Social exchange theory (SET) is the most important model which explains about the understanding of workplace behavior (Cropanzano and Mitchell, 2005).
The concept of social exchange has been utilized by the organization scholars to describe the motivation based employee behaviors and the creation of positive employee attitudes (Blau, 1964). The further explanation by Blau (1964) stated that social exchange theorists highlighted about the employment as the platform of efforts and loyalty towards tangibles and socio-emotional benefits. Thus, social exchange theory is emphasized on the relationship develop over time into trusting, loyalty and mutual commitment by employees towards their organization. In addition the theory also known as negotiated exchange process between parties which both parties involved based on the exchanges of responsibilities for one another and depends on each other’s (Almaaitah, Harada, ; Sakdan, 2017). Furthermore, social exchange theory explains that employees feel obligated to reciprocate the firms’ support when the firm committed to them through contribution that benefits the firm (Organ, 1990). It can be described the reciprocity norm assists the favourable return when one party treats another well (Gouldner, 1960).
This shows that the employees who receive support from the organization will feel the obligation to return the organization with commitment and work related behavior. This statement have been supported by Maurer, Pierce, & Shore (2002) by stating that high quality relationships in the workplace generated through mutually dependent interactions based on the right circumstances. Further, the author explained that employees are willing to show greater performance when they are satisfied with the outcomes based on their workplace exchanges within organizational setting (Shaw, Dineen, Fang, & Vellella, 2009). In addition, all parties involved in organization should consider the exchange as valuable which makes them to contribute in order to develop reciprocal social exchange relationships. A series of successful reciprocal exchanges happens when the actor provides benefits to the target which transform the economic exchange relationship into a high quality social exchange relationship. So, this will encourage people to be committed and develop trust towards organization.
This process shows in Figure 2.4, panel 1. However, when the actor does harm the target which means the subordinates treated poorly will create less attention to be given on relationship formation. This shows that positive social exchange relationship would be less emphasized and low quality economic exchange relationship developed. In another word mutually beneficial exchanges are less likely to be created when people are managing in harm as stated in Figure 2.4 (panel 2).