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The Interactive Effects of Procedural Justice and EquitySensitivity 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 thecombined 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 com-

mitment 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 findings provide a new insight sug-

gesting that worse outcomes are to be anticipated

especially if employees have an expectation that procedural

justice can prevent any form of contract breach. In addi-

tion, 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 influenced by interactive forces of the individ-

uals 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 fulfill 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 recip-

rocate by providing some contributions in return (Blau

1964). Previous research on psychological contracts has

primarily focused on three areas. The first 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: [email protected]

P. Bordia S. Bordia

School of Management, The University of South Australia,

Adelaide, SA, Australia

123

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DOI 10.1007/s10869-009-9097-1


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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, sat-

isfaction, and turn-over intentions; Kickul and Lester 2001;

Restubog and Bordia 2006; Restubog et al. 2006; Turnley

and Feldman 1999). These studies suggest that employeesare 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 influence

the relationship between breach and employee outcomes

(e.g., Kickul et al. 2002). For example, procedural and

interactional justice reduces the negative impact of psy-

chological 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 idiosyncraticbelief (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 character-

istic (equity sensitivity) on the breach-employee outcomes

relationship. Most of the research undertaken in the area of

psychological contracts has emphasized situational moder-

ators (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 fills 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) influence the breach-

outcomes relationship is firmly embedded in an interac-

tionist 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 influenced 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 con-

tract 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 eval-

uate the extent to which the psychological contract has beenmet 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 fami-

lism 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 par-

allel 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 specifically

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 commit-

ment and civic virtue behavior. Next, we present procedural

justice and equity sensitivity as moderators influencing the

relationship between breach and these employee outcomes.

Organizational Commitment

Organizational commitment reflects 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 fulfill its commitments, employees will view

their social exchange with the organization as less valu-

able. As a result, employees will reciprocate by decreasingtheir affective commitment to the organization (e.g.,

Bunderson 2001; Turnley and Feldman 1999). We expect

that fulfillment of the psychological contract-related obli-

gations 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 fulfilled has a significant 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 findings regarding the relationship between

breach and affective commitment, we predict that psy-

chological 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 sup-

portive environment in the workplace (Blakely et al. 2003,

2005). OCBs have been conceptualized as comprising of

five key dimensions: altruism, civic virtue, conscientious-

ness, courtesy, and sportsmanship (Podsakoff et al. 2000).

In the current study, we focus on civic virtue behaviors as itis 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 orga-

nizational 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 reflect a general interest, responsible

involvement, and consideration in the affairs of the

organization.

Previous research suggests that OCBs can be negatively

influenced by failure on the part of the organization to ade-

quately fulfill the psychological contract of its employees.

For example, employees whose psychological contracts

were not fulfilled by their employers were less likely to

demonstrate civic virtue behaviors (Restubog and Bordia2006; Robinson and Morrison 1995). A large majority of

research supports the relationship between breach and OCBs

(Robinson and Morrison 1995; Turnley et al. 2003). Draw-

ing from SET and the norm of reciprocity, when employees

feel that the organization has fulfilled 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 theprocess by which outcomes such as promotions or bud-

getary allocations are made (Cohen and Spector 2001).

Employees responses to management decisions are

strongly influenced 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 citi-

zenship behavior (Liao and Rupp 2005). Perceptions of

procedural justice induce trust in management and satis-

faction with performance appraisal system (Cropanzanoet al. 2002). Rifai (2005) found that procedural justice

affects job satisfaction which affects organizational citi-

zenship behavior via affective commitment. More compre-

hensively, 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 organiza-

tion 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 higherjob 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, there-

fore, can control the negative effects of breach and makes

its impact on employee outcomes less harmful.

In the context of the current research, affective com-

mitment and civic virtue behavior could be considered as

employee inputs or contributions. Thus, when employees

perceive that their psychological contract has been brea-

ched, their willingness to reciprocate by under-performingor withholding behaviors beneficial to their organization

will depend on whether they perceive organizational

processes and procedures to be fair. Based on the litera-

ture reviewed, we expect that under conditions of high-

procedural justice, the negative impact of breach of

psychological contract will be mitigated.

