The role of the psychological contract in affecting employee behaviour under the influence of merger and acquisition: a study of local regional managers in Hong Kong

Abstract

In past decades, the expectation of synergy has fueled many thousands of mergers and acquisitions. Meanwhile, economists and analysts have reported a large proportion of merger failures. This apparent contradiction has provided researchers with a rich source of studies. One of the likely causes of a merger failure is the “people factor”. Revolving around the axis of mergers and acquisitions, the peoples affected are, on the one side, the stockholders, top management, and economists who “talk the project” and tend to have a positive attitude and on the other side, the people who “walk the project” – the employees - who have a more hesitant attitude.This empirical study adopted the construct of Psychological Contracts to measure the expectations of employees who are influenced by mergers and acquisitions. Based on this construct, a model was developed to study employees’ behaviour after a merger, examining it from a multitude of dimensions. Using the PLS-Graph analysis tools, the model was tested with the aim of assessing the factors’ impact on employees’ behaviour. Apart from the direct causal relationship between two variables, the indirect effects caused by other variables are assessed as well.The first contribution made by this research is the fact that it examines the relevance of a psychological contract in a non-Western geographical region. Next, the study clearly confirms some of the existing conceptualizations regarding psychological contracts and reveals some additional insights, particularly in relation to the consideration of psychological contracts in a non-Western socio-cultural context.The research aspires to generalize the model for predicting the post-merger behaviour of employees anywhere, across any industry, business segment and profession.