from SET and the norm of reciprocity, when employees feel that the organization has fullled its obligations towards them, they will reciprocate by helping their organization. Conversely, when employees feel that their organization has failed to provide what is due to them, they will reciprocate by performing only their required responsibilities and reducing civic virtue behaviors. Therefore, based on the literature, we predict that psychological contract breach will be negatively related to civic virtue behavior. Hypothesis 2 Psychological contract breach will be negatively related to civic virtue behavior. Procedural Justice Employees perception of justice within the organizational system affects their attitudes and behavior towards the organization (Blakely et al. 2005; Kim and Leung 2007). Among the three facets of justice that have been examined in the organizational literature (distributive, procedural and interactional), procedural justice refers to the fairness in the process by which outcomes such as promotions or budgetary allocations are made (Cohen and Spector 2001). Employees responses to management decisions are strongly inuenced by the perceived fairness of procedures and rules (Cohen and Spector 2001). Procedural justice is likely to have a direct and moderating effect. That is, procedural justice increases the likelihood of positive employee outcomes. A climate of procedural justice has been found to foster organizational commitment and citizenship behavior (Liao and Rupp 2005). Perceptions of procedural justice induce trust in management and satisfaction with performance appraisal system (Cropanzano et al. 2002). Rifai (2005) found that procedural justice affects job satisfaction which affects organizational citizenship behavior via affective commitment. More comprehensively, recent meta-analytic studies found a positive relationship between employees perceptions of procedural justice and work performance, job satisfaction, OCBs, affective commitment, and trust in the organization (Cohen and Spector 2001; Colquitt et al. 2001). Based on this research, we predict that procedural justice will be

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positively related to affective commitment and civic virtue behavior. Hypothesis 3 Procedural justice will be positively related to affective commitment. Hypothesis 4 Procedural justice will be positively related to civic virtue behavior. Procedural justice may also play a moderating role in the relationship between psychological contract breach and employee outcomes. Empirical evidence suggests that individuals responses to unfavorable actions are less severe when they perceive the decision-making process to be procedurally just (Brockner et al. 1990). For example, Turnley and Feldman (1999) found that procedural justice moderated the relationship between breach and exit such that employees were most likely to stay in their organization when the magnitude of breach was low and procedural justice was perceived to be high. Kickul et al. (2002) found similar moderating effects. In particular, they found higher job satisfaction, in-role performance, and OCBs and lower intentions to leave when procedural justice was perceived to be high. These results suggest that fair treatment can mitigate the negative responses of employees who have experienced a contract breach. Procedural justice, therefore, can control the negative effects of breach and makes its impact on employee outcomes less harmful. In the context of the current research, affective commitment and civic virtue behavior could be considered as employee inputs or contributions. Thus, when employees perceive that their psychological contract has been breached, their willingness to reciprocate by under-performing or withholding behaviors benecial to their organization will depend on whether they perceive organizational processes and procedures to be fair. Based on the literature reviewed, we expect that under conditions of highprocedural justice, the negative impact of breach of psychological contract will be mitigated. Hypothesis 5 Procedural justice will moderate the relationship between psychological contract breach and affective commitment. The consequences of breach will be worse when procedural justice is low compared to when it is high. Hypothesis 6 Procedural justice will moderate the relationship between psychological contract breach and civic virtue behavior. The consequences of breach will be worse when procedural justice is low compared to when it is high. Equity Sensitivity Equity sensitivity is an individual difference variable which concerns peoples preferences for different input/