Hypothesis 5 Procedural justice will moderate the rela-

tionship 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 rela-

tionship 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 influence reactions to breach. Huseman et al. (1985,

1987) classified three types of individuals along a contin-

uum, 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 out-puts (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 hasbeen 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 self-

reported 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 influence 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 under-

rewarded as compared to either equity sensitives or be-

nevolents. In contrast, benevolents are less likely to report

negative reactions to contract breach as they possess amore 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 under-

reward conditions, benevolents reported significantly

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 rela-

tionship 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 influenced by multiple

factors (Chatman 1989; Davis-Blake and Pfeffer 1989;

George and Jones 1996; Schneider 1983). Equity sensi-

tivity has implications for how individuals react to inputs

and outputs in exchange relationships. In other words,equity sensitivity may have implications for how individ-

uals react to varying levels of justice. Following the

interactionist perspective, we predict that the resultant

interactions involving procedural justice and equity sensi-

tivity 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 be-

nevolents 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 expectnegative reactions for both benevolents and entitleds.

Moreover, since benevolents are more forgiving of trans-

gressions 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 stronger-

negative reactions toward breach which is accompanied by

unfair treatment because of their low threshold for situa-

tions 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 vari-

ability 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 first group consisted of 293 full-time employ-

ees 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 thestudy. 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 significant 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 andthree 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%), financial insti-

tutions (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 low-

level service positions to middle-supervisory roles. Educa-

tional background of the participants ranged from thosewith 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 question-

naire 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 first administration of the survey, measures of

psychological contract breach and demographic charac-

teristics 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 moder-ator (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 col-

lection. 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 final sample.

After the participants completed the self-report mea-sures, they were requested to pass on a rating scale to their

immediate supervisor to complete. The rating scale asses-

sed 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 question-

naire. 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 coefficient 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 psy-

chological contract because it best captures employees

perceptions of how well the organization has fulfilled its

obligations to them (Robinson and Morrison 2000). This

scale yielded a coefficient alpha of .87.

Affective commitment. Affective commitment was

assessed using the 6-item measure designed by Allen and

Meyer (1990). This scale yielded a coefficient alpha of .81.

Civic virtue behavior. Civic virtue behavior was asses-

sed 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 supervi-

sors 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 highinternal 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) repre-

senting 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 cit-

izenship behaviors. Therefore, we have chosen to use the

instrument in its original form of two responses. Thisinstrument consists of a five 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 coeffi-

cient alpha of .86 (ONeill and Mone 1998) and a test

retest reliability of .80 (Miles et al. 1989). For this study,

Cronbachs coefficient 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 deci-

sion making in the workplace. This scale yielded a

coefficient alpha of .87.

Control variables. Four-control variables were used in

the statistical analyses to rule out alternative explanations

in our findings. 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).

Results

Descriptive statistics, inter-correlations, and internal con-

sistency reliabilities of the study variables are summarizedin 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 significant corre-

lations between psychological contract breach and outcome

variables. All were in the expected direction. Overall,

correlations were generally low to moderate and multi-

collinearity was not a threat to the stability of the regres-

sion analyses reported below (Tabachnick and Fidell

1996). There were also significant 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 inall 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

first 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 sig-

nificance 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.

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 var-

iable. Psychological contract breach, equity sensitivity, and

procedural justice explained additional variance above the

effect of demographic variables on affective commitmentDR2 = .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 sup-

porting Hypothesis 1. Procedural justice also significantly

predicted affective commitment (b = .39, p\ .001), sup-

porting Hypothesis 3. However, the hypothesized

relationship between equity sensitivity and affective com-

mitment (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 affectivecommitment was approaching significance, DR2 = .01,

F(2,391) = 2.99, p\ .054. The breach 9 procedural jus-

tice interaction term was not found to be significantly

related to affective commitment, b = -.03, ns. Hypothesis

5 was not supported. Although the significance 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 sensi-

tivity were statistically significant. However, contract

breach had stronger-negative effects for the benevolents,

Table 1 Means, standard deviations (SD), and inter-correlations for the study variables

