Stigler (1989), a Nobel Prize winner, stated that large enterprises in America have grown by mergers and acquisitions rather than internal expansions. In the competitive and economic depression environment, enterprises decided to utilize Mergers and Acquisitions (M&A) as a strategy. The purpose is to make them survive as rival organizations, but also try to expand their magnitude (Aguilera & Dencker, 2004). Take more recent examples, the global financial crisis occurred in 2008. Either large or small-medium enterprises (SMEs) have faced budget deficit problems. Under this difficult dilemma, the strategy of M&A has become a solution for enterprises that are in the pain to grow stronger and sustain in the tough environment (Grave, Vardiabasis, & Yavas, 2012).
In order to face the challenge brought by financial crisis, many enterprises are forced to integrate or adjust their internal environment of the organization. The difficulty is the financial and personnel issues are for most business owners or CEO while implementing M&A strategy successfully on the fusion of two different or similar backgrounds of the organizations. Under the circumstances, human resource plays an important role on dealing with M&A process in the organizations (Antila, 2006). Some predictable conflicts and troubles regarding their positions and personal benefits continuously occurred between top management and employees it can probably cause not only dispute but also low performance in the workplace (Marks & Mirvis, 2011). Therefore, solving the organization‟s financial problems and protecting employee‟s rights are always an important to the organization and government. .
Taiwan passed the law of mergers and acquisitions in 2002. Since then, M&A activities
Commerce Industrial Services, Ministry of Economic Affairs, R.O.C. (2013), up to September, 2013, the total cases of M&A in Taiwan come to 2,028 and the total amount of the transaction is over 900 billion NT dollars. However, not all the companies suffering M&A process in Taiwan are so successful and smooth. The success of the M&A strategy is being widely discussed.
Under the unstable economic environment, people are difficult to adapt to the situations.
Directorate-General of Budget, Accounting and Statistics, Executive Yuan, R.O.C. (2012) reported that most recent five years, over 70% of working laborers in Taiwan intend to leave their job. This is because the organizations already break out the long-term employment relationship. Employees are aware that they should find their own way to survive. Facing the changes of the environment, working labors meet higher pressures (Yan & Zhu, 2013).
Under this condition, organizations are expected to reach the expectations or there might be an unbalance labor relationship which can also cause a lot of problems.
In order to decrease the unnecessary cost and enhance employee performance, psychological contract was widely applied in the company in the end of the 20th century (Rousseau, 1995). The management of psychological contract becomes the way to acquire the competitiveness human resources gradually. While the employees have the expectation on the psychological contract not shown clearly as the visible contract, the accomplishment of it can be important to them. Psychological contract, which is regarded as the unwritten contract promised by the employers, is commonly used in the companies (Rousseau, 1995). Under M&A circumstances, entrepreneurs tend to form some psychological contract to their employees and the employees will form psychological expectation when receiving the psychological contract from the employers. However, as the economic crisis struck the enterprises, the bad situation cause the company to brought in psychological contract breach,
employees (Robinson & Rousseau, 1994). When employees find themselves being breached in their psychological contract, various behaviors such as uncooperative, idling or low performance are expected.
Another issue in organization which has been widely discussed recently is organizational justice. Compared to the past, people in nowadays society are more willing to speak out for their own rights. In Career magazine, Hong and Tsai (2013) reported that employees feel respectful and be more involved to their work if the organization provides an equity working environment. Considering that people want to be treated equally, organizational justice can be regarded as the most important concern in the organization and can influence the employees‟
behavior toward work (Niehoff & Moorman, 1993). The origin of organizational justice is form from Homans (1961). He developed the equity rule from social exchange theory and adam (1965) developed the equity theory based on his point of view and it has been widely discussed in many decades. Three main kinds of justice includes distributive justice, procedural justice and interactional justice which represents the employee‟s perceived feelings of justice in duty and salary distributing, procedure in decision making and the interacting between colleagues, respectively.
Robinson and Rousseau (1994) found that fifty-five percent of their sample manager observed that their organizations had failed to accomplish one or more promised obligations in the first two years of the employment relationship. These perceptions have been found to reduce employees‟ attitude such as trust, job satisfaction, intensions to stay with the organization, sense of responsibility, and in-role and extra-role performance (Robinson, 1996;
Robinson & Morrison, 1995). The attitudes addressed above are some main factors to influence job involvement. Job involvement, is the attitudes to major the extent of how employees regard their job or how important is job to employees‟ self-image (Lodahl &
cause lots of problems in the organization, they tend to find out some ways to decrease the bad influence from the violation of the promises. What‟s more, social scientists are now developing ways to enhance the job involvement of the employees to the companies. Since the environment changed severely under the M&A circumstances, enterprises are told to pay more attention to the usage of the psychological contract to avoid unnecessary problems and enhance the employees‟ involvement toward jobs as they can.
