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Organisational
Organisational justice climate, justice climate
social capital and firm
performance
Ashish Mahajan 721
Odette School of Business, University of Windsor, Windsor, Canada, and
Received December 2010
Philip Benson Revised May 2011
Department of Management, College of Business, New Mexico State University, Accepted September 2011
Las Cruces, New Mexico, USA

Abstract
Purpose – The purpose of this paper is to develop a conceptual framework in order to understand the
impact of organizational justice climate on firm performance.
Design/methodology/approach – This paper reviews the literature on organizational justice and
social capital and theorizes their relationship with firm performance. The underlying argument of this
paper is that a climate of organizational justice influences firm performance indirectly through its
influence on social capital.
Findings – The paper suggests ways through which different types of justice climate – distributive,
procedural, interactional – are related to different dimensions of social capital. This paper also extends
the findings of organizational justice research from an individual level to organizational level by
proposing an indirect relationship with firm performance.
Originality/value – This paper is unique, as no research to date has proposed a conceptual
framework integrating organizational justice climate, social capital and firm performance.
Keywords Social capital, Organizational performance, Social justice, Organizational justice,
Organizational culture
Paper type Conceptual paper

A strong emphasis on organizational justice is an important element of ethical

organizations (Greenberg and Bies, 1992). Research suggests that organizational
justice is positively related to organizational citizenship behavior (OCB), organizational
commitment, trust, higher moral standards (Cropanzano et al., 2001b), work performance
and negatively related to employees’ intentions to quit their organization (Moorman
et al., 1998). Research also suggests that organizational justice collectively affects
the quality (i.e. the structure and strength) of interpersonal relations between
employees working in an organization (Lamertz, 2002). Researchers refer to the quality
of interpersonal relations between employees as social capital (e.g. Leana and Van
Buren, 1999). Social capital is an important organizational resource that influences the
development of human and intellectual capital within an organization (Nahapiet and
Ghoshal, 1998). Further social capital has been found to be strongly associated with
value creation and firm performance (Tsai and Ghoshal, 1998).
Although previous research suggests that organizational justice is related with
firm performance (Bosse et al., 2009), and social capital affects firm performance (Tsai
and Ghoshal, 1998), a conceptual framework integrating the three concepts is lacking.
This paper attempts to fill this void by discussing a conceptual framework in order to Journal of Management Development
Vol. 32 No. 7, 2013
understand the relationship between organizational justice, social capital, and firm pp. 721-736
r Emerald Group Publishing Limited
performance. In order to address problems associated with levels of analysis, this 0262-1711
paper uses the term organizational justice climate which refers to a group-level DOI 10.1108/JMD-12-2010-0091
JMD cognition regarding the extent to which employees in an organization are treated
32,7 fairly (Colquitt, 2004; Colquitt et al., 2002; Naumann and Bennett, 2000; Roberson and
Colquitt, 2005). It is operationalized as an aggregate of justice perceptions across
employees in a work unit (Colquitt et al., 2002; Naumann and Bennett, 2000).
The underlying argument of this paper is that a climate of justice within an
organization positively affects the structure and strength of interpersonal relations
722 between employees (i.e. social capital) which in turn increase firm performance.
In order to develop a conceptual framework, this paper uses a multi-disciplinary
approach and extensively draws from the fields of organizational behavior, sociology,
social psychology and strategic management. Based on the field theory (Lewin, 1943),
this paper argues that organizational justice climate is a distal factor and affects
firm performance, at least in part, by its relationship with a more proximal factor.
This paper suggests social capital to be that proximal factor because of three reasons:
first, organizational justice climate is an aggregate of individual-level justice
perceptions and indicates the extent to which employees (as a collective) perceive that
their organization is treating them fairly. Thus organizational justice climate is more
likely to directly affect the quality of interpersonal relations (i.e. social capital) among
employees (and less likely to directly affect firm performance); second, several studies
have found strong correlations between social capital and firm performance (e.g.
Andrews, 2010; Leana and Pil, 2006), thus indicating social capital to be closely
related to firm performance; and finally, the role of social capital as a mediator of the
relationship between several individual and organizational-level variables such as
OCB (Bolino et al., 2002), employment practices (Leana and Van Buren, 1999) and firm
performance has been fairly established in the literature. This paper builds on this
research by arguing that social capital mediates the positive relationship between
organizational justice climate and firm performance.
