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This paper examines the theoretical and empirical relationships between employees' trust in their employers and their experiences of psychological contract breach by their employers, using data from a longitudinal field of 125 newly hired managers. Data were collected at three points in time over a two-and-a-half-year period: after the new hires negotiated and accepted an offer of employment; after 18 months on the job; and after 30 months on the job. Results show that the relationship between trust and psychological contract breach is strong and multifaceted. Initial trust in one's employer at time of hire was negatively related to psychological contract breach after 18 months on the job. Further, trust (along with unmet expectations) mediated the relationship between psychological contract breach and employees' subsequent contributions to the firm. Finally, initial trust in one's employer at the time of hire moderated the relationship between psychological contract breach and subsequent trust such that those with high initial trust experienced less decline in trust after a breach than did those with low initial trust.
In light of trends toward globalization, restructuring, and downsizing, psychological contracts are playing an increasingly important role in contemporary employment relationships. Organizations, under pressure to make rapid and constant changes, have had to alter employment relationships and the psychological contracts that underlie them. Psychological contracts refer to employees' perceptions of what they owe to their employers and what their employers owe to them. In this climate of change, the traditional contract of long-term job security in return for hard work and loyalty may no longer be valid (Sims, 1994), and employees and employers alike are now reconsidering their mutual obligations. More importantly, these changes have increased the likelihood of psychological contract breach. Organizations must now repeatedly manage, renegotiate, and alter the terms of the employment agreement continually to fit changing circumstances (Tichy, 1983; Altman and Post, 1996) and thus may be less willing or less able to fulfill all of their promises. In addition, constant contract change means increased opportunities for employees and employers to misunderstand the agreement and to perceive a contract breach even when an actual breach did not occur. It should not be surprising, therefore, that the majority of employees currently believe their employer has breached some aspect of their...