Statement of the problem
While M&A affects both financial and personnel aspects of the organization, employees under the M&A strategy could meet more psychological contract breach issues (Linde &
Schalk, 2008). In Robinson and Rousseau‟s (1994) investigation, over fifty percent of the employees in United States had experienced the psychological contract breach, which results in some negative attitudes toward their job. These negative attitudes, such as low job performance, dissatisfaction to their job, intension to leave and lack of responsibility, affected the enterprises. Take job involvement as the factor to influence organizational effectiveness as an example, 55% of employees in the United States are not involved in their job, and 15%
of them are in the mood of changing their jobs (Branham, 2005). Moreover, a newest report from Gallup (2013) indicated that only 8% of the Taiwanese people are engaged in their job while over 60 percent of the employees are not, which can directly cause low job performance and effectiveness with a huge economic loss. As job involvement often plays a pivotal role to form job engagement (Kahn, 1990; Maslach, et. al., 2001; Harter, et. al., 2002.), the low engagement might also be caused by the low job involvement and other related factors. It gave us a sign that the enterprises should make more effort on arousing employees‟
job involvement (Robbins, 1998). However, how to enhance the job involvement is a hard job for the head of the companies.
As mentioned above, M&A is a long-term process which changes financial and personnel functions in the company. Some conditions toward the enterprise are different from general company. For example, we can find the reaction of the employees different when the violation of psychological contract happened (Linde & Schalk, 2008). To search the article on the periodical and the National Digital Library of Theses and Dissertations in Taiwan, most of the related researches emphasize on the accomplishment or breach and violation of psychological contract, and rarely researches on the target sample of M&A. Whether M&A strategy brings differences on the effect of psychological contract breach to the job involvement is also an interesting part to the theoretical field.
Most of the employees had left the company willingly or unwillingly during the process of M&A, those who remain in the organizations are, it is interesting to find out the relationship between psychological contract breach and job involvement, especially under the changing environment. On the other hand, the researcher aimed to find out whether the organizational justice can affect the relationship between psychological contract breach and job involvement under the unstable working environment.
Purpose of Study
According to the aspects addressed above, it is interesting to find out the relationship between psychological contract breach and job involvement, especially under the changing environment. On the other hand, the researcher aimed to find out whether the organizational justice can affect the relationship between psychological contract breach and job involvement under the unstable working environment.
The purpose of this study was to find out how the employees under M&A circumstances react when the psychological contract is violated. The researcher aimed to analyze the
researcher also wanted to find out the moderating effect of the organizational justice between psychological contract breach and the job involvement.
Research Questions
Base on the research purpose, this study attempts to answer the following questions:
1. Is psychological contract breach associate with the job involvement?
2. Does perceived organizational justice have the moderating effect on the relationship between psychological contract breach and job involvement?
Definition of Key Terms
This section provides the general concept of key terms in this study, which are: Mergers and Acquisitions, psychological contract breech, job involvement and organizational justice.
Mergers and Acquisitions
Mergers and acquisitions (abbreviated M&A) refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling, dividing and combining of different companies and similar entities that can help an enterprise grow rapidly in its sector or location of origin, or a new field or new location, without creating a subsidiary, other child entity or using a joint venture (Stahl & Voigt, 2005).
Psychological Contract Breach
Psychological contract breach in this study is known as a personal perspective of experience, referring to the employees that run into the situation that their employers has failed to accomplish adequately promised obligations of psychological contract (Rousseau, 1989).
Job Involvement
In this research, job involvement is viewed as attitudes that major the extent of how employees regard their job or how important is job to employees‟ self-image (Lodahl &
Kejner, 1965). What‟s more job involvement in this study can be cognitive or belief state of psychological identification in either particular job or general work (Kanungo, 1982).
Perceived organizational Justice
In this research, perceived organizational justice is regarded as the perspective of how employees regarded the organization when allocating the sources and the task, the procedure when making decisions and the interaction ways with the colleagues. It is defined as how employees judge the behavior of the organization and their outcome attitude and behavior that comes from this (Greenberg, 1987).