CHAPTER 2 LITERATURE REVIEW
2.1 Psychological Contract Violation
2.1.1 Summary of Psychological Contract Theory
2.1.1.1 Connotation and Development of Psychological Contract
By sorting out the existing literature, the development of the theory of psychological contract can be divided into the early stage of the theory generation and the development stage, in which the early stage is mainly the budding stage of the psychological contract concept, represented by scholars such as Chris Argyris and Levinson, while the developmental stage is the formation and development of the psychological contract concept, mainly represented by Rousseau's narrow psychological contract theory and Guest's generalized psychological contract theory.
1) The early stage of psychological contract theory (1960s - 1970s)
The theory of psychological contract was first traced to Barnard's (1938) equity theory, which suggested that employee perceptions of organizational fairness are a basic prerequisite for maintaining employment, and thereafter, March and Simon (1958) indicated that after entering the organization, employees would accept a series of job duties requirements, such as adhering to
organizational rules, performing job duties, and so on. Most of these job elements are clearly marked, but there are also implicit forms in employment contracts, such as employee loyalty and identity to the organization, and the existence of this "unspoken contractual responsibility" in the employment relationship, which forms the basis for maintaining the employment relationship. Thereafter, in 1960, Chris Argyris first proposed the term "Psychological Work Contract" in Understanding Organizational Behavior, describing it as an implicit understanding and tacit relationship between workers and foremen, a process of social exchange (Argyris, 1960). Although he did not give a specific definition of the concept and content of psychological contract, he opened the door of psychological contract research, and then triggered a research upsurge of scholars in different fields on psychological contract. Levinson, Munden, Price, Mandl, and Solley (1962), through a qualitative study of 874 employees at a U.S. plant, found that workers had various expectations toward the employer and that the employer's duty to help the employee in fulfilling it comes from the employee's perception of what responsibilities the organization should perform. Thus, for the first time, he academically proposed the term "psychological contract", which is defined as an "unwritten contract", referring to the sum of a series of expectations between the employer and the employee in the employment relationship, which is not publicly stated and precedes the written contract and is the default commitment in both parties.
Because Levinson first provided a more comprehensive interpretation of the concept of psychological contract, he was lauded as the father of psychological contract. As for Kotter (1973), he defined the connotation of psychological contract more clearly through quantitative research method, considered that psychological contract is an implicit agreement between employers and proposed the concept of match to express the coupling of expectations between employers. The study shows that the degree of matching is positively related to job satisfaction and performance, but negatively related to employee departure. On the basis of research by Argyris (1960); (Levinson et al., 1962; Schein, 1980) further explored the concept of psychological contract, which was defined as a set of unwritten expectations between individuals and organizations based on the principle of reciprocity that encompassed both the job itself and the amount of compensation, as well as the rights, obligations and responsibilities of both employers. Schein argues that the psychological contract
includes elements from both the employee's and the employer's perspectives, and changes over time and in the organizational context. For example, from an organizational perspective, the psychological contract will change as the organization changes in its own responsibilities and obligations to cope with itself and in its work requirements for the employee, whereas from an employee perspective, the psychological contract will not only be affected by personal needs, life experiences, work experiences, social practices, but will also change as a result of changes in the environment leading to changes in occupational demands. Thus, the psychological contract is in fact a psychological game between employ EES, and when an employee perceives that his or her psychological contract is violated, such as organizational maxima, the employee creates a sense of disappointment with the organization, which will ultimately lead to negative attitudes and behaviors by the employee.
To sum up, different researchers hold different views on the definition of psychological contract in the early stages of its development, but in essence, its theoretical basis is social exchange theory and fair theory (Anderson &
Schalk, 1998). Scholars have argued that a psychological contract exists in the exchange relationship between employ EES, which encompasses both employee and organizational levels, as an understanding and perception of both employ EES' expectations in relation to each other.
2) The development stage of psychological contract theory (late 1980s - now)
From the early stages of theory, it seems very reasonable to state theoretically that a psychological contract exists for both subjects, but operationalizing it is difficult when it is used in situational research. For example:
how are expectations measured? How to balance the expectations of both employers and employees? In the context of this perplexity, Rousseau (1989) opens the developmental antecedents of the second phase of the psychological contract and re- assigns a new connotation to the psychological contract, which Rousseau (1995) puts the perspective of the psychological contract, based on the individual, arguing that the psychological contract is merely an employee's subjective understanding of the exchange relationship, including organizational commitment to employees (e.g., salary benefits) and standards of work (e.g., job duties) and also included subjective
perceptions of coworker attitudes and behaviors. If these subjective perceptions are accepted by the employee, both employ EES develop a psychological contract, which is specifically formulated as: a psychological contract is an employee's understanding of the responsibilities to cope with themselves and the organization, which is committed and reciprocal (Rousseau, 1989, 1995). Overall, the unilateral definition of psychological contract proposed by Rousseau is more operable and supported by many researchers, which promotes the research progress in this field. However, some researchers have questioned this theory and adhered to the bilateral perspective of early psychological contract. Schalk, Campbell, and Freese (1998) propose that a psychological contract is an exchange between employ EES and therefore requires simultaneous consideration of the expectations and responsibilities of both parties.
Whereas Herriot and Pemberton (1997) argue that Rousseau's narrow theory of psychological contract, which does not take into account the process of contractualization, but should be the subjective understanding of the value both employers provide to each other. As for Tsui (1995), he proposes to replace an organizational side with an "organizational agent". Guest and Conway (2002) notes that a psychological contract is a suitable tool for analyzing employment, which is a two-way exchange, so both the expectation and the perception of responsibility of the hire should be taken into account.
Generally speaking, the unilateral theory and the bilateral theory of psychological contract form two kinds of schools, namely, Rousseau school and the "classical school" which advocates following the early theory of psychological contract. Although scholars have different research perspectives, there is a consensus that psychological contract includes the responsibilities and obligations of organizations and employees.