Insurance-like effects of corporate social responsibility in understanding employees’ responses to psychological contract breach during a crisis

Abstract

Crises create significant challenges for organizations to fulfil their commitments to employees, so employees often experience psychological contract (PC) breach during crises. However, it remains unclear how employees react to organizational breaches during crises and whether employees are likely to forgive such breaches. Drawing on the risk management theory of corporate social responsibility (CSR), we argue that organizations’ CSR efforts create an insurance-like effect, which tempers employees’ destructive reactions and facilitates constructive reactions to breach during crises. Study 1, in the context of the COVID-19 crisis, demonstrates that employees who perceive high levels of CSR from their organization are more likely to attribute the PC breach to factors outside the organizations’ control and subsequently exhibit reconciliation behaviours. Study 2, a scenario-based experiment manipulating CSR (high/low), crisis context (crisis/non-crisis), and PC breach (high/low), reveals that a crisis context amplifies the insurance-like effect of CSR strengthening the positive association of PC breach with employees’ external attributions.