Employment Modes from Transactional and Relational Perspectives: An Exploratory Case Study

The current study uses a case study approach to investigate why organizations allocate different kinds of employees We adopt relational (social exchange theory) and transactional (agency theory) perspectives to explain the increasing allocation of external employees, in contrast to previous scholars who only emphasize cutting operating costs as the main reason for hiring external employees. Our study shows that opportunism is assumed to be important ― not because everyone is opportunistic but because it is impossible to obtain reliable information concerning the opportunism of the partner. Therefore, to control risk, it is perhaps safer for an organization to hire external workers and then to shorten the cognitive distance between managers and new hires, thereby fostering opportunities for mutual understanding. When trust is built, long-term relationships are easier to maintain and turnover rates typically decrease.