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Are we paid to be creative? The effect of compensation gap on creativity in an expatriate context

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  • Hon, Alice H.Y.
  • Lu, Lin

Abstract

In developing countries, there is a relatively large compensation gap between locals and expatriates, which incurs a wide range of negative reactions from the former. Referring to the equity theory and reflection theory of pay, we proposed a negative association of local employees’ creativity with perceived compensation gap. We adopted a multi-level approach to examine the moderating effects of trust climate directed toward the expatriates on individual-level relationship of compensation gap and creativity. Data were collected from 298 Chinese employees and their supervisors in the service sector. HLM results show that perceived compensation gap was negatively related to employee creativity, more important, we found that climate of trust (cognitive and affective trust) in expatriates can mitigate the negative effect of compensation gap and employee creativity. Research and managerial implications for managers are discussed.

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  • Hon, Alice H.Y. & Lu, Lin, 2015. "Are we paid to be creative? The effect of compensation gap on creativity in an expatriate context," Journal of World Business, Elsevier, vol. 50(1), pages 159-167.
    • Handle: RePEc:eee:worbus:v:50:y:2015:i:1:p:159-167
    DOI: 10.1016/j.jwb.2014.03.002
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    References listed on IDEAS

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    2. Phookan, Himadree & Sharma, Revti Raman, 2021. "Subsidiary power, cultural intelligence and interpersonal knowledge transfer between subsidiaries within the multinational enterprise," Journal of International Management, Elsevier, vol. 27(4).
    3. Liu, Dong & Jiang, Kaifeng & Shalley, Christina E. & Keem, Sejin & Zhou, Jing, 2016. "Motivational mechanisms of employee creativity: A meta-analytic examination and theoretical extension of the creativity literature," Organizational Behavior and Human Decision Processes, Elsevier, vol. 137(C), pages 236-263.
    4. Lorenz, Melanie P. & Ramsey, Jase R. & Richey, Robert Glenn, 2018. "Expatriates’ international opportunity recognition and innovativeness: The role of metacognitive and cognitive cultural intelligence," Journal of World Business, Elsevier, vol. 53(2), pages 222-236.
    5. Liping Fu & Shan Zhang & Fan Wu, 2022. "The Impact of Compensation Gap on Corporate Innovation: Evidence from China’s Pharmaceutical Industry," IJERPH, MDPI, vol. 19(3), pages 1-14, February.
    6. Khadija Straaten & Niccolò Pisani & Ans Kolk, 2020. "Unraveling the MNE wage premium," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 51(9), pages 1355-1390, December.

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