Enough is enough? Threshold models for the relationship

between psychological contract breach and job-related

attitudes

Thomas RigottiUniversitat Leipzig, Leipzig, Germany

Psychological contracts are a powerful concept in research on organizationalbehaviour. Substantial negative reactions towards perceived breaches to thepsychological contract have been reported in many studies. There are soundtheoretical arguments for the existence of a point in the continuous perceptionof contract breach, where sudden changes in attitudes occur in the relationshipbetween breach and outcomes (i.e., thresholds). Using questionnaire data from592 employees working in more than 30 different organizations acrossGermany, segmented regression models were tested against curvilinear effectsfor the relationship between breach of the psychological contract and jobsatisfaction, affective organizational commitment, intention to quit, violation,and trust. This study provides empirical evidence for threshold models ofpsychological contract breach. The results imply that prior studies haveunderestimated the impact of psychological contract breach.

Keywords: Psychological contracts; Segmented regression; Breach; Violation.

Psychological contracts have become a prominent concept for studying theemployment relationship between employees and employers, as well as forpredicting and explaining organizational behaviour. Psychological contractscan be defined as ‘‘an individual’s belief in mutual obligations between thatperson and another party such as an employer (either a firm or anotherperson). This belief is predicated on the perception that a promise has beenmade and a consideration offered in exchange for it, binding the parties to

Correspondence should be addressed to Thomas Rigotti, Universitat Leipzig, Institute of

Psychology II, Work and Organizational Psychology, Seeburgstr. 14-20, 04103 Leipzig,

Germany. E-mail: rigotti@uni-leipzig.de

This research is part of the Psycones-project (PSYchological CONtracts across Employment

Situations) supported by a grant from the EU’s fifth framework programme (HPSE-CT-2002–

00121). Further information about the project is available at www.uv.es/*psycon

EUROPEAN JOURNAL OF WORK AND

ORGANIZATIONAL PSYCHOLOGY

2009, 18 (4), 442–463

� 2008 Psychology Press, an imprint of the Taylor & Francis Group, an Informa business

http://www.psypress.com/ejwop DOI: 10.1080/13594320802402039

some set of reciprocal obligations’’ (Rousseau & Tijoriwala, 1998, p. 679).Within this framework, psychological contract breach and its consequencesare the most common phenomena under study. Breach is the individualperception that promise-based obligations in the social exchange betweenemployee and employer have not been met (cf. Rousseau, 1995). A plethoraof studies have reported on the substantial relationship between perceivedbreaches and diverse outcomes, such as lowered job satisfaction (e.g.,Gakovic & Tetrick, 2003; Raja, Johns, & Ntalianis, 2004; Robinson &Rousseau, 1994; Tekleab, Takeuchi, & Taylor, 2005), organizationalcommitment (e.g., Conway & Briner, 2002; Coyle-Shapiro & Kessler,2000; Raja et al., 2004), or health and well-being of employees (e.g.,Cantisano & Dominguez, 2005; Gakovic & Tetrick, 2003; Isaksson,Josephson, & Vingard, 2003; Johnson & O’Leary-Kelly, 2003), as well asincreased turnover intentions (e.g., Huiskamp & Schalk, 2002; Robinson &Rousseau, 1994; Tekleab et al., 2005). Hence, it comes as no surprise thatthe first published meta-analysis on psychological contracts systematicallysummarized the relationship between psychological contract breach and aset of outcomes, based upon 51 studies (Zhao, Wayne, Glibowski, & Bravo,2007). Job satisfaction and organizational commitment are importantindividual attitudes that shape an employee’s performance. Turnover isrelated to high costs for organizations (and turnover intention can be seen asan antecedent). Hence, explaining changes in these attitudes is crucial fororganizational performance. In addition to these attitudes, trust towardsmanagement and leaders, as well as violation, which is considered aproximal emotional reaction towards breaches to the psychologicalcontract, will be included as outcomes in this study.

In the majority of studies, a linear relationship between perceptions ofbreach to the psychological contract, and attitudes, or behaviouralintentions has been tested. But do our moods and attitudes towards thejob really change in a linear fashion dependent on the extent to which weperceive the promises made by the employer to be broken? Several authorsargued for the existence of thresholds, either for perceiving breaches (e.g.,Morrison & Robinson, 1997) or for reactions towards breaches (e.g., Guzzo,Noonan, & Elron, 1994; Rousseau, 1995; Schalk & Roe, 2007). The aim ofthis study is to test threshold models for the relationship between perceivedbreaches to the psychological contract and work-related attitudes. The ideaof a threshold implies that sudden changes in attitudes in relation toperceived breaches to the psychological contract only occur when a certainlevel of breach has been reached. Because curvilinear models can be seen asan alternative way of understanding how levels of breach and attitudes arelinked, they will serve as a comparison. Curvilinear models imply that thereis a positive acceleration effect: With every step in the level of perceivedbreach, attitudinal reactions become more pronounced.

