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External Solutions and Internal Problems: The Effects of Employment Externalization on Internal Workers' Attitudes

Australian Graduate School of Management, Sydney, NSW 2052, Australia
elizabeg{at}agsm.edu.au

This study examines whether employment externalization, or the use of temporary and contract workers in organizations, is associated with weak psychological bonds between the internal workforce and organization. Specifically, the extent and length of such externalization would negatively relate to internal workers' trust in, commitment toward, and psychological contract with organizations. The premise for this argument is that internal workers may view externalization as an indicator of the organization's low–level commitment to them. Internal workers would reciprocate by decreasing their attachment to the organization. Externalization might also be seen as violating the psychological contract between employees and employers, since externalization is associated with slowed upward mobility and poor work support for internal workers. However, organizational actions that indicate commitment toward employees would mitigate such negative effects. I posit that externalization would be viewed less negatively both by workers who believe they have secure jobs, and by those who supervise and train others. These hypotheses were tested with data collected from 256 internal workers in three organizations. Results indicate that both the extent and length of externalization are negatively related to internal workers' attitudes, especially for those of internal workers with fewer supervisory responsibilities. However, contrary to the hypotheses, the relationship is also more negative for internal workers with high job security.

Key Words: Employment Externalization; Trust; Commitment; Psychological Contracts

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