Employment relationship and firm performance: Evidence from the People's Republic of China

With increasing international competition and rapid technological change, a variety of employment relationship approaches have been used to gain competitive advantage by organizations in both the United States and beyond. This dissertation attempted to ask two fundamental questions in this line of research. First, how should organizations design employment relationship with their employees to gain competitive advantage? Second, why have different employment relationship approaches been used across organizations? It was proposed that employment relationship influence firm performance either directly or indirectly through its fit with firm's strategic orientations. Firm's strategic orientation and type of firm were proposed as the factors that influence the choice of employment relationship approaches. Based on the inducement-contribution framework (Barnard, 1938; March & Simon, 1958; Tsui, Pearce, Port & Tripoli, 1997), three studies that focused on the employment relationship with middle managers were conducted to answer these two research questions in the People's Republic of China (PRC) context. The first study involved interviews with human resource managers in a heterogeneous sample of firms and written survey to a sample of managers and professionals to define the content domain of employer's expected contributions and provided inducements with managers in the organizations in the PRC. The second study, using a large sample of managers and professionals, involved identifying the dimensions of employer's expected contributions and provided inducements with middle managers in organizations in the PRC. The third study tested the hypotheses on the consequences and determinants of employment relationship with middle managers by using a cross industry, heterogeneous national sample.; The results of the first two studies suggested that both employer's expected contributions and provided inducements are multidimensional. In addition, the results confirmed that both balanced and unbalanced employment relationship approaches were used by organizations. The empirical evidence in the third study provided partial support for the conceptual model proposed in this dissertation. First, firms with employment relationship that is characterized by high expected contributions and high provided inducements always outperformed other firms. Second, consistent with prior work in the field of strategic human resource management, the study failed to find the effect of fit between employment relationship and firm's strategic orientation on firm performance. Third, results of this study suggested that prospector strategic orientation was associated with the choice of employment relationship approaches. Firms with higher prospector strategic orientation were more likely to use employment relationship approach that is characterized by low expected contributions and low provided inducements than other approaches. Fourth, type of firm also influenced the choice of employment relationship approaches. State-owned enterprises were more likely to use employment relationship approaches that are characterized by high provided inducements than employment relationship approaches that are characterized by low provided inducements than non-state owned enterprises. Finally, limitations and suggestions for future studies in this line of research are discussed.