Mean SD 1 2 3 4 5 6 7 8 9 10

Gender .42 .49

Age 29.45 8.21 -.09

Tenure 5.37 6.05 -.08 .70***

Sample 1.73 .47 .08 -.16* -.21***Contract breach 3.18 1.29 -.02 -.06 -.01 .16*** (.87)

Equity sensitivity 4.57 1 .22 -.04 .19*** -.15** -.11* -.08 (.75)

Procedural justice 27.76 5.92 .01 .09 .08 -.11* -.46*** .14** (.87)

Affective commitment 4.87 1.20 -.02 .20*** .20*** -.26*** -.42*** .16** .52*** (.81)

CVBself rating 5.35 1.02 .02 .19*** .19*** -.11* -.21*** .20*** .30*** .38*** (.74)

CVBsupervisor rating 5.10 1.15 -.19* .19* .09 -.13 -.18* .06 .07 .29*** .28*** (.83)

Pairwise N ranges from 137 to 403. Values for age and tenure are expressed in years

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

J Bus Psychol (2009) 24:165178 171

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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 mar-

ginally supported.

Three-way interactions. Entry of the three-way interac-

tion 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

Table 2 Summary of hierarchical regression analysis for variables predicting employee outcomes

Predictors Affective commitment

(N = 403)

Self-reported civic virtue

behavior (N = 403)

Supervisor-rated civic virtue

behavior (N = 137)

b DR2 b DR2 b DR2

Step 1

Gender .01 .05 -.17*

Age .13* .13 .22?

Tenure .06 .09 -.10

Sample -.23*** .10*** -.07 .05*** -.10 .08*

Step 2

Gender -.01 .04 -.18*

Age .08 .09 .21?

Tenure .07 .10 -.06

Sample -.15***

-.03 -.07

Contract breach (PCB) -.21*** -.11* -.18*

Equity sensitivity (ES) .05 .13** .01

Procedural justice (PJ) .39***

.27***

.16***

.08***

-.03 .03

Step 3

Gender -.01 .04 -.18*

Age .07 .10 .22?

Tenure .08 .09 -.09

Sample -.16***

-.03 .07

Contract breach -.22*** -.11* -.17?

Equity sensitivity .04 .13**

.01

Procedural justice .39*** .18*** -.01

PCB 9 ES -.09* -.03 .01

PCB 9 PJ -.03 .01?

-.15*

.02*

-.17*

.03

Step 4

Gender -.01 .04 -.19*

Age .07 .09 -.21?

Tenure .08 .09 -.10

Sample -.15*** -.02 -.06

Contract breach -.24*** -.12* -.19*

Equity sensitivity .09* .16**

.09

Procedural justice .39***

.18***

.00

PCB 9 ES -.10* -.04 -.03

PCB 9 PJ -.02 -.14**

-.15

PCB 9 ES 9 PJ .12**

.01*

.08 .00 .18 .02

We have a total of 137 paired supervisor-subordinate samples from 403 employees

b represents the standardized regression coefficient 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

172 J Bus Psychol (2009) 24:165178

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contract breach 9 equity sensitivity interaction was not

significant at high levels of procedural justice (b = -.08,

ns). However, the interaction was marginally significant 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 significant, but there was

a stronger-negative relationship between breach and affec-

tive 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

significantly 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 findings suggest that the greater the magnitude of

psychological contract breach, the lower the performance

of civic virtue behaviors by the employees. Procedural

justice also significantly 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 equitysensitivity and self-reported civic virtue behavior (b = .13,

p\ .01) was also significant 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 proce-

dural justice and breach 9 equity sensitivity) explained a

significant amount of additional variance in self-reported

civic virtue behavior, DR2 = .02, F(2,391) = 5.34,

p\ .01. Table 2 shows a significant interaction between

psychological contract breach and procedural justice,

(b = -.15, p\ .05). Simple slope analysis was performed

to determine the relationship between psychological con-tract 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 significant.