PSYCHOLOGICAL CONTRACT THRESHOLDS 443

PSYCHOLOGICAL CONTRACT BREACH:ARGUMENTS FOR A THRESHOLD MODEL

The referent cognitions theory (Folger, 1987, 1993), as well as socialexchange theories, such as Adams’ equity theory (Adams, 1965), suggestthat people evaluate their state of being either in relation to a desiredreference or in comparison to significant others. Both models imply thatreactions towards changes in a social exchange relationship include athreshold. Within the referent cognition theory, the threshold would bereached when actions from others fall outside of the realm of expectations.Within equity theory, a threshold is surpassed when the equation owncontributions in relation to own outcomes results in a higher value than theequation others’ contributions in relation to their outcomes.

With respect to psychological contracts, evaluative processes were alsoproposed as preceding perceptions of breaches (e.g., Morrison & Robinson,1997; Turnley & Feldman, 1999). Morrison and Robinson (1997) point out,however: ‘‘Whereas equity is evaluated by considering ratios of inputs andoutcomes, breach of contract is determined by comparing inputs andoutcomes relative to what was promised’’ (p. 242). Hence, a psychologicalcontract should be seen as a referent ‘‘cognition’’, although (given a sharedenvironment) the comparison with the situation of colleagues may also playa role.

Referring to concepts initially introduced in the context of socialexchange theories, Rousseau (1995) used the term ‘‘zone of acceptance’’(p. 148) for gradual changes in mutual obligations that may still be acceptedor tolerated. A similar idea was recently adopted by Schalk and Roe (2007):‘‘The psychological contract seems to include a standard for evaluatingwhether changes are, or are not, important enough to respond to’’ (p. 171).Schalk and Roe introduced a further distinction between an acceptanceband and a tolerance band. Their theoretical propositions include theassertion that breaches of the psychological contract falling outside of theacceptance band may result in the balancing (i.e., withdrawing from owncommitments towards the employer) or in the revising of the psychologicalcontract. Breaches that fall outside of the range of tolerance should lead todesertion, that is, to the abandonment of the relationship.

We may conclude that two thresholds in the perception and reaction ofchanges in the social exchange process between employer and employeeappear to exist. A first threshold is reached when employees perceive thatpromises they think their employer has made have not been met. However,the idea of breach as a continuous variable includes the idea that promisekeeping is not evaluated on the basis of a yes or no decision. Rather,promises can be partly kept, partly broken. An employee may, for exampleperceive his or her employer as having promised to allow participation in

444 RIGOTTI

decision making. This (implicit) promise might have been kept when newsoftware was introduced, but may have been broken when vacations werebeing planned in the work team. If the first case is assessed as being moreimportant than the latter case, the employee may perceive a moderatebreach regarding the participation in decision making. The overall situationmight still fall within her/his zone of acceptance and may not result in achange of attitudes towards the work or the employer in terms of, forexample, job satisfaction, organizational commitment, or trust. However, ifthis employee is not allowed to participate in the planning of a new productthat his/her work team will be responsible for in the future, he or she mayperceive a higher level of breach, where her/his zone of acceptance has beensurpassed and where further reactions on the part of the employee are likelyto ensue.

Another line of argument for the existence of thresholds is provided bythose researchers who stress the event-based character of psychologicalcontract formation. The main proposition is that psychological contracts aremaintained until some triggering event occurs (e.g., Conway & Briner, 2005;Guzzo et al., 1994). As perfect delivery of perceived promise-basedobligations is more the exception than the norm (cf. Robinson & Rousseau,1994), deviations from a perfect fulfilment are likely to be tolerated.

There are further arguments for the threshold model proposed here:First, most of the outcomes considered in psychological contract researchcan be seen as relatively stable over time and multidetermined (e.g., for jobsatisfaction, see Dormann & Zapf, 2001), at least within the sameemployment relationship, which is likely to lessen their sensitivity to slightunderfulfilment of perceived promises. Second, contextual and individualmoderators may play a crucial role, especially at low levels of breach. Itcould be shown, for instance, that psychological contracts are sensitive tothe culture, and to labour market conditions (e.g., Rigotti, Otto, & Mohr,2007), as well as to differences in personality traits (e.g., Raja et al., 2004).Hence, reactions towards perceiving the first signs of employers not fullydelivering what they have promised might be easily masked by othercircumstances.

The threshold model can be seen as an alternative to a monotonic linearrelationship between the degree of promise breaking and attitudes. Theassertion in an assumed monotonic linear relationship is that every furtherstep in perceptions ranging from promises perfectly kept to promises notfulfilled at all results in the same amount of change in attitudes. In spite ofthe cited propositions, the majority of prior empirical research on the impactof perceived psychological contract breaches used statistical methods thatwere based on the assumption of a monotonic linear relationship betweenvariables. One exception can be found in the expanded view onpsychological contracts proposed by Lambert, Edwards, and Cable (2003).

