TRUST, LEADER-MEMBER EXCHANGE AND ORGANIZATIONAL OUTCOMES: A STRUCTURAL EQUATION MODEL IN THE MALAYSIAN WORK SETTING

Abstract

Social exchange theory has been influential in explaining a wide range of organizational outcomes including organizational commitment, performance, turnover and job satisfaction. It has also been combined with other theories such as those on leadership, selfmanaging teams and human resource management to produce new findings of interest to researchers and practicing managers. However, the fact remains that the majority of such research has been done in a Western context. There is a need to test social exchange theory in non-Western settings. This study tested the reliability and validity of social exchange theory in the Malaysian setting. Data was collected from 252 respondents of 18 Malaysian service and manufacturing sector firms. The results using AMOS 23 showed that trust (β = 0.652, p < 0.01) lead to LMX, explaining 42.5% of its variance. Trust (β = 0.443, p < 0.01) and LMX (β = 0.282, p < 0.01) are positively related to empowerment, accounting for a total variance of 43.9%. Furthermore, LMX (β = 0.616, p < 0.01) is positively related to organization commitment, accounting for 53.6% of its variance. Finally, trust (β = 0.339) and LMX (β = 0.321, p < 0.01) are positively related to intention to remain in the organization, explaining 52.8% of its variance.