outcome relations (Huseman et al. 1985, 1987). Given that psychological contract breach involves an assessment of unfair distribution of outcomes, equity sensitivity is likely to inuence reactions to breach. Huseman et al. (1985, 1987) classied three types of individuals along a continuum, each showing different orientation towards equity. At one end of the continuum is the benevolents. These are individuals who prefer their inputs to exceed their outputs (Huseman et al. 1985, p. 1,056). They derive satisfaction from what they are able to contribute to the organization. Benevolents are interested in investing in a long-term employment relationship with their employer. Those falling within the middle range of the continuum are called the equity sensitives who prefer their outcomes and contributions to be equal (Huseman et al. 1985, p. 1,056). Finally, those at the other end of the continuum are the entitleds who prefer their outcomes to exceed their inputs (Huseman et al. 1985, p. 1,056). These individuals are more concerned with what they can gain from their organization. Treated as a continuum, equity sensitivity has been found to be positively related with organizational commitment (King and Miles 1994; ONeill and Mone 1998), job satisfaction (King et al. 1993; ONeill and Mone 1998), organizational citizenship behaviors, and selfreported job performance (ONeill and Mone 1998). Based on the literature, we predict that equity sensitivity will be positively related to affective commitment and civic virtue behavior. Hypothesis 7 Equity sensitivity will be positively related to affective commitment. Hypothesis 8 Equity sensitivity will be positively related to civic virtue behavior. Equity sensitivity may also inuence the affective and behavioral reactions as a consequence of contract breach (Morrison and Robinson 1997). Entitleds are more likely to react negatively to contract breach as they are highly reactive to situations of under-reward (Huseman et al. 1987; Miles et al. 1989). For example, King et al. (1993) found that entitleds report lower satisfaction when underrewarded as compared to either equity sensitives or benevolents. In contrast, benevolents are less likely to report negative reactions to contract breach as they possess a more liberal threshold for anger (Miles et al. 1989, p. 583) and have a greater acceptance of under-reward (Miles et al. 1994, p. 586). Benevolents are characterized as givers (Huseman et al. 1987, p. 224) and expect little reciprocation for their contributions (Miles et al. 1989). For example, Miles et al. (1994) found that in identical underreward conditions, benevolents reported signicantly higher levels of satisfaction than entitleds. Thus, equity sensitivity may moderate the relationship between breach

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and outcomes such as affective commitment and civic virtue behavior. Hypothesis 9 Equity sensitivity will moderate the relationship between psychological contract breach and affective commitment. The effects of breach will be worse for low levels of equity sensitivity (entitleds) than for high levels of equity sensitivity (benevolents). Hypothesis 10 Equity sensitivity will moderate the relationship between psychological contract breach and civic virtue behavior. The effects of breach will be worse for low levels of equity sensitivity (entitleds) than for high levels of equity sensitivity (benevolents). Organizational scholars have argued that the experience of work is multi-faceted and is inuenced by multiple factors (Chatman 1989; Davis-Blake and Pfeffer 1989; George and Jones 1996; Schneider 1983). Equity sensitivity has implications for how individuals react to inputs and outputs in exchange relationships. In other words, equity sensitivity may have implications for how individuals react to varying levels of justice. Following the interactionist perspective, we predict that the resultant interactions involving procedural justice and equity sensitivity will affect the relationship between contract breach and employee outcomes. That is, the effect of procedural justice in the relationship between breach and outcomes will vary depending upon whether an employee has a benevolents or entitleds tendency. Assuming that a breach has been perceived, if procedural justice is high, there will be weaker differences between benevolents and entitleds. However, if procedural justice is low, we would expect negative reactions for both benevolents and entitleds. Moreover, since benevolents are more forgiving of transgressions and accepting of situations of under-reward (Miles et al. 1989, 1994), their negative responses toward breach would be weaker as compared with the entitleds. Entitleds, on the other hand, are likely to exhibit strongernegative reactions toward breach which is accompanied by unfair treatment because of their low threshold for situations of under-reward (Miles et al. 1989, 1994). That is, a combination of an entitleds disposition and low procedural justice may lead to the most negative outcomes of breach. Thus, we predict the following: Hypothesis 11 There will be a three-way interaction between psychological contract breach, equity sensitivity, and procedural justice on affective commitment. There will be a stronger-negative relationship between breach and affective commitment for low levels of equity sensitivity (entitleds) when procedural justice is low. Hypothesis 12 There will be a three-way interaction between psychological contract breach, equity sensitivity,

