Journal of Applied Psychology 2001, Vol. 86, No. 4, 781-788 Copyright 2001 by the American Psychological Association, Inc. 0021-9010/01/S5.00 DOI: 10.1037//0021-9010.86.4.781 Examining the Effects of Work Externalization Through the Lens of Social Identity Theory Prithviraj Chattopadhyay and Elizabeth George University of Queensland This study examines whether dissimilarity among employees that is based on their work status (i.e., whether they are temporary or internal workers) influences their organization-based self-esteem, their trust in and attraction toward their peers, and their altruism. A model that is based on social identity theory posits that work-status dissimilarity negatively influences each outcome variable and that the strength of this relationship varies depending on whether employees have temporary or internal status and the composition of their work groups. Results that are based on a survey of 326 employees (189 internal and 137 temporary) from 34 work groups, belonging to 2 organizations, indicate that work-status dissimilarity has a systematic negative effect only on outcomes related to internal workers when they work in temporary-worker-dominated groups. The contingent workforce has, in the recent past, attracted a great deal of attention from both researchers (Houseman, 1997; Lee & Johnson, 1991) and practitioners (Fierman, 1994). This phenomenon may be linked to the increasing reliance of organi- zations on external workers, such as temporary, part-time, leased, and contract workers. In a study of 550 organizations, Houseman (1997) found that 46% of the establishments surveyed used some type of temporary worker, 23% had more than half their workforce made up of temporary workers, and two-thirds of the businesses anticipated an increase in their use of these workers. Organizations tend to employ temporary workers to enhance organizational flex- ibility and reduce employment-related costs, and much has been written about these benefits of externalization (cf. Caudron, 1997; Houseman, 1997). However, the use of such external workers may also result in negative consequences that are overlooked by both researchers and practitioners. Previous research on the influence of work externalization on employee outcomes has typically compared the attitudes and be- haviors of internal and temporary workers (cf. Davidson, 1999; Galup, Saunders, Nelson, & Cerveny, 1997), without any evidence that work status has a consistent influence on those outcomes. A possible reason is that employee attitudes and behaviors are more heavily influenced by factors such as the mix of internal and temporary workers in a work group than by the individual's work status (Caudron, 1997; Smith, 1997). This may be because em- ployee attitudes and behaviors that are related to their work status are influenced by their social identity, which encompasses those aspects of individual's identity that are based on membership in social categories such as work status. Because social identity tends to be determined by individuals comparing themselves with rele- vant referent others, such as fellow group members (Tajfel & Prithviraj Chattopadhyay and Elizabeth George, Department of Man- agement, University of Queensland, Brisbane, Queensland, Australia. Correspondence concerning this article should be addressed to Prithviraj Chattopadhyay, Department of Management, University of Queensland, St. Lucia, Brisbane, Queensland 4072, Australia. Electronic mail may be sent to r.chattopadhyay@gsm.uq.edu.au. Turner, 1986), it is important to study the mix of work status in a work group. Researchers such as Geary (1992) and Smith (1994) have described cases in which internal workers develop negative work attitudes and behaviors from having to work with temporary coworkers and have demonstrated the need to examine the dynam- ics between internal and external workers to understand the influ- ence of work externalization on employee outcomes. In this article, we go beyond the earlier descriptive case studies and systematically examine the effects related to combining inter- nal and temporary workers in organizational work groups, using social identity theory (Tajfel & Turner, 1986) to provide a strong theoretical framework. Four organizationally important outcome variables are studied: the employees' organization-based self- esteem (OBSE), their attraction toward and trust in their cowork- ers, and their altruism. The hypothesized model is summarized in Figure 1. Theoretical Model We define internal and temporary workers on the basis of Pfeffer and Baron's (1988) research. Both types of employees are under the administrative control of the organization and work full-time on-site. However, whereas temporary workers have a limited temporal connection to their organization, internal workers have a more long-term relationship with the firm. The work status of an employee refers to whether the employee is a temporary or internal worker. We use the theoretical framework of relational demography (Tsui, Egan, & O'Reilly, 1992) to define work-status dissimilarity: This refers to the extent to which an individual differs from the rest of the members of his or her work group in terms of work status. Organization-based self-esteem is defined as an employee's feelings of self-worth in an organizational context (Pierce, Gard- ner, Cummings, & Dunham, 1989). Trust in peers is defined as employees' expectations regarding the behavior of their work- group peers so that those who they trust will reliably support processes that help them and oppose processes that will harm them (Deutsch, 1973). Attraction toward peers refers to the extent to 781