The remaining paper is structured in the following way. Next section reviews the
literature on organizational justice and social capital. It is followed by a presentation of
the theoretical model and propositions emerging from the model. This paper concludes
by discussing implications of the theoretical framework and offering directions for
future research.

Literature review
From organizational justice to organizational justice climate and its relationship with
firm performance
Expectations of justice in social exchange processes go back to Gouldner’s (1960)
norms of reciprocity. Gouldner (1960) argued that individuals value reciprocity
primarily because of three underlying reasons. First, self-interest influences an
individual’s behavior. That is, reciprocity is valued because it results in some form
of economic gain. Second, individuals fulfill mutual obligations toward each other
in order to maintain membership in their own group. Finally, individuals feel obligated
to return any service in order to uphold their ethical or righteous beliefs of giving
back. Researchers have used these norms to suggest different types of justice and
consequently explore their impact on several employee outcomes.
For example, early social exchange theorists argue that employees value reciprocity
as it increases their economic gain (Adams, 1965; Homans, 1961). The notion of
distributive justice is largely based on the economic gains perspective, as is evident
from the works of Homans (1961) and Adams (1965). The economic gains perspective
suggests that individuals are guided by a self-interest motive and exchange resources
with each other in anticipation of future returns (Blau, 1964). In comparison to the Organisational
economic model of social exchange, Lind and Tyler’s (1988) group value model justice climate
of procedural justice draws on Gouldner’s (1960) second norm of reciprocity. According
to this model, employees value their membership with a group as it provides them with
a sense of identity. Procedures that conform to the overarching beliefs of a group are
considered as fair. As these beliefs develop over time and largely result from
socialization process of employees, fair procedures have a strong positive impact 723
on employee’s status in the group, and security with their group membership.
The emphasis on Gouldner’s third norm – valuing reciprocity because it upholds
ethical beliefs of individuals (e.g. doing the right thing) – is visible in the works of Bies
and Moag (1986). Building on the works of Bies and Moag (1986), Bies (2001) not only
introduced a third type of justice – interactional justice – but also asserted the need
for justice from a moralistic standpoint (Cropanzano et al., 2001a; Folger, 1998). These
scholars argue that concern for human dignity itself should be a strong motivator for
organizations in order to promote justice in the workplace.
Researchers have found distinct effects of distributive, procedural and interactional
justice on several individual and organizational outcomes. For example, Folger and
Konovsky (1989) found that fairness in distribution of pay raises is a strong predictor
of employee pay satisfaction. Further, research has found that distributive justice
reduces negative behavior of an employee, for instance employee theft (Greenberg,
1990), increases work quality (Cowherd and Levine, 1992), improves cooperation with
coworkers and increases job performance (Pfeffer and Langton, 1993). Likewise several
studies have shown positive effects of procedural justice on increased job satisfaction,
organizational commitment, OCBs, attachment with the team, trust in the leader and
lower intentions to quit (Folger and Greenberg, 1985; Konovsky, 2000; Korsgaard et al.,
1995; Masterson et al., 2000; Phillips et al., 2001). Among studies on interactional
justice, research has found that low levels of interactional justice results in poor work
attitudes, higher incidents of interpersonal conflict and low job performance among
employees (Bies and Greenberg, 2002; Bies and Moag, 1986). On the other hand
organizations that provide sound rationale for an unfavorable outcome create higher
levels of tolerance within an aggrieved employee (Bies and Shapiro, 1988).
From a strategic perspective, researchers have also argued that distributive justice
reduces the agency costs or the costs incurred by an organization due to the negative
behavior of its employees (Davis et al., 1997; Donaldson and Davis, 1991). Under low
levels of distributive justice, employees behave opportunistically and against the
interest of their organization. In such situations agency costs increase as organizations
invest heavily in internal and external control mechanisms in order to control
opportunistic behavior of their employees (Walsh and Seward, 1990). Importance of
procedural justice has also been highlighted in several studies done by Kim and
Mauborgne (1991, 1993a, b, 1995) which show that procedural fairness in decisions
formulated at the parent company affects subsidiary managers’ higher order work
outcomes such as commitment, trust and social harmony.
