Academic journal article Journal of International Business Research

Impact of Career Change on Employee-Organization Relationship: A Case of Japanese Company

Academic journal article Journal of International Business Research

Impact of Career Change on Employee-Organization Relationship: A Case of Japanese Company

Article excerpt


Recently, employment relationship has gained popularity in Japan, in large part due to changes in the employee-organization relationships (EOR) in Japanese organizations. Confronted with the low productivity of white-collar employees and Japan's low economic growth, many Japanese organizations were forced to examine their own EOR. According to a 2001 survey conducted by the Japanese Ministry of Health, Labour and Welfare, 62.3% of organizations have adopted pay-for-performance schemes for their middle and senior managers. Further, a survey by the Institute of Labor Administration revealed that the proportion of organizations that have introduced demotion systems has also been increasing. The externalization of employment has also been increasing at a considerable rate in Japan, as it has in other industrialized nations. According to the Japanese Statistics Bureau, the ratio of part-time, temporary, and other limitedcontract employees has been on the rise. Japanese organizations have begun to sort employees into various categories with different levels of employment protection.

Although the abovementioned changes have been occurring widely, there are strong appeals for long-term employment, which constitutes Japanese management (Abegglen, 1958). The fact that long-term employment still enjoys long-standing importance in Japanese organizations has been clarified by many theoretical and empirical studies (Clegg and Kono 2002; Jacoby 2005).

The EOR theories include both macro perspectives such as transactional cost theory and micro perspectives such as psychological contract (PC) and OC (Coyle-Shapiro and Shore 2007). Research on long-term employment, however, has mainly been conducted from the perspective of economic theory and human resource management (i.e., macro perspectives). Although several views exist, there is consensus among theorists that long-term employment enables organizations and employees to make a relation-specific investment with low risk. On the other hand, there are few researches concerning long-term employment from the micro perspective. Then, the purpose of this paper is to examine the evolving nature of EOR from the perspective of OC and PC. In more detail, this paper examines the effects of several career change variables such as tenure, vertical, functional, and horizontal career change in organization on OC and PC.


Economic rationality of long-term employment

The most researched topic in Japanese EOR is the economic rationality of long-term employment. The assumptions of transaction cost theory (TCT) and agency theory (AT) lie at the heart of this line of research. Because it is difficult for contract parties in the market to monitor each other, this raises the possibility of opportunistic actions (Williamson 1975). In order to reduce such actions, TCT argues that the each party's incentives need to be aligned with the other party's. Further, this can be accomplished by developing an employment contract (Williamson 1975). Long-term employment enables organizations to avoid losses in their investment toward human resources and to have a stable and predictable stock of capabilities (Pfeffer and Baron 1988). For employees, long-term employment reduces their risk of unemployment and enables them to invest more in firm-specific abilities.

Although such findings have yielded important insights, they have overlooked the fact that EOR could change over time as employees develop their career and they and organization improve their knowledge of each other. As employees' careers develop, their understanding of what their organizations require of them and their benefits as employees changes (Schein 1978). Thus, EOR can change with time.

Organizational commitment and psychological contract

This paper investigates the evolving nature of EOR from the perspective of OC and PC. As micro concepts concerning EOR, both concepts have gained significant popularity among researchers and practitioners. …

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