and procedural justice on civic virtue behavior. There will be a stronger-negative relationship between breach and civic virtue behavior for low levels of equity sensitivity (entitleds) when procedural justice is low. Methods Participants Turnley and Feldman (1999) recommend using diverse samples in psychological contract research to allow variability in responses. Following this recommendation, this study utilized a sample consisting of employees from a variety of occupations. Data were collected from two groups. The rst group consisted of 293 full-time employees enrolled in part-time graduate business programs (e.g., business administration, economics, and commerce) at three universities in the Philippines. Only those students who were currently working full time were included in the study. The second group consisted of 110 full-time support and administrative staff of a large-educational institution. As expected, the MBA sample had lower age, tenure, and educational attainment compared to the sample from the university sector. There were also signicant differences in the study variables (e.g., breach, affective commitment, equity sensitivity, and procedural justice). These sample differences are to be expected. However, in order to maintain the diversity of our sample pool and capitalize on the statistical power, we combined the two samples in analyzing the hypothesized relationships. The aggregated sample comprised four hundred and three employees. About 59% of the participants were female while 41% were males. The average age and tenure of the participants were 29.4 years (SD = 8.28) and 5.37 years (SD = 6.13), respectively. A wide variety of sectors was represented, including educational and training institutions (29%), retail and trade (18.4%), governmental agencies (17.3%), manufacturing (11.2%), nancial institutions (10.2%), service and hospitality (8.2%), information technology and telecommunications (4.2%), and consulting (1.5%). The jobs held by the participants ranged from lowlevel service positions to middle-supervisory roles. Educational background of the participants ranged from those with a minimum of a high-school diploma to a PhD degree. Procedure Survey questionnaires were administered to the participants in two stages, approximately 1 week apart. The questionnaire in stage 1 included the measures of the predictor variables while the questionnaire for stage 2 measured the moderator and criterion variables. We separated the

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measures of predictor and criterion variables to minimize the effects of common method variance (Podsakoff and Organ 1986). In the rst administration of the survey, measures of psychological contract breach and demographic characteristics were included. We received a total of 583 out of 650 questionnaires distributed (response rate of 89.69%). In the following week, a second-survey assessing moderator (e.g., equity sensitivity, procedural justice) and dependent variables (e.g., affective commitment, civic virtue behavior) were administered to the 583 participants. Of 583 participants from week one, 430 replied, yielding a response rate of 76.16% for the second wave of data collection. The questionnaires obtained from 27 participants were removed because they either failed to provide the same-anonymous code during both administrations or failed to complete the questionnaires. Thus, a total of 403 participants who completed both questionnaires comprised the nal sample. After the participants completed the self-report measures, they were requested to pass on a rating scale to their immediate supervisor to complete. The rating scale assessed the extent to which the employee engaged in civic virtue behavior. Participants were assured that no one in their organization would have access to the completed questionnaires. A participant-generated code was used to match the supervisor ratings with the self-report questionnaire. After the supervisors had completed the rating forms, they were instructed to detach the cover sheet from the rating form (this cover sheet had the name of the employee being rated on civic virtue behavior), place it in sealed envelope and mail it to the researchers. A total of 137 (34%) supervisors returned the completed ratings. Measures Unless otherwise stated, participants responded using a seven point likert scale (1 = strong disagree and 7 = strongly agree). The coefcient alphas for the variables are also reported below. Psychological contract breach. This 5-item measure was taken from Robinson and Morrison (2000). We utilized a global measure as opposed to multiple facets or components (e.g., relational vs. transactional) of the psychological contract because it best captures employees perceptions of how well the organization has fullled its obligations to them (Robinson and Morrison 2000). This scale yielded a coefcient alpha of .87. Affective commitment. Affective commitment was assessed using the 6-item measure designed by Allen and Meyer (1990). This scale yielded a coefcient alpha of .81. Civic virtue behavior. Civic virtue behavior was assessed using the 4-item measure designed by Podsakoff et al.

(1990). Internal consistency reliability of the self-reported scale for civic virtue was .74. We also requested supervisors to provide an assessment of their employees civic virtue behavior. The same four items were used. Internal consistency estimate was .83. Equity sensitivity. The participants equity sensitivity orientation was measured using the ESI (Huseman et al. 1987). This instrument has been found to exhibit high internal reliability, uni-dimentionality, is consistent with the theoretical perspective, it is derived from and is based on a non-student sample (Foote and Harmon 2006). The only criticism on ESI has been based on its dichotomous response pattern (as opposed to a continuous scale) representing benevolents and entitleds. Foote and Harmon (2006) suggested expanding the response options to include benevolents, equity sensitives, and entitleds. However, Blakely et al. (2005) found that benevolents and equity sensitives reacted similarly in terms of organizational citizenship behaviors. Therefore, we have chosen to use the instrument in its original form of two responses. This instrument consists of a ve item forced-choice response format. Participants were instructed to allocate a total of ten points between two response options for each item. One of these options depicts a focus on personal outcomes (the entitleds response) while the other presents a way of maintaining a long-term employment relationship with the organization (the benevolents response). A sample item is, My personal philosophy in dealing with the organization would be: AIf I dont look out for myself, nobody else will, BIts better for me to give than receive. Points assigned to the options that refer to the benevolents response are added together resulting in participants scores ranging from 0 to 50. Higher scores represent a benevolents tendency and lower scores represent an entitleds tendency. Previous studies have yielded a coefcient alpha of .86 (ONeill and Mone 1998) and a test retest reliability of .80 (Miles et al. 1989). For this study, Cronbachs coefcient alpha was .75. In line with previous research, the present study has treated the score derived from the Equity Sensitivity Instrument as a continuous measure (Kickul and Lester 2001; ONeill and Mone 1998). Procedural justice. Procedural justice was assessed with a 6-item measure taken from Niehoff and Moorman (1993). It contains items which refer to fair procedures and decision making in the workplace. This scale yielded a coefcient alpha of .87. Control variables. Four-control variables were used in the statistical analyses to rule out alternative explanations in our ndings. Age and tenure were assessed using an open-ended response format. A dummy-coded variable was used for gender (0 = male and 1 = female). In order to control for the effects of context, sample site was also

