ABSTRACT
A psychological contract is an individual’s beliefs about the mutually held terms and obligations of the exchange relationship between an individual employee and an organization. Importantly, although these beliefs are considered by the individual to be mutually understood by the relationships partner, there may be discrepancies in beliefs and in execution. The idea of psychological contracts is based in theories of social exchange and were advanced by Denise Rousseau. There is a bipolar continuum along which to classify psychological contracts ranging from transactional to relational. Psychological contracts dynamically and cyclically advance through phases of creation, maintenance, renegotiation, and repair, as an individual gains information about the relationship through environmental inputs. Breaches of psychological contracts predict many important workplace variables including turnover intentions and performance. Both situational factors such as economic market and cultural context, and individual factors such as personality and workplace ideologies impact the formation of psychological contracts and reactions to contract breach.
