Compensation Disparity between Locals and Expatriates in China: A Multilevel Analysis of the Influence of Norms

Abstract

In developing countries, there is a large gap in the compensations of locals and expatriates, which is related to negative attitudes of locals. A multilevel study was conducted in China on the influence of low compensation parity in MNC operations. Findings show that the negative effects of low compensation parity on outcome variables, namely, evaluation of and knowledge sharing with expatriates, as well as job satisfaction and intention to quit, were fully mediated by distributive justice based on a comparison with expatriates. Personal pro-disparity norm regarding low compensation parity played a buffering role and was related to a weaker relationship between compensation parity and comparative distributive justice. Organizational pro-disparity norm showed a similar cross-level buffering effect. Trust climate was related to a weaker relationship between compensation parity and comparative distributive justice, and fully mediated the moderating effect of organizational pro-disparity norm. The findings have important theoretical and managerial implications for mitigating the negative influence of low compensation parity in multinational firms, and point to some important topics for future research on the social integration of locals and expatriates.