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 sensi-

tivity 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.

4.6

4.7

4.8

4.9

5.0

5.1

5.2

5.3

Low

Psychological contract breach

A

ffectivecommitment

Entitleds

Benevolents

High

Fig. 1 The interaction between psychological contract breach and

equity sensitivity on affective commitment

4.1

4.2

4.3

4.4

4.5

4.6

4.7

4.8

4.9

5.0

Low


Affectivecomm

itment

Entitleds

Benevolents

High


equity sensitivity at low levels procedural justice on affective

commitment

4.5

4.6

4.7

4.8

4.9

5.0

5.1

5.2

5.3

5.4

5.5

Low


Self-reportedcivicvirtuebehavior

Low Procedural Justice

High Procedural Justice

High


procedural justice on self-reported civic virtue behavior

J Bus Psychol (2009) 24:165178 173

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Three-way interactions. In order to test a 3-way interac-

tion 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 significant

amount of variance in the prediction of self-reported civic

virtue behavior, DR 2 = .00, F(1,390) = 2.07, ns andsupervisors 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 conse-

quences on employee outcomes. Breach was negatively

related to both affective commitment and civic virtue

behavior. Indeed, employees feelings of psychologicalcontract 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 findings are consistent

with previous research that examined the direct conse-

quences 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 significant 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 findings. First, procedural justice

buffers the effects of low levels of breach but not when

there is a high level of breach. That is, the efficacy 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 differ-

ence 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 pro-

cedural justice cannot safeguard against extreme or high

levels of breach. This finding 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 conse-quences 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 (oroutsourcing) 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 psycho-

logical 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

fulfill its function. These explanations were also in accor-

dance 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 significant, we believe that the counter-

intuitive findings 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 benevo-

lents assumption of what is expected in a good-

employment relationship and thus may be viewed as a

betrayal of trust upon which the employment relationship isbuilt. Moreover, breach may implicitly communicate to the

benevolents that their employer has undervalued the rela-

tionship 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 significant negative association between breach

and affective commitment for benevolents. This finding

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 levelsof 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 en-

titleds 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 dis-

concerting and too much to endure for the benevolents.

Thus, failure on the part of the organization to adequately

fulfill the psychological contract and implement fair pro-

cedures could severely hurt the benevolents, which in turn

could affect how they will behave towards their organiza-

tion. 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 find-

ings 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 finding 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 psy-

chological 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 theirsupport 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 haveadopted an interactionist perspective in examining the joint

effects of a situational and dispositional variable in pre-

dicting 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 final limitation

relates to the effect sizes of the interaction effects. How-

ever, interaction effects are difficult to detect and 1% of the

variance should be considered important because most field

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 ques-

tionnaires 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 influences 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 findings.

We believe that this research not only extends the liter-

ature on psychological contracts but also makes several

contributions to organizational behavior research in gen-

eral. First, we replicated in the Philippines research findings

from Western countries suggesting the negative ramifi-

cations 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 pre-

liminary 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 findings 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 anexpectation that procedural justice can prevent any form of

contract breach. Since a stronger-negative relationship was

found between breach and employee behaviors under con-

ditions of high procedural justice, clearly more research in

this area is warranted. Third, we also extended the theo-

retical 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 andimportantly, 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 influence reactions to psy-

chological contract breach.

There is a growing interest in the nature of psycholog-

ical contracts in different countries (Rousseau and Schalk

2000). Future research should examine the consequences of

psychological contract breach from a cross-cultural per-

spective. The differences in the way employees in

individualist and collectivist cultures relate to their orga-

nization 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). Further-

more, 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 fulfill 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 psy-

chological contracts in the past decade. However, some

questions remained unanswered especially with respect to

the role of dispositional and situational variables in mod-

erating the relationship between breach and employee

outcomes. The results of this study build on the currentbody of research on psychological contracts by examining

how the interactive effects of equity sensitivity and pro-

cedural justice influence employee outcomes. In doing so,

this research demonstrates that the type and intensity of

ones reactions to psychological contract breach are influ-

enced 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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