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Compensation Disparity between Locals and Expatriates in China: A Multilevel Analysis of the Influence of Norms

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Abstract

In developing countries, there is a large gap in the compensations of locals and expatriates, which is related to negative attitudes of locals. A multilevel study was conducted in China on the influence of low compensation parity in MNC operations. Findings show that the negative effects of low compensation parity on outcome variables, namely, evaluation of and knowledge sharing with expatriates, as well as job satisfaction and intention to quit, were fully mediated by distributive justice based on a comparison with expatriates. Personal pro-disparity norm regarding low compensation parity played a buffering role and was related to a weaker relationship between compensation parity and comparative distributive justice. Organizational pro-disparity norm showed a similar cross-level buffering effect. Trust climate was related to a weaker relationship between compensation parity and comparative distributive justice, and fully mediated the moderating effect of organizational pro-disparity norm. The findings have important theoretical and managerial implications for mitigating the negative influence of low compensation parity in multinational firms, and point to some important topics for future research on the social integration of locals and expatriates.

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Notes

  1. The equality norm is more salient in collectivistic societies, such as China, than in individualistic societies (Leung 1997). Our research was conducted in China, and because of the market reform in the past decades, the equity norm, which requires the ratio of input and outcome to be similar across employees, is now salient in the Chinese work context (e.g., Chen 1995; He et al. 2004). Another reason for the salience of the equity norm is that expatriates are likely to be viewed as outgroup members, and it is well-documented that Chinese tend to adopt the equity norm with outgroup members (Leung 1997). We thank an anonymous reviewer for this argument.

  2. We thank an anonymous reviewer for alerting us to the potential significance of this finding.

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Acknowledgments

This research is supported by a grant from the Research Grants Council of Hong Kong (CityU 1274/03H).

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Authors and Affiliations

  1. Department of Management, City University of Hong Kong, Hong Kong, China

    Kwok Leung

  2. Department of Management and Marketing, University of Macau, Macau, China

    Xiaowan Lin

  3. Antai College of Economics and Management, Shanghai Jiao Tong University, Shanghai, China

    Lin Lu

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  1. Kwok Leung
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  2. Xiaowan Lin
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Correspondence to Kwok Leung.

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Leung, K., Lin, X. & Lu, L. Compensation Disparity between Locals and Expatriates in China: A Multilevel Analysis of the Influence of Norms. Manag Int Rev 54, 107–128 (2014). https://doi.org/10.1007/s11575-013-0190-3

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