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included as a control variable (0 = MBA sample and 1 = university sample).

Analysis with Affective Commitment as the Dependent Variable Main effects. Table 2 shows the results for the regression analysis with affective commitment as the dependent variable. Psychological contract breach, equity sensitivity, and procedural justice explained additional variance above the effect of demographic variables on affective commitment DR2 = .27, F(3,393) = 55.66, p \ .001. Psychological contract breach was found to be negatively related to affective commitment, (b = -.21, p \ .001), thus supporting Hypothesis 1. Procedural justice also signicantly predicted affective commitment (b = .39, p \ .001), supporting Hypothesis 3. However, the hypothesized relationship between equity sensitivity and affective commitment (b = .05, ns) was not found. Thus, Hypothesis 7 was not supported. Two-way interactions. As can be observed in Table 2, our results revealed that the interactive effect between breach and equity sensitivity in predicting affective commitment was approaching signicance, DR2 = .01, F(2,391) = 2.99, p \ .054. The breach 9 procedural justice interaction term was not found to be signicantly related to affective commitment, b = -.03, ns. Hypothesis 5 was not supported. Although the signicance level of the moderating effects of equity sensitivity does not conform to standard statistical conventions, we still plotted the slopes at one standard deviation above and below the mean of equity sensitivity (which represents high and low levels of equity sensitivity) given the counter-intuitive results. Higher scores represent benevolents and lower scores represent entitleds. The slopes for both high (benevolents) and low levels (entitleds) of equity sensitivity were statistically signicant. However, contract breach had stronger-negative effects for the benevolents,

Results Descriptive statistics, inter-correlations, and internal consistency reliabilities of the study variables are summarized in Table 1. As previously noted, internal consistency of the scales was acceptable, with alpha values ranging from .74 to .87. As shown in Table 1, there were signicant correlations between psychological contract breach and outcome variables. All were in the expected direction. Overall, correlations were generally low to moderate and multicollinearity was not a threat to the stability of the regression analyses reported below (Tabachnick and Fidell 1996). There were also signicant correlations between some of the demographic characteristics and the study variables as depicted in Table 1. Given these relationships, we controlled for the effects of demographic variables in all analyses reported below. We next conducted a series of hierarchical multiple regression analyses to assess the incremental-explanatory power of variables in each block and to control statistically for demographic variables (Aiken and West 1991). The rst set of analyses examined affective commitment as the dependent variable while the second set of analysis looked into civic virtue behavior. To fully test for the two- and three-way interaction effects, we followed the guidelines suggested by Aiken and West (1991) for moderated regression. In particular, we examined the sign and signicance of the slope of the relationship between psychological contract breach and the focal-moderating variable. We plotted the slopes at one standard deviation above and below the mean of the focal-moderator variable.

Table 1 Means, standard deviations (SD), and inter-correlations for the study variables Mean Gender Age Tenure Sample Contract breach Equity sensitivity Procedural justice Affective commitment CVBself rating CVBsupervisor rating .42 29.45 5.37 1.73 3.18 4.57 27.76 4.87 5.35 5.10 SD .49 8.21 6.05 .47 1.29 1.22 5.92 1.20 1.02 1.15 -.09 -.08 .08 -.02 -.04 .01 -.02 .02 -.19* .70*** -.16* -.06 .19*** .09 .20*** .19*** .19* -.21*** -.01 -.15** .08 .20*** .19*** .09 .16*** -.11* -.11* -.26*** -.11* -.13 (.87) -.08 -.46*** -.42*** -.21*** -.18* (.75) .14** .16** .20*** .06 (.87) .52*** .30*** .07 (.81) .38*** .29*** (.74) .28*** (.83) 1 2 3 4 5 6 7 8 9 10

