Workgroup Salary Dispersion and Turnover Intention in China: A Contingent Examination of Individual Differences and the Dual Deprivation Path Explanation

• Author: Li‐Rong Long,Bård Kuvaas,Wei He
• DOI: http://doi.org/10.1002/hrm.21674
• Published date: 01 March 2016
• Date: 01 March 2016

Human Resource Management, March–April 2016, Vol. 55, No. 2. Pp. 301–320

© 2015 Wiley Periodicals, Inc.

Published online in Wiley Online Library (wileyonlinelibrary.com).

DOI:10.1002/hrm.21674

Correspondence to: Li-Rong Long, Huazhong University of Science and Technology, School of Management,

1037Luoyu Road, Wuhan 430074, PR China, E-mail: lrlong@mail.hust.edu.cn

WORKGROUP SALARY DISPERSION

AND TURNOVER INTENTION

IN CHINA: A CONTINGENT

EXAMINATION OF INDIVIDUAL

DIFFERENCES AND THE DUAL

DEPRIVATION PATH EXPLANATION

WEI HE, LI-RONG LONG, AND BÅRD KUVAAS

The present study generalizes previous pay dispersion research to the Chinese

context by examining the cross-level relationship between workgroup salary dis-

persion and employee turnover intention contingent on individual differences.

Field survey data including annual objective salary and self-reported attitudes

among 370 Chinese employees in 51 organizational workgroups supported our

cultural predictions by showing that the relationship between workgroup sal-

ary dispersion and turnover intention was positive only among employees with

higher rather than lower levels of Chinese traditionality and among those with

lower rather than higher salary levels. Furthermore, the results of mediated

moderation analyses suggest that a dual-deprivation path model can explain the

above relationships. We discuss the theoretical, cultural, and practical implica-

tions of these fi ndings for organizations. © 2015 Wiley Periodicals, Inc.

Keywords: salary dispersion, Chinese traditionality, turnover intention

Introduction

Employee turnover is a challenge for orga-

nizations and managers not only because

of the decreased firm performance fol-

lowed by the loss of talent, but also due to

the expensive replacement cost associated

with hiring, selecting, and training the alternatives

(Allen, Bryant, & Vardaman, 2010). The problem

of voluntary turnover is particularly serious in

transitional China, where significant changes in

employee-organization relationships (EORs) are

taking place as a result of economic reforms (Tsui,

2006). One of the significant changes is the aboli-

tion of the guaranteed lifelong employment (also

known as the “iron rice bowl”) policy, leading

to more frequent voluntary turnover in Chinese

firms (Hom etal., 2009). Moreover, as the societal

values of China have become more open-minded

and compatible with Western norms, generating

turnover intention when personal needs cannot

be satisfied is no longer felt to be morally unac-

ceptable for Chinese employees. Hence, studying

302 HUMAN RESOURCE MANAGEMENT, MARCH–APRIL 2016

Human Resource Management DOI: 10.1002/hrm

Even though theorists

have suggested a

set of psychological

considerations

to explain the

negative effect of

pay dispersion,

such as low levels

of commitment and

justice, deteriorated

cohesion, and a high

extent of relative

deprivation, these

psychological

explanations have

rarely been examined

empirically within

an overarching

framework.

abilities, and competencies he/she possesses

(Milkovich et al., 2011). More importantly, the

previous research on pay dispersion has seldom

examined the effect of the salary structure on

employees’ attitudes and behaviors in the group

and organizational settings (Gupta, Conroy, &

Delery, 2012).

To make more specific cultural contributions,

we set out to investigate two individual-level mod-

erators in the salary dispersion and turnover inten-

tion relationship. The first moderator is Chinese

traditionality, a new cultural value reflecting the

extent to which individuals endorse the tradi-

tional values and norms of the Chinese society

(Farh, Earley, & Lin, 1997). We choose to focus on

traditionality because it is conceptually more emic

to the Chinese context than other general cul-

tural values, like individualism and/or collectiv-

ism (Farh, Hackett, & Liang, 2007). Traditionality

has also been demonstrated to have satisfactory

empirical validity in prior management research

(e.g., Z. X. Chen & Aryee, 2007; Farh etal., 1997,

2007; Hui, Lee, & Rousseau, 2004). Because tradi-

tional Chinese people have a strong Confucian

value of egalitarianism (K. S. Yang, 2003), we argue

that the positive relationship between salary dis-

persion and turnover intention exists only among

employees with higher Chinese traditionality.

In addition, prior research has shown that the

effect of pay dispersion on employee turnover is a

function of one’s actual pay level, but the research

findings are mixed. For example, in support of the

psychological literature on relative deprivation,

equity theory, and social comparison processes,

Pfeffer and Davis-Blake (1992) demonstrated that

salary dispersion positively affected the turnover

of university administrators who had relatively

low salary levels. In a recent study on executive

turnover, however, Messersmith et al. (2011)

found unexpected results showing that a dispersed

pay structure in a top management team (TMT)

was positively related to the turnover of execu-

tives with relatively high pay levels. Given such

conflicting results, we revisit the moderating role

of the actual salary level in the Chinese context.

The second issue we identified from the exist-

ing literature is that little scholarly attention has

been given to examining the underlying mecha-

nisms through which pay dispersion affects

employee turnover. Even though theorists have

suggested a set of psychological considerations to

explain the negative effect of pay dispersion, such

as low levels of commitment and justice, deterio-

rated cohesion, and a high extent of relative depri-

vation (e.g., Akerlof & Yellen, 1990; Bloom, 1999;

Cowherd & Levine, 1992; Levine, 1991; Martin,

1981; Trevor & Wazeter, 2006), these psychological

how to retain the contemporary Chinese employ-

ees has practical implications for managers not

only of Chinese firms, but also of the Western

enterprises that are engaging in foreign direct

investment (FDI) in China or are employing

Chinese employees in their diversified workforce.

Although several theoretical models and

empirical explorations have been conducted in

the turnover literature (see Holtom, Mitchell,

Lee, & Eberly, 2008, for a review), a gap remains

between science and practice regarding how to

retain employees, and one serious

misconception held by most man-

agers is that people quit mainly

because of pay (Allen et al., 2010).

In fact, the meta-analytic evidence

suggests that the pay level and

pay satisfaction are relatively weak

predictors of employee turnover

(Griffeth, Hom, & Gaertner, 2000).

Given this surprising finding, recent

researchers have shifted their atten-

tion to investigating the predictive

effect of the pay structure, which

refers to the “array of pay rates for

different work or skills within a

single organization” (Milkovich,

Newman, & Gerhart, 2011, p. 69).

Despite the accumulated knowledge

in this field, a review of the scarce

research reveals several critical issues

that warrant further investigation.

First, the extant studies explor-

ing the effect of a dispersed pay

structure (i.e., pay dispersion) on

employee turnover have generated

inconclusive findings; some have

included positive evidence (Bloom &

Michel, 2002; Messersmith, Guthrie,

Ji, & Lee, 2011), whereas others

have obtained insignificant results

(Pfeffer & Davis-Blake, 1992; Shaw

& Gupta, 2007). Moreover, these

empirical investigations have been

conducted exclusively in Western

contexts. Given the increased glo-

balization of today’s business environment, it is

imperative for scholars to undertake contextual-

ized management studies to extend the existing

knowledge to novel contexts (Leung, 2007; Tsui,

2006). Therefore, the first objective of our study is

to explore the relationship between salary disper-

sion and employee turnover intention in China.

We focus on salary because it is the primary com-

ponent of an employee’s pay package, compensat-

ing for the job contents and values of the position

an employee occupies and the knowledge, skills,