PSYCHOLOGICAL CONTRACT THRESHOLDS 445

They operationalized breach by using a combination of perceived promisesand ratings on their fulfilment, assessed 10 weeks later. They then usedpolynomial regression models that allow for the drawing of a three-dimensional surface. Because curvilinear models can be seen as analternative way of understanding how breach and attitudes are linked(e.g., Lambert et al., 2003), threshold models should be tested againstcurvilinear models. Curvilinear models imply that changes in attitudes areconstantly more pronounced with every perceived step of breach. Thus, acurvilinear relationship models a positive acceleration of reactions towardsbreaches.

Given that job satisfaction, organizational commitment, and turnoverintentions are the most heavily researched correlates of psychologicalcontracts, these variables were chosen as work-related attitudes (cf. Conway& Briner, 2005; Zhao et al., 2007). Many scholars did not make a distinctionbetween breach and violation of the psychological contract until Morrisonand Robinson (1997) proposed a useful conceptual differentiation. Theydefined breach as a rational, mental calculation of what individuals have orhave not received; a violation of the psychological contract is defined as an‘‘emotional and affective state that may follow from the belief that one’sorganization has failed to adequately maintain the psychological contract’’(Morrison & Robinson 1997, p. 230). Violation includes feelings ofdisappointment, frustration, and distress, in combination with feelings ofanger, resentment, bitterness, indignation, and outrage, resulting inperceptions of betrayal. Betrayal will thus be treated as a proximal responseto breaches in this study. Finally, trust in the organization was chosen as afurther outcome, as it is possibly one of the most important prerequisites offruitful social relationships (e.g., Guest & Conway, 2002; Robinson, 1996).Although trust has been shown to influence and moderate future perceptionsof psychological contract breaches, it can also be framed as an outcome.Psychological contract breach is based upon an evaluation of the prioractivities and actions of the employer. Trust, on the other hand, includes aprospective component regarding employees’ beliefs concerning the extentto which promises made by the employer will be kept in the future.

In line with the aforementioned considerations, the relationship betweenperceived breach and the chosen outcomes is proposed to be as follows:

Hypothesis 1. Breach has a discontinuous linear relationship to (a) jobsatisfaction, (b) organizational commitment, (c) turnover intentions,(d) violation, and (e) trust. There is a threshold, at which point therelationship between breach and these outcomes gets stronger.Hypothesis 2. The threshold models explain more variance in (a) jobsatisfaction, (b) organizational commitment, (c) turnover intentions,(d) violation, and (e) trust than curvilinear models.

446 RIGOTTI

METHODS

Sample

In order to establish enough variation in the psychological contract (e.g.,Turnley & Feldman, 1999), data were gathered from 34 organizationsacross Germany in 2004. Fourteen (n¼ 226) organizations were selectedfrom the educational sector (organizations providing vocational education),11 organizations (n¼ 202) were from the retail sector (shops, banks), and 9organizations (n¼ 215) were from the food sector (production plants). Thegoal was to have an approximately equal amount of respondents within thethree sectors involved, and a final sample with a minimum of 600 individualrespondents. To fulfil this goal, we contacted as many organizations asnecessary. All organizations willing to participate were included. Onaverage these organizations employed 187 employees (median¼ 86,SD¼ 210), with a range of 20–822 employees. In order to reduce apotential bias by having too many respondents in larger companies, themaximum number of questionnaires given to HR managers was 60. Onaverage, data from 19 employees from each firm was gathered (with a rangeof 3–50, which equals a maximum of 8% of data from one company).Response rates within organizations varied between 18%, and 100%, andwas on average above 60%. A special effort was made to sample temporaryworkers to broaden the variance in psychological contracts. Temporaryemployees are more likely to hold narrower, more transactional psycholo-gical contracts, and permanent employees more relational psychologicalcontracts (e.g., De Cuyper et al., 2008a; McLean Parks, Kidder, &Gallagher, 1998).

Questionnaires were distributed by HR-managers, and respondents couldfill them out either during work or at home. The questionnaires were eithercollected in a closed urn or could be sent to the researchers directly (postagestamps were provided). Participation was voluntary and anonymity wasguaranteed.