Pairwise N ranges from 137 to 403. Values for age and tenure are expressed in years * p \ .05; ** p \ .01; *** p \ .001

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172 Table 2 Summary of hierarchical regression analysis for variables predicting employee outcomes Predictors Affective commitment (N = 403) b Step 1 Gender Age Tenure Sample Step 2 Gender Age Tenure Sample Contract breach (PCB) Equity sensitivity (ES) Procedural justice (PJ) Step 3 Gender Age Tenure Sample Contract breach Equity sensitivity Procedural justice PCB 9 ES PCB 9 PJ Step 4 Gender Age Tenure Sample Contract breach Equity sensitivity Procedural justice PCB 9 ES PCB 9 PJ PCB 9 ES 9 PJ -.01 .07 .08 -.15
***

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Self-reported civic virtue behavior (N = 403) b DR2

Supervisor-rated civic virtue behavior (N = 137) b DR2

DR2

.01 .13 .06

*

.05 .13 .09 .10*** -.07 .04 .09 .10 -.03 -.11* .13 .27***
**

-.17* .22? -.10 .05*** -.10 -.18* .21? -.06 -.07 -.18* .01 .08*** -.03 -.18* .22? -.09 .07 -.17? .01 -.01 .01 .02* -.17* -.19* -.21? -.10 -.06 -.19* .09 .00 -.03 -.15 .00 .18 .02 .03 .03 .08*

-.23*** -.01 .08 .07 -.15*** -.21*** .05 .39*** -.01 .07 .08 -.16*** -.22*** .04 .39 -.03
***

.16*** .04 .10 .09 -.03 -.11* .13** .18*** -.03

-.09* .01?

-.15* .04 .09 .09 -.02 -.12* .16 -.04 -.14**

**

-.24*** .09* .39*** -.10* -.02 .12

**

.18***

.01

.08

We have a total of 137 paired supervisor-subordinate samples from 403 employees b represents the standardized regression coefcient for each step of the hierarchical regression analysis; DR2 is the incremental variance explained between each step
?

p \ .10; * p \ .05; ** p \ .01; *** p \ .001

t(190.5) = -4.83, p \ .001 compared to entitleds, t(190.5) = -2.4, p \ .05. As can be observed in Fig. 1, at low levels of breach, benevolents had a higher degree of affective commitment. However, at high levels of breach, the degree of affective commitment for benevolents and entitleds was almost equivalent. Hypothesis 9 was marginally supported.

Three-way interactions. Entry of the three-way interaction terms in Step 4 explained an additional amount of variance in affective commitment, DR2 = .011, F(1,390) = 6.73, p \ .01. Median split was performed on procedural justice and two-way interactions between psychological contract breach and equity sensitivity were conducted at high and low levels of procedural justice. The psychological

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5.3

173

5.2 5.1 5.0 4.9 4.8 4.7 4.6 Low High

Entitleds Benevolents

Psychological contract breach

Fig. 1 The interaction between psychological contract breach and equity sensitivity on affective commitment

5.0 4.9

4.8 4.7 4.6 4.5 4.4 Entitleds 4.3 4.2 4.1 Low High Benevolents

Psychological contract breach

Fig. 2 The interaction between psychological contract breach and equity sensitivity at low levels procedural justice on affective commitment

Self-reported civic virtue behavior

contract breach 9 equity sensitivity interaction was not signicant at high levels of procedural justice (b = -.08, ns). However, the interaction was marginally signicant at low levels of procedural justice (b = -.13, p \ .06). To aid interpretation, this interaction was plotted. As depicted in Fig. 2, the slopes for high (benevolents), t(395) = -4.35, p \ .001, and low (entitleds), t(395) = -3.99, p \ .001, equity sensitivity were statistically signicant, but there was a stronger-negative relationship between breach and affective commitment for the benevolents as compared to the entitleds. Hypothesis 11 was partially supported. Analysis with Civic Virtue Behavior as the Dependent Variable Main effects. Table 2 also depicts the results for the regression analysis with civic virtue behavior as the dependent variable. Psychological contract breach was signicantly related to self-reported (b = -.11, p \ .05) and supervisors assessment of civic virtue behavior

