Cultural dynamics in expatriate psychological contracts: unpacking spillover effects in the breach-violation relationship

Expatriates work in multi-party settings with concurrent psychological contracts with both home and host organizations. Prior research indicates that a psychological contract breach by one party can lead to a negative emotional response toward the other. The present study builds on the sensemaking perspective in psychological contract theory to theorize that such spillover is not universal. Instead, we propose that it depends on the interaction between the degree of cultural difference between the home and host organization and expatriates’ cultural intelligence, i.e., their ability to interpret and make sense of these cultural differences. Drawing on primary data from a two-wave study with 221 expatriates, we find that cultural distance moderates the spillover effect of psychological contract breach by the host organization on the psychological contract violation toward the home organization. We find that high cultural distance neutralizes this spillover effect. Moreover, this neutralizing effect of cultural distance is stronger among expatriates with low cultural intelligence. As such, under conditions of high cultural distance, psychological contract breach by the host organization is less likely to translate into psychological contract violation toward the home organization when cultural intelligence is low (a three-way interaction). Our findings have important implications for PC theory and the management of expatriate assignments.