Respondents

Overall, we gathered data from 643 employees. As it is necessary for ourassessment of breach of psychological contracts that respondents indicatethat at least one promise had been given, we had to exclude n¼ 51 persons(7.9%) from further analyses because they had perceived none of thepromises as having been given. To test whether the exclusion of theseparticipants may have an impact on our further analyses, we performedt-tests, testing for differences in the dependent variables between theincluded and excluded subjects. With the exception of the variableviolation, t¼ 3.53, p5 .01, none of the other mean differences reached

PSYCHOLOGICAL CONTRACT THRESHOLDS 447

statistical significance. Furthermore, t-tests were performed between theexcluded and included respondents on age, t¼ 1.28, p¼ .20, educationallevel, t¼ 0.71, p¼ .48, and weekly working hours, t¼ –1.18, p¼ .24, andchi-square tests on type of contract, w2¼ .00, p¼ 1.00, and sex, w2¼ 1.82,p¼ .19. The final sample for analyses consisted of 592 employees, including51% females. Respondents represented the three sectors almost equally(n¼ 194 from food industry, 32.8%; n¼ 187 from retail stores, 31.6%; andn¼ 211 from education, 35.6%). Concerning qualifications, 12.7% of therespondents in the sample had a lower secondary level educationalbackground, 33.8% an upper secondary level, 5.4% postsecondary level,42.1% a first stage of tertiary education, and 2.5% a second stage oftertiary education (3.5% missing answers). The average age was 37 years(SD¼ 12 years), with a range of 16–72 years. Almost half of the sample(45%) held a temporary employment contract. All of the (temporary)employees were directly hired by the organization. Temporary employeeshad an average tenure of 2.20 years (SD¼ 2.99) with the organization.Permanent employees worked on average 10.38 years for the currentemployer (SD¼ 8.59).

Instruments

Controls. Gender was used as a dichotomous variable: 0 (women), 1(men). Age was used as a continuous variable. Educational level wasassessed by using a combination of school and vocational education, whichwas then transformed into one of the six levels of the international standardscheme ISCED (Organisation for Economic Cooperation and Development[OECD], 1999). As is commonly done, this measure was considered to bemetric. Dummy coding was used for type of employment contract: 0(temporary employment contract), 1 (permanent employment contract). Forthe three sectors involved, two dummies were computed, using theeducational sector as the reference group.

Breach of the psychological contract. There have been several attempts touse combined measures in psychological contract research. Examples aresimple (Robinson, 1995), and squared differences (Bunderson, 2001)between expectations, and fulfilment; difference scores of promised andfulfilled obligations (Lester & Kickul, 2001), and a multiplicativecombination of importance of certain aspects and their breach (Bocchino,Hartmann, & Foley, 2003). In this study, a global and continuous measureof breach will be used, as the focus is not on which processes lead tothe perception of a breach to the psychological contract, but on therelationship between breach and work-related attitudes. Hence, for this

448 RIGOTTI

research question a direct assessment of breach seemed to be the preferablestrategy.

A set of 15 items was formulated, based on factor analyses of earlierstudies and on a literature review of the contents of the psychologicalcontract (e.g., De Jong, 2001; Huiskamp & Schalk, 2002; Robinson,Kraatz, & Rousseau, 1994). Seven topics were covered: content of the job,employment relationship, compensation, advancement, participation,social relationship, and work–family balance. We asked our respondentsto answer the items after having been given the following instruction:‘‘Has your organization promised or committed itself to . . .’’, e.g.,‘‘provide you with a reasonably secure job?’’. Answers could be ratedwith a 0 (‘‘no’’), if employees perceived the promise as not having beengiven at all, or range from 1 (‘‘yes, but promise not kept at all’’) to 5(‘‘yes, and promise fully kept’’) to rate the fulfilment of the promise.Factor analyses based on tetrachoric correlations were performed on itemscoded as 0 (‘‘no’’) and 1(‘‘including all answers from 1 to 5’’) (see e.g.,McLeod, Swygert, & Thissen, 2001), using the program Testfact (Bocket al., 2003). Although there was some evidence for a two- or even three-factor solution (Eigenvalues: 8.86, 1.46, 0.93), a single factor explained56% of the variance. The ratios of chi-squared and degrees of freedomdropped only slightly from 2.52, w2¼ 1544.42/df¼ 612 for one factor, to2.15, w2¼ 1282.73/df¼ 598 for two factors, to 2.04, w2¼ 1192.10/df¼ 585for three factors, applying 100 iterations. Nevertheless, even after rotationof factor loadings, there were many cross-loadings of items. For the one-factor solution, all loadings were greater than .60. Hence, for the purposeof this study, the use of the measure assuming only one underlying latentconstruct seems to be justified. Breach was operationalized by computingthe mean of recoded items with values ranging from 1 to 5. As the ratingis idiosyncratic, i.e., dependent on which promises were rated as beinggiven, no reliability analysis can be performed. A similar approach wastaken by Kickul, Lester, and Finkl (2002; see also Conway & Briner,2005).

Violation. Violation was measured by asking respondents to rate threepositive moods (e.g., pleased) and three negative moods (e.g., angry) on a5-point scale, ranging from 1 (‘‘not at all’’) to 5 (‘‘very’’), after having beengiven the following instruction: ‘‘Considering the extent to which thisorganization has or has not, on the whole, kept its promises andcommitments, to what extent do you feel . . .’’ (cf. De Cuyper, Rigotti, DeWitte, & Mohr, 2008b). Items reflecting positive moods were recoded toreflect violation. The scale yielded an alpha of .79.