(b = -18, p \ .05), providing support for Hypothesis 2. These ndings suggest that the greater the magnitude of psychological contract breach, the lower the performance of civic virtue behaviors by the employees. Procedural justice also signicantly predicted self-reported civic virtue behavior (b = .16, p \ .001) but not supervisor-rated civic virtue behavior (b = -.03, ns) providing partial support for Hypothesis 4. Additionally, the relationship between equity sensitivity and self-reported civic virtue behavior (b = .13, p \ .01) was also signicant providing partial support for Hypothesis 8. Two-way interactions. As can be gleaned in Table 2, entry of the two-way interaction terms (breach 9 procedural justice and breach 9 equity sensitivity) explained a signicant amount of additional variance in self-reported civic virtue behavior, DR2 = .02, F(2,391) = 5.34, p \ .01. Table 2 shows a signicant interaction between psychological contract breach and procedural justice, (b = -.15, p \ .05). Simple slope analysis was performed to determine the relationship between psychological contract breach and civic virtue behavior at high and low levels of procedural justice. The slopes for high, t(190.5) = -3.44, p \ .001, and low, t(190.5) = -2.01, p \ .05, procedural justice were statistically signicant. Figure 3 shows that the level of civic virtue behavior was higher for those who experienced high levels of procedural justice, especially at low levels of breach. However, at high levels of breach, the lines converged, indicating similar levels of civic virtue behavior. Hypothesis 6 was supported. Furthermore, the hypothesized two-way interaction between psychological contract breach and equity sensitivity for self-reported (b = -.03, ns) and supervisors assessment (b = .01, ns) of civic virtue behavior was not found. Thus, Hypothesis 10 was not supported.

Affective commitment

Affective commitment

5.5 5.4 5.3 5.2 5.1 5.0 4.9 4.8 4.7 4.6 4.5 Low High
Low Procedural Justice High Procedural Justice

Psychological contract breach

Fig. 3 The interaction between psychological contract breach and procedural justice on self-reported civic virtue behavior

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Three-way interactions. In order to test a 3-way interaction between psychological contract breach, equity sensitivity, and procedural justice in predicting self-reported civic virtue behavior, a three-way term was computed. After controlling for all 2-way interactions in Step 3, inclusion of the 3-way interaction at Step 4 did not add any signicant amount of variance in the prediction of self-reported civic virtue behavior, DR 2 = .00, F(1,390) = 2.07, ns and supervisors assessment of civic virtue behavior, DR2 = .02, F(1,123) = 3.05, ns. Overall, Hypothesis 12 was not supported.

Discussion The obtained results generally support our argument that psychological contract breach has detrimental consequences on employee outcomes. Breach was negatively related to both affective commitment and civic virtue behavior. Indeed, employees feelings of psychological contract breach were also negatively related with their supervisors assessment of civic virtue behavior. This demonstrates that employees who perceived a contract breach were also seen by their supervisors as exhibiting less civic virtue behaviors. These ndings are consistent with previous research that examined the direct consequences of psychological contract breach not only on a wide range of self-reported work attitudes and behaviors (Kickul and Lester 2001; Kickul et al. 2002; Restubog and Bordia 2006; Robinson and Morrison 1995, 2000) but also with independent assessments of work behaviors (e.g., OCB-directed at other individuals and the organization; Restubog et al. 2006; Turnley et al. 2003). Results suggest a signicant interaction between breach and procedural justice in predicting self-reported civic virtue behavior. We found a stronger-negative relationship between breach and civic virtue behavior when procedural justice is perceived to be high. There are two possible interpretations for these ndings. First, procedural justice buffers the effects of low levels of breach but not when there is a high level of breach. That is, the efcacy of procedural justice in mitigating the impact of breach on employee outcomes may be contingent upon the extent or degree of contract breach experienced. Extent or degree of breach is analogous to what Shore and Tetrick (1994) referred to as size of discrepancy or the perceived difference between what was promised and what was actually received. Our results suggest that negative consequences that arise from low level of breach (or small discrepancies) can be minimized by the presence of procedural justice, thus, making its impact less harmful. However, even procedural justice cannot safeguard against extreme or high levels of breach. This nding is especially interesting when