More recently justice scholars have started studying organizational justice as a
group level cognition (Colquitt, 2001; Colquitt et al., 2002; Dietz et al., 2003; Liao and
Rupp, 2005; Mayer et al., 2007; Mossholder et al., 1998; Naumann and Bennett, 2000).
One of the underlying reasons to aggregate justice perceptions of employees at a
unit level (referred to as organizational justice climate) is because employees largely
work as a collective rather than alone (i.e. they are interdependent; Cropanzano and
Schminke, 2001; Konovsky, 2000). Therefore, it is likely that performance of employees
JMD in a work unit is affected by the extent to which other employees in their unit
32,7 are treated fairly. Further, employees form context-specific expectations such as their
expectation to a new policy announced by their organization or their response to the
newly appointed leader (Ambrose and Kulik, 2001; Naumann and Bennett, 2000).
It is likely that employees share such information with each other and may develop a
level of shared justice perceptions within their work unit. Research has shown that
724 after controlling for individual-level justice perceptions organizational justice climate
influences individual-level work outcomes such as job satisfaction (Mossholder et al.,
1998), OCBs (Naumann and Bennett, 2000), team performance and absenteeism
(Colquitt et al., 2002).
Although some research has studied the relationship between organizational justice
climate and individual-level work outcomes, no research to date has studied the
relationship between organizational justice climate and firm performance. It is argued
that research on social capital might help explain this oversight. As social capital is
located within an organization, it is affected by organizational policies and norms
(Adler and Kwon, 2002). Organizational policies that are perceived by employees as fair
(at an individual level) help in creating a climate of fairness (at a group level). This
affects the quality of relationship between employees (i.e. leads to the formation of
social capital at a group level), which in turn affects firm performance.

Social capital and firm performance

In a critique of transaction cost economics, Ghoshal and Moran (1996) argued that
organizations have distinct advantages over markets. One of the key distinctions
highlighted by Ghoshal and Moran (1996) was the existence of shared purpose in
organizations that was missing in markets. Further, Ghoshal and Moran (1996) add
that “It is [shared] purpose that allows organizations to create and nurture a social
context that shapes the values, goals and expectations of members” ( p. 37). As social
capital within an organization is realized through a shared purpose among employees,
it facilitates collective action and creates value for the firm (Leana and Van Buren,
1999; Tsai and Ghoshal, 1998).
Several researchers have emphasized the importance of social capital as an external
and internal resource of an organization (Adler and Kwon, 2002). Among the external
set of researchers, social capital serves as a bridging resource, where one organization
relies on the other from a resource dependence perspective (Adler and Kwon, 2002).
Market ties between organizations help them to exploit structural holes (i.e.
unidentified opportunity, Burt, 1992, 1997) in order to gain competitive advantage over
others (Adler and Kwon, 2002; Baker, 1990; Belliveau et al., 1996). On the other hand,
for the internal set of researchers, social capital serves as a bonding resource between
employees within an organization (Adler and Kwon, 2002). Employees work in
organizations because it facilitates creation and sharing of knowledge among them
and provides an opportunity for them to work together for their mutual benefit (Kogut
and Zander, 1996; Nahapiet and Ghoshal, 1998).
Although both perspectives are important, recent research has emphasized the
relative importance of the internal perspective (e.g. Bolino et al., 2002; Leana and Van
Buren, 1999). In line with the argument of the internal set of researchers, this paper
uses the internal perspective to demonstrate the importance of social capital in
increasing firm performance. From an internal perspective, Nahapiet and Ghoshal’s
(1998) framework of social capital is useful as it helps in tracing the antecedents of
social capital and exploring its impact on firm performance. According to Nahapiet
and Ghoshal (1998), there are three dimensions of social capital – structural, relational Organisational
and cognitive. justice climate
Structural social capital. The structural dimension of social capital provides a
basic framework for developing interpersonal relations between employees within an
organization. It consists of network ties, network configuration and appropriable
organization (Nahapiet and Ghoshal, 1998). Network ties provide access to resources
both within and outside the organization as well as facilitate diffusion of 725
information within the organization (Baker, 1990; Coleman, 1988; Nahapiet and
Ghoshal, 1998).