Job satisfaction was measured using four items reported by Price (1997;e.g., ‘‘I find enjoyment in my job’’, Brayfield & Rothe, 1951). Responses

PSYCHOLOGICAL CONTRACT THRESHOLDS 449

could vary from 1 (‘‘strongly disagree’’) to 5 (‘‘strongly agree’’). The scaleyielded an alpha of .75.

To assess affective commitment towards the organization, we used fouritems out of the commitment scale from Cook and Wall (1980, e.g., ‘‘I amquite proud to be able to tell people who it is I work for’’). Answer formatranged from 1 (‘‘strongly disagree’’) to 5 (‘‘strongly agree’’). Cronbach’salpha of the scale in our sample was .68.

The intention to quit scale indicates an individual’s willingness tovoluntarily change employment conditions—either to change from oneorganization to another, to become self-employed, or even to becomeunemployed (Baillod & Semmer, 1994). Four items were taken from Sjobergand Sverke (2000), as well as Price (1997), and modified to ensure conceptualequivalence for both permanent and nonpermanent employees (e.g., ‘‘If Icould, I would quit today.’’). Response format was a 5-point Likert-typescale, ranging from 1 (‘‘strongly disagree’’) to 5 (‘‘strongly agree’’). The scaleyielded an alpha of .79.

Trust. To measure trust, we used a subset of three items from Guest andConway (2002, e.g., ‘‘In general, how much do you trust your organizationto keep its promises or commitments to you and other employees?’’).Answers could be given on a 5-point scale ranging from 1 (‘‘not at all’’) to 5(‘‘totally’’). The scale yielded an alpha of .80.

A correlation matrix including information on Cronbach’s alphas,means, and standard deviations is presented in Table 1. The correlationsbetween breach and job satisfaction, r¼ –.38, p5 .01, affective organiza-tional commitment, r¼ –.33, p5 .01, and intention to quit, r¼ .28, p5 .01,are comparable to the average correlations from up to 17 different studiesreported by Conway and Briner (2005, p. 73; r¼ –.46 for job satisfaction,r¼ –.32 for commitment, and r¼ .33 for intention to quit), which supportsthe validity of the measures.

TABLE 1Intercorrelations, Cronbach’s alphas, means, and standard deviations of study variables

1 2 3 4 5 6 M SD

1. Breach of employers’

obligations

(—) 2.43 0.77

2. Job satisfaction 7.38* (.75) 4.11 0.68

3. AOC 7.33* .57* (.68) 3.87 0.70

4. Intention to quit .28* 7.52* 7.45* (.79) 1.46 0.69

5. Violation .54* 7.48* 7.41* .44* (.79) 2.12 0.70

6. Trust 7.49* .32* .41* 7.32* 7.59* (.80) 3.40 0.95

*p5 .01. N¼ 584–592. AOC¼ affective organizational commitment.

450 RIGOTTI

Confirmatory factor analysis, and nested data structure

To justify the inclusion of five different dependent variables in subsequentanalyses, a confirmatory factor analysis with a five-factor model wasperformed on all items, allowing all latent factors to correlate and includingcorrelations of error variances for recoded items. The results of this five-factor model provided an acceptable fit to the data, w2(543)¼ 655.19,CFI¼ .90, AGFI¼ .85, RMSEA¼ .07.

Furthermore, to test whether analyses on the individual level areappropriate, considering the fact that individuals are nested within organiza-tions and that responses from employees within one organization cannot beseen as independent, the intraclass correlation (ICC) was calculated for allvariables under study. The ICC indicates the amount of variance of a variablethat is due to differences between organizations. Using HLM 6.04, null modelswere tested for all variables. Although the intercept reached significance for allvariables, indicating mean differences between organizations, the ICCs werebetween .01 for organizational commitment and .08 for breach, which seems tojustify analyses based only on individual level data.

Analyses

To test the hypotheses two regression techniques were used, namely multiplehierarchical regression analyses with quadratic terms, as well as segmentedregression analyses. The first approach models a curvilinear relationshipbetween breach and job-related attitudes (acceleration), and the second methodtests for a threshold dividing two linear regimes in the relationship betweenbreach and outcomes. For all five dependent variables under study, a quadraticeffect of psychological contract breach was tested (Step 2), after controlling forthe simple linear effect in Step 1.The fit of the obtained regression models isthen compared with partial F-tests. For the hierarchical regression analyses,independent variables were centred by the mean (Aiken & West, 1991).

