Opportunistic Behaviour and Psychological Contract between Employer and Employee

N. N. J. Navaratne

Abstract  

It is assumed that employment agreement is not perfect or complete because, it never offers an account of virtues such as benevolence, effort, knowledge, or courage and it implies that the economic agent is “law-abiding” but not “fair”. In a sense, what is legal does not equal to what is moral. Moreover, imperfect or incomplete agreement may create residual or remaining rights for both the employer (the contract maker) and employee (the contract maker) by nurturing an environment to get an opportunistic behaviour. But moral or ethical values such as justice from an employer and commitment from an employee changes individuals’ utility or well-being function. Therefore, can assume that a decline from the opportunistic behaviour. In addition it may facilitate long-term psychological contract by creating a balance between how the employee is treated by the employer and what the employee puts into the job while minimizing opportunistic behaviour between them. Thus, all forms of justice and commitment are negatively related to opportunistic behaviour while positively influencing psychological contract. Using survey data collected from two hundred and seventy three, (273) fulltime employees at fourteen (14) manufacturing companies in the apparel industry in Sri Lanka, this study empirically tested the relationship between organizational justice from the employer perspective and commitment from the employee perspective as the originators of the psychological contract. The results of Correlation Test and Chi-Squared Test show a positive association among justice and commitment behaviour. Moreover, the findings of the research suggest that the utmost importance of moral or ethical values as an essential part of the business strategic decision-making behaviour.

Keywords: Employment Agreement, Imperfect, Opportunistic Behaviour, Psychological Contract