While network ties define the network of connections employees share with each
other, network configuration is defined by the pattern of these connections in terms of
density, connectivity and hierarchy (Nahapiet and Ghoshal, 1998). Network
configuration influences the speed with which information diffuses among
employees and helps in the discovery of unidentified opportunities within a social
network (Burt, 1992, 1997; Granovetter, 1973; Lawler and Yoon, 1996). Dense networks
represent strong ties between individuals and are usually formed between a few people
in an organization (Granovetter, 1973). Dense networks can also inhibit the flow
of knowledge to other members in an organization due to fewer connections of
members outside their own network (Burt, 1992). On the other hand, sparse networks
represent weak ties between individuals and serve as conduits through which crucial
information and ideas flow to socially distant people. Weak ties facilitate interaction
between non-redundant contacts (i.e. employees with unique information) and increase
chances of discovering structural holes, which if exploited can benefit the organization
(Lawler and Yoon, 1996).
Finally, an appropriable organization allows the use of network ties and network
configuration for multiple purposes (Coleman, 1988; Nahapiet and Ghoshal, 1998).
In other words, social capital formed in one context can be brought to use in a different
social setting.
Relational social capital. The relational dimension of social capital refers to the
quality and depth of relations among employees (Bolino et al., 2002; Nahapiet and
Ghoshal, 1998). It is defined by the level of interpersonal trust, existence of norms
and obligations and identification with the organization.
Interpersonal trust indicates willingness of an individual to be vulnerable to another
individual’s actions (Mayer et al., 1995; Mishra, 1996). Interpersonal trust also brings
with it other virtues, such as obligation to and expectations from each other (Coleman,
1988). An obligation represents inner conscience or a moral value to reciprocate
in return of any service or reward being offered by another individual. However, all
forms of reciprocity may not yield high levels of trust. In this regard, scholars have
distinguished between calculative and integral reciprocity. According to Leana and
Van Buren (1999) calculative reciprocity is based on formal contractual means of
equilibrating gains and losses, and only builds fragile trust, whereas integral
reciprocity is based on internalized beliefs or moral principles of integrity and hence
builds resilient trust.
Norms and obligations represent a consensus among employees regarding the
behavior that is expected of them (Nahapiet and Ghoshal, 1998). As an integral element
of formal and informal relationships within an organization, norms are either
internalized by employees or are enforced through various organizational policies and
procedures (Akerlof, 1982; Coleman, 1988). For example, norms of cooperation may
come from internalized beliefs of employees because of the value they derive from
JMD collaboration or from organizational policies such as gain sharing, which serve as an
32,7 inducement for joint effort.
Finally, the relational dimension of social capital is also concerned with the level of
identification organizational members share with each other or with the group
to which they belong (Nahapiet and Ghoshal, 1998). Social identity theory (Tajfel
and Turner, 1986) suggests that identity of individuals is defined by the group or
726 organization to which they belong. So far as individuals value their identification with
the group, they cooperate to achieve organizational goals.
Cognitive social capital. An important element of a meaningful social exchange is the
extent of cognitive comfort employees derive from an exchange process. According to
Nahapiet and Ghoshal (1998) a shared context or overlapping of ideas between
exchange partners determines the extent of cognitive comfort between the partners.
They discuss two ways through which sharing of ideas can happen within an
organization: existence of shared language and exchange of narratives.
Sharing of ideas among employees enriches the process of dialogue, facilitates
transfer of knowledge and enhances organizational learning (Kogut and Zander, 1996;
Nahapiet and Ghoshal, 1998). Kogut and Zander (1996) highlight the critical role of
language and discourse in transforming specialized knowledge into a more generalized
form and diffusing it throughout the organization. At a group level, shared language
leads to a shared understanding of the organization and the immediate task
environment; thereby, facilitating formation of shared mental models (Druskat and
Pescosolido, 2002; Klimoski and Mohammed, 1994). Research has shown that shared
mental models within a team enable prediction and coordination of member behavior,
facilitate learning, generate interdependence and increase team effectiveness (Druskat
and Pescosolido, 2002). Beyond shared language are the narratives or stories and
metaphors that provide much deeper understanding of the social context in which
they are exchanged (Nahapiet and Ghoshal, 1998). Interpretation of these narratives
may reveal several stories confirming to different social realities (Boje, 1995; Pondy
and Mitroff, 1979). Further, sharing of narratives increases the flow of tacit