Segmented regression analyses. In segmented regression (also: splineregression or piecewise regression), the slope of the regression line changesfor different ranges of the independent variable (here: x¼ breach). Thevalues at which this change happens are referred to as break-points, change-points, transition points, switch-points, thresholds (see Muggeo, 2003), andalso as knots or joinpoints in spline regression models (e.g., Seber & Wild,2003). In the most general cases, the regression models for different segmentsmight be nonlinear (e.g., quadratic) and describe complex relationships. Inthis case, we will limit our scope to linear relationships within differentsegments, where the slopes change at certain values within the range of theindependent variable.

PSYCHOLOGICAL CONTRACT THRESHOLDS 451

A segmented regression model that assumes linearity within the segmentsand one change-point can be written as follows (for simplicity, error-termsare left aside, cf. Seber & Wild, 2003, p. 435):

E½y j x� ¼ b10 þ b11x for x � a;

b20 þ b21x for x > a: ð1Þ

In principle, two strategies can be differentiated: either fixing the knots apriori or estimating the knot(s). For the first strategy, the researcher canconsult the scatter smooth plot and simply look for sudden changes in thecluster of points (e.g., Kunst, Looman, & Mackenbach, 1993), or refer totheoretically significant thresholds where the regression model is supposedto change. Several methods have been suggested for the estimation of knotsfrom the data. Their application can be found in a wide range of disciplines,including epidemiology, computer science, chemistry, and biology.Segmented regression can also be found in logistic regression, where thedependent variable is dichotomous (e.g., in epidemiological studies dead vs.alive). I was not able to find any applications in the field of AppliedPsychology, however.

For the analyses, the nonlinear regression function of SPSS 14.0 (seeAppendix for the syntax) was used. The specified regression model is similarto a moderated regression analysis and includes an intercept (ba0), plus thedirect effect of breach on the dependent variable (ba1*breach), plus theinteraction effect (bb1*(breach-knot1)*(breach� knot1)). If there is asignificant change of the slope of the regression line, then bb1 shouldbecome a significant parameter in the model. This iterative nonlinearregression method performs several regression analyses by constantlychanging the parameters of the regression model. The algorithm looks fora minimization of the sum of squares of residuals (i.e., unexplained variance)and quits when no further improvement of the model can be obtained. Theunstandardized betas from the hierarchical regression analysis have beenused as start values for the intercept (ba0) and direct effect (ba1) of theindependent variable.

The parameter bb1 was set at bb1¼ –4 as start value. Each model wasrun with different start values for the knot, ranging from 1.5 to 3.5 in0.5 steps. Whenever two different analyses led to a different estimation ofthe knot, the model with the lowest correlation of the parametersba1 and bb1 was chosen, as high correlations indicate that it is notnecessary to include both parameters in the model. The graphicalrepresentations were made by scatterplots, plotting values of breachagainst the predicted values from the obtained parameter estimates of theregression model.

452 RIGOTTI

RESULTS

Noncontinuous-linear relationships between breach andattitudes

Table 2 shows the results for the hierarchic regression analyses modelling acurvilinear relationship between breach and outcomes. The incrementalvariance explained by the second step is significant for all variables butorganizational commitment. The curvilinear relation between breach andoutcomes explained 1% (job satisfaction, and trust), 3% (intention toquit), and 6% (violation) additional variance compared to a simple linearmodel.

All hierarchical regression analyses were also run with the inclusion ofthe following sociodemographic variables as controls (in a first step,preceding the inclusion of breach): sex, age, education, type of employ-ment contract, and sector. In general, the pattern of results was the same,with one exception: In the case of organizational commitment, thecurvilinear effect (quadratic term of breach) became significant with theinclusion of controls, b¼ –.08, DR2¼ .007, p5 .05. The inclusion ofcontrol variables in the segmented regression models is not as straightfor-ward, because the betas would need to be specified beforehand. Given thata further goal was to compare the two principle models (rather thanproviding exact figures of explained variance), the comparison of the tworegression models was based on the presented results, which did notinclude sociodemographic controls.

Table 3 presents the parameters obtained from segmented regressionanalyses. Again, for four of the five dependent variables (exceptingcommitment), the inclusion of a knot (change-point) led to an improvementof the fit of the regression model to the empirical data. Compared to a linearcontinuous relationship, the gain in explained variance when comparing thesegmented models with the linear regression models was 2% for jobsatisfaction, 3% for intention to quit, 7% for violation, and 1% for trust. Ascan be seen in Table 4, which shows the results of a partial F-test betweenthe segmented regression models and the simple linear model in the first row,the segmented regression models show a statistically better fit to the data.Furthermore, in the second row of Table 4, the results of a partial F-testcomparing the segmented regression models with the quadratic effect ofbreach are shown. The threshold models obtained with the segmentedregression procedure proved to fit the data significantly better for jobsatisfaction, violation (p5 .05), and intention to quit (p5 .10). Hence,Hypothesis 2 could partly be confirmed. For the other variables, none of theregression models fit the data better than the other. The significantsegmented regression models are plotted against the linear models inFigures 1 to 4.

