Giving the Benefit of the Doubt: Investigating the Insurance-Like Effect of CSR in Mitigating Negative Employee Reactions to Psychological Contract Breach

Abstract

Many studies document employees’ value-creating reactions to perceptions of their organization's corporate social responsibility (CSR) initiatives. Unknown, however, is whether perceived CSR can have value-protecting effects by mitigating employees’ negative responses when they believe the organization's other actions harm their interests, as proposed by theory on the insurance-like effect of CSR. In this respect, we develop hypotheses about the moderating role of CSR-based moral capital, such that higher levels mitigate the effect of psychological contract breach (PCB) on employees’ negative assessment of the organization (i.e., corporate hypocrisy) and associated value-eroding responses (i.e., lower loyal boosterism and higher turnover intentions). In Study 1, we use data from time-lagged employee surveys. In Study 2, we conduct two experiments in a causal-chain design. The findings support nuanced hypotheses from our theorized model and provide new insights that contribute to the broader CSR literature on value-protection and insurance-like effects, micro-CSR scholarship, and PCB research.