compared with previous studies on contract breach and procedural justice (e.g., Kickul et al. 2002). These studies found that procedural justice mitigated the impact of breach on employee attitudes and behaviors regardless of the extent of breach. However, the present results indicate that there is a boundary condition in the buffering role of procedural justice. In other words, procedural justice appears to be effective in reducing the negative consequences that arise from low levels of breach. However, its buffering power seems to weaken as the magnitude of psychological contract breach increases. Second, this interaction is similar to the interaction effects found in previous studies where employees with more positive attitudes had a stronger-negative relationship with outcome variables (Brockner et al. 1992; George 2003). For example, Brockner et al. (1992) found that individuals with relatively high-prior commitment reacted more negatively to unfair treatment than did individuals with low-prior commitment. Similarly, George (2003) found that the impact of employee externalization (or outsourcing) on work attitudes of permanent staff was more negative for employees who had high-job security than those with low-job security. These interaction effects may be explained by the expectancy-violation hypothesis which posits that, people react more strongly to another partys actions that violate their previous expectations of how the other party is likely to behave (Brockner et al. 1992, p. 258). In the context of our research, employees reporting high-procedural justice have an expectation that procedural justice mechanisms in their organization would safeguard them against any form of injustice. Breach of the psychological contract is a form of injustice (Morrison and Robinson 1997; Rousseau 1995). As a result, this produces feelings of anger and resentment because the procedurally just system which they expected to protect them failed to fulll its function. These explanations were also in accordance to a betrayal perspective which was found in previous research (Restubog and Bordia 2006). Although the interactive effects involving breach and equity sensitivity in predicting affective commitment were only marginally signicant, we believe that the counterintuitive ndings require further elaboration. Both entitleds and benevolents reacted negatively to breach and there was a stronger-negative effect for the benevolents. At low levels of breach, benevolents had a higher level of affective commitment than entitleds. This concurs with previous literature on equity sensitivity (King et al. 1993; Miles et al. 1994). Benevolents value the intrinsic dimensions of their work such as long-term job security and non-material exchange with their organization. For example, King et al. (1993) found that benevolents, as compared to entitleds, place more emphasis on their work and are inclined to emphasize an input-focused ideology (p. 311)that is,

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what they can contribute to the organization. This ideology buffers the effects of low levels of breach for benevolents. However, high levels of breach resulted in a sharp drop in the levels of commitment among the benevolents. An experience of high breach may be inconsistent to benevolents assumption of what is expected in a goodemployment relationship and thus may be viewed as a betrayal of trust upon which the employment relationship is built. Moreover, breach may implicitly communicate to the benevolents that their employer has undervalued the relationship in which they have invested. Equity sensitivity, procedural justice, and psychological contract breach interacted with one another in predicting affective commitment. When procedural justice is low, there was a signicant negative association between breach and affective commitment for benevolents. This nding suggests that benevolents showed a reduction in their affective commitment as the magnitude of contract breach increased. This pattern mirrors the two-way interaction above. Benevolents have higher commitment at low levels of breach but drops to the level of entitleds at high breach. Thus, benevolents appear to exhibit adverse reactions when their employment relationship is threatened. There are two insights that can be derived from the study. First, our results suggest that benevolents and entitleds have different reactions to varying levels of breach and procedural justice. Previous literature depicted benevolents as accepting of under-reward situations (Miles et al. 1989, 1994). However, having to experience a high level of breach and unfair procedures may be quite disconcerting and too much to endure for the benevolents. Thus, failure on the part of the organization to adequately fulll the psychological contract and implement fair procedures could severely hurt the benevolents, which in turn could affect how they will behave towards their organization. In contrast, entitleds reported similar (low) levels of input regardless of the amount of breach experienced. Second, the general pattern of results suggests that employees with an orientation that is favorable to the organization (benevolents or those that perceived high levels of procedural justice) were more likely to respond negatively to psychological contract breach. Similar ndings alluding to the higher they are, the harder they fall have been noted in other research (Brockner et al. 1992, p. 241; George 2003). A further explanation for the differences in nding in this study from those in the existing literature can be due to cultural differences in the context. As mentioned in the introduction, majority of the studies conducted on psychological contract breach has been in the western countries. The Philippine cultural context exhibits the prevalence of collectivism, high-power distance, and workplace familism (Hofstede 1997; Restubog and Bordia