PSYCHOLOGICAL CONTRACT THRESHOLDS 453

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454

DISCUSSION

This study aimed to empirically test a threshold model of psychologicalcontract breach on a range of attitudinal and emotional outcomes. This wasdone by employing segmented regression analyses and testing them againstcurvilinear models. The presented results show that most prior research hasunderestimated the impact of psychological contract breaches on work-related attitudes. Both, the threshold models, as well as the curvilinearmodels were able to explain more variance in work-related attitudes (exceptfor commitment), and in a sense of violation than a monotonic linear model.The results indicate that, for high levels of breach, the predicted loss of jobsatisfaction and trust, and the increase in sense of violation and intention toquit are higher than one would expect from a monotonic linear regressionmodel.

TABLE 3Estimated parameters for segmented regression models (breach as independent

variable)

Dependent

variable ba0 ba1 bb1 knot

95% confidence

interval for the knot

Sum of squares

(residuals) R2

Job satisfaction 4.28 .13 7.60 1.73 1.30–2.17 224.30 .16

AOC 4.46 7.22 7.25 2.60 1.86–3.34 260.17 .11

Intention to quit 1.13 .10 .68 2.84 2.59–3.09 255.98 .11

Violation 1.39 .22 .85 2.64 2.46–2.82 178.57 .36

Trust 4.67 7.48 7.53 2.78 2.37–3.19 403.03 .25

AOC¼ affective organizational commitment.

TABLE 4Comparison of segmented regression models with the linear model and quadratic

model with the partial F-test

Comparison of

regression models

Job

satisfaction AOC

Turnover

intention Violation Trust

Segmented regression vs. linear regression

DR2 .017 .005 .035 .065 .012

DF (df1, df2) 3.95 (3, 586) 1.20 (3, 586) 7.69 (3, 586) 19.68 (3, 581) 3.07 (3, 585)

p .008 .309 .000 .000 .027

Segmented regression vs. quadratic regression

DR2 .010 .000 .008 .009 .005

DF (df1, df2) 3.56 (2, 586) 0.16 (2, 586) 2.52 (2, 586) 3.97 (2, 581) 2.05 (2, 585)

p .029 .852 .081 .019 .130

DF ¼ R21�R2

2ð Þ= df1�df2ð Þ1�R2

1ð Þ=n�df1�1 . AOC¼ affective organizational commitment.

PSYCHOLOGICAL CONTRACT THRESHOLDS 455

Figure

1.

Predictedrelationshipsbetweenbreach

andjobsatisfaction

basedonalinearandsegmentedregressionmodel.

Figure

2.

Predictedrelationshipsbetweenbreach

andintentionto

quitbased

onalinearandsegmentedregressionmodel.

456

Figure

3.

Predictedrelationshipsbetweenbreach

andviolationbasedon

alinearandsegmentedregressionmodel.

Figure

4.

Predictedrelationshipsbetweenbreach

andtrust

basedona

linearandsegmentedregressionmodel.

457

More specifically, the threshold models could be shown to fit the databetter than a curvilinear function for job satisfaction, violation, andintention to quit, and fit the data equally well for trust. The choice betweenthe two types of models might not necessarily be based upon statisticalsignificance alone, but also on theoretical considerations. The existence ofthresholds in detecting and responding to psychological contract breacheshas been proposed by several authors (e.g., Guzzo et al., 1994; Morrison &Robinson, 1997; Schalk & Roe, 2007). Prior theorizing on possiblethresholds was mainly limited to employees’ organizational commitmentas outcome (Guzzo et al., 1994; Schalk & Roe, 2007), but it could be shownthat attitude changes related to job satisfaction, turnover intentions, andtrust, as well as emotional reactions following psychological contractbreaches, seem also to include a zone of acceptance. The fact thatcommitment was the only variable that did not show a threshold may berelated to the relatively low reliability of the measure employed, as well as tothe neglect of possible confounding variables in the segmented regressionanalysis (the curvilinear model for the relationship between breach andorganizational commitment reached significance only after inclusion ofcontrols).

Although the first signs of a nonperfect fulfilment of perceived employers’obligations and promises do not seem to be related to severe differences inattitudes, a ‘‘kick in’’ of responses seems to take place when a threshold isreached. This might be ‘‘the straw that broke the camel’s back’’. Thedifferences in predicting attitude change in linear, as opposed to thresholdmodels, can best be depicted in the provided figures. These differences stressthe importance of psychological contracts for shaping employees’ attitudesand behaviour. The thresholds presented here are more likely indicating thatthe zone of acceptance has been surpassed, as a surpassing of the zone oftolerance is likely to lead to an abandonment of the relationship (cf. Schalk& Roe, 2007).

