Psychological Contract Perspective and Implications in Small and Medium Enterprises

Abstract

MSMEs are micro, small and medium enterprises which are contributing significantly to India’s total GDP. In fact, it is the growth engine of Indian economy which generates highest employments. This study attempts (a) to understand the importance of psychological contract (PC) in small and medium enterprises (SMEs), (b) to assess the extent to which organisational culture dimensions and happiness contribute in determining PC in SMEs. Three standardised questionnaires namely Organisational Culture: OCTAPACE Profile, Psychological Contract Scale and The Oxford Happiness Scale have been used to collect the data. Four hundred samples have been drawn from different SMEs. The statistics used is multiple regression analysis to analyse the data and interpret the results. The study has thrown many interesting results. The present research findings show that PC is the function of happiness and organisational culture dimensions. It is found that the dimensions of culture namely trust, collaboration and pro-action have come out to be the most promising influencers to PC along with happiness. Numerous studies have identified a strong linkage between PCs, organisational performance and productivity. Based on the findings organisation development (OD) and behavioural intervention strategies are suggested to enhance PC in SMEs.