Does cultural value exacerbate or mitigate the effect of perceived compensation gap between locals and expatriates in hotel industry?

Within the expatriation system in the hospitality industry, a large compensation gap exists between expatriates and local employees. Drawing upon equity and social exchange theories, this paper examines the relationship between the perceived reasonableness of the expatriate–local compensation gap and workplace deviance behaviors (organizational and interpersonal). Moreover, the paper discusses the moderating effect of power distance and traditionality as important cultural boundaries in this relationship. Results of a survey among 46 expatriates and 297 local employees in the Chinese hotel industry indicated that the perceived compensation gap is positively related to the organizational and interpersonal deviance of local subordinates. High traditionality mitigates the effect of the compensation gap on deviance. However, contrary to our expectation, high power distance exacerbates such effect. The paper likewise discusses the theoretical and practical implications of the findings.