The presented analyses not only make a theoretical contribution, but alsooffer relevance for organizational practice. The assessment of psychologicalcontracts within organizational diagnosis, especially during restructuring,enables managers and the workforce to detect discrepancies betweenperceived promises and their fulfilment. Knowing about thresholds canhelp to understand differences in individual reactions. Given the importanceof psychological contracts for shaping employees’ work-related attitudesand involvement, managing the psychological contract of employees shouldbe a promising organizational strategy. Breaches to the psychologicalcontract can be regarded as distributive injustice. Organizational justiceliterature has shown that procedural and interactional fairness can buffernegative effects related to unfavourable outcomes (e.g., Lind, 2001). Regu-larly updating the set of mutual obligations, and providing explanations and

458 RIGOTTI

justifications for changes, should help to revise the psychological contractand reduce the likelihood of breaches. Recently, Lester, Kickul, andBergmann (2007) provided empirical support for the relevance of perceivedadequacy of social accounts (i.e., explaining and justifying organizationaldecisions). They concluded that ‘‘organizations should not assume that oncethey have succeeded in getting their employees to perceive a relationalpsychological contract, they no longer have to worry about providingadditional explanations for managerial decision making’’ (p. 202). If they donot, employees are likely to either seek a new balance in the employmentrelationship by reducing own efforts and commitments towards theorganization, or leave the relationship (cf. Schalk & Roe, 2007). In caseswere breaches to the psychological contract are unavoidable, employers canprofit from knowing about a threshold effect. As the impact of brokenpromises on certain aspects can be buffered by fulfilling others, employersshould carefully explain their reasons, give employees a voice (proceduraljustice), and offer compensations for losses, so that the threshold in overallbreach is not surpassed.

Limitations, strengths, and outlook

To begin with, in this first study using segmented regression models toobserve the relationship between breach of the psychological contract andoutcomes, only a global measure of breach was used. This measure does notdifferentiate between different contents, even though the set of promisesunderlying the breach evaluation varies between individuals. It might befruitful for future research to explore different contents, such as breaches totransactional versus relational terms (e.g., Coyle-Shapiro & Kessler, 2000),extrinsic versus intrinsic terms (Kickul et al., 2002), or multidimensionalapproaches (e.g., Cassar, 2001). Second, only promises from the employerwere included in this study, which neglects the mutual promise makinginherent in psychological contract definitions. Third, a cross-sectional designdoes not allow us to draw any causal conclusions, and using questionnairedata as a single source may lead to an overestimation of effects (Podsakoff,MacKenzie, Lee, & Podsakoff, 2003). Furthermore, the cross-sectionaldesign leads to models explaining differences between individuals, and notdifferences within individuals across time. For this reason, tests exploringwhether individuals’ reactions towards psychological contract breachesinclude thresholds should use longitudinal designs in the future. The samplefor this study was drawn from different organizations. Hence, it cannot beassumed that individual reports are independent of each other, as some ofthe variance in the dependent variables may be due to differences on the firmlevel. The presented ICCs, however, seem to justify the use of individualdata, without controlling for firm-level effects in multilevel analyses.

PSYCHOLOGICAL CONTRACT THRESHOLDS 459

Nevertheless, the impact of the organizational context should be furtherexplored in future studies. Last, neglecting possible confounding variableson the individual level within the segmented regression analyses can be seenas problematic. However, patterns of results did not change for thecurvilinear regression models, when the control variables were included(effects were even more pronounced).

The investigation of thresholds is likely to further our knowledge andunderstanding of why individuals react to the same set of environmentalfactors differently. Some of the included variables (e.g., violation and trust)were more closely linked to breach than others (e.g., job satisfaction,commitment, turnover, intention), if we consider the variance explained andalso the relative thresholds found in segmented regressions. This suggeststhat there are more proximal and more distal reactions to perceivedbreaches, and that the former may mediate the latter.

Prior studies revealed several moderators for the psychological contractbreach–attitudes relationship. It may be assumed that moderators not onlyinfluence the strength of responses to breaches, but may also impact theposition of the threshold. Overall, segmented regression analyses may give adeeper insight into how variables are linked and might therefore be a fruitfultool to consider in other fields within Applied Psychology.

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First published online November 2008

APPENDIX

SPSS syntax for parameter estimation of segmentedregressions

MODEL PROGRAM ba0¼ 4.91 ba1¼7.61 bb1¼74 knot1¼ 1.5.COMPUTE predex1¼ ba0þ ba1*breachþ bb1*(breach-knot1)*(breachge knot1).CNLR trust

/PRED¼ predex1/SAVE pred resid (residex1)/BOOTSTRAP.

GRAPH/SCATTERPLOT(BIVAR)¼ breach WITH predex1/MISSING¼LISTWISE.

PSYCHOLOGICAL CONTRACT THRESHOLDS 463