2007). In a cultural context marked by high-workplace familism (where employees see the organization as an extension of the family), employees may be willing to withstand a low-level breach because they perceive the organization to be generally nurturing and loyal towards them thus being worthy of their loyalty and goodwill. However, in case of substantial breach of contract, the employees may perceive it as a betrayal from within their support and trusted network, perhaps by one of their own. This could lead to a situation where even procedural justice or benevolence cannot minimize the negative outcomes from high levels of breach. Study Limitations and Future Research This study had three main limitations. First, data were cross sectional in nature. Thus, results cannot indicate causality. Future research should utilize a longitudinal design to provide a better understanding of the cause and effect relationships among the variables. Second, while we have adopted an interactionist perspective in examining the joint effects of a situational and dispositional variable in predicting employee outcomes, perceptions of procedural justice are purely self-report. We were unable to validate the authenticity of employees perceptions of procedural justice in their respective organizations. A nal limitation relates to the effect sizes of the interaction effects. However, interaction effects are difcult to detect and 1% of the variance should be considered important because most eld studies in social science research have only accounted for 13% of the variance (Champoux and Peters 1987). Despite these limitations, the current study has several strengths. From a methodological standpoint, the questionnaires for the predictor and outcome variables were administered at two separate occasions minimizing threats of common method variance (Podsakoff and Organ 1986). Another strength is that we collected employee work behaviors from an additional source (e.g., supervisors). The reliance on multiple informants such as self and supervisors is likely to yield superior measures of civic virtue behavior (as they overcome same-source bias) and provide a more complete picture of how contract breach inuences work behavior. Finally, this study utilized a diverse sample of employees from a wide range of occupations and business sectors enabling greater generalizability of the ndings. We believe that this research not only extends the literature on psychological contracts but also makes several contributions to organizational behavior research in general. First, we replicated in the Philippines research ndings from Western countries suggesting the negative ramications of psychological contract breach on employee outcomes. The collection of data in the Philippines adds to our understanding of the global workplace and suggests that

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psychological contract breach and its harmful effects do exist in a non-western context. Second, we provided preliminary evidence that a high degree of procedural justice may not always buffer the effects of contract breach as previously noted in the literature (Kickul et al. 2002). While our ndings are counter to what we have hypothesized, it does provide a new insight suggesting that worse outcomes are to be anticipated especially if employees have an expectation that procedural justice can prevent any form of contract breach. Since a stronger-negative relationship was found between breach and employee behaviors under conditions of high procedural justice, clearly more research in this area is warranted. Third, we also extended the theoretical characterization of the benevolents. Although previous research has portrayed benevolents as more accepting of situations of under-reward (Huseman et al. 1985, 1987), this study has demonstrated that they too have their limits or threshold for under-reward situations. That is, if the quality of their employment relationship is put at risk, benevolents are likely to respond negatively. Fourth and importantly, the simultaneous consideration of a situational (procedural justice) and dispositional (equity sensitivity) moderators was a worthwhile pursuit. The adoption of an interactionist perspective which recognizes the importance of both dispositional and situational variables as joint determinants of behavior (Schneider 1983; Terborg 1981) provides preliminary evidence that procedural justice and equity sensitivity combine to inuence reactions to psychological contract breach. There is a growing interest in the nature of psychological contracts in different countries (Rousseau and Schalk 2000). Future research should examine the consequences of psychological contract breach from a cross-cultural perspective. The differences in the way employees in individualist and collectivist cultures relate to their organization are likely to have implications for the nature of psychological contracts and consequences of breach. A collectivist culture is described as a society where people have a high degree of connectedness to others and strong emotional ties with institutions (Hofstede 1997). Furthermore, the relationship between the employer and the employee in collectivist societies is likened to a familial relationship where the employer assumes the role of a parent, while an employee takes on the role of a child (Hofstede 1997; Restubog and Bordia 2006). Thus, employees expect to be supported, taken care of and helped just as in a parental relationship. In line with this reasoning, the impact of psychological contract breach would be more pronounced in a collectivist culture compared with an individualist culture. That is, failure on the part of the organization to fulll what has been promised may be interpreted by collectivists as incompatible to the parental role that they accord to the organization.

Conclusion There has been an upsurge of empirical studies on psychological contracts in the past decade. However, some questions remained unanswered especially with respect to the role of dispositional and situational variables in moderating the relationship between breach and employee outcomes. The results of this study build on the current body of research on psychological contracts by examining how the interactive effects of equity sensitivity and procedural justice inuence employee outcomes. In doing so, this research demonstrates that the type and intensity of ones reactions to psychological contract breach are inuenced by interactive forces of the individuals disposition and the organizational procedures.
Acknowledgments We thank Marigirl Padilla, Susie Eala, and Franco Quodala for assistance in data collection, and Flora Calleja for logistical support and Elizabeth George and Nerina Jimmieson for their helpful comments on an earlier draft of this manuscript.

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