THEORY OF THE PSYCHOLOGICAL CONTRACT

Theory Of The Psychological Contract

Theory Of The Psychological

Introduction

Researchers have shown that international job assignments have been crucial to the success of multinational companies (MNCs) in recent years (Bartlett and Ghoshal, 1989; Morrison and Roth, 1992; Stroh and Caligiuri, 1998). Many MNCs have attempted to design better human resources systems to facilitate the transfer of employees from one location to another. Unfortunately, some scholars have reported that, after returning to their home countries where headquarters were located, 10-25 percent of “repatriates” (expatriates who have returned home) left their companies within the first year (Adler, 1986; Black and Gregersen, 1999). A more recent survey shows that about 60 percent of the 72 Finnish repatriates who stayed with the same employer upon returning home were seriously considering leaving their companies (Suutari and Brewster, 2003). The high-turnover rate of repatriates suggests that MNCs do not fully utilize the expertise that they bring back from abroad (Stroh, 1995; Stroh et al., 2000); furthermore, this high turnover could discourage other employees within the company from accepting future international assignments.

High turnover rates pose the need for a critical investigation of employee-organization relationships between repatriates and MNCs. We suggest that repatriates' perceived fulfillment of their psychological contracts (Rousseau, 1989; Morrison and Robinson, 1997) by their employers is critical to an understanding of these repatriates' relationships with the MNCs. According to Rousseau (1989), the term “psychological contract” refers to a person's beliefs about the reciprocal exchange agreement between him or her and the organization to which he or she belongs. An accepted psychological contract provides an employee with a sense of control and security in his or her relationship with the organization. It is especially meaningful for the career management of repatriates of MNCs (Baruch et al., 2002; Paik et al., 2002).

Although empirical evidence has suggested a strong link between the perceived fulfillment of employees' psychological contracts and their job attitudes (Lo and Aryee, 2003; Robinson et al., 1994; Turnley et al., 2003), it is not clear whether this relationship is due simply to benefits (or a deprivation of benefits) from the company. Thus, our primary research question is whether or not repatriates' perceived fulfillment of their psychological contracts is related to their job attitudes, once we have controlled the effects of repatriates' assessments of actual changes to their employment (e.g. promotion or demotion, pay raises or reductions, skill improvement or not) before and after expatriation. Moreover, we wish to examine the extent to which repatriates' counterfactual thinking about taking international assignments is related to their job attitudes and to their perceived fulfillment of their psychological contracts.

This paper offers a number of contributions to the organizational behavior and international human resource literature. First, we extend the existing literature on psychological contracts, specifically by examining the relationship between repatriates' perceived fulfillment of their psychological contracts with job attitudes and with counterfactual thinking. We wish to achieve our goal by testing the relationships beyond the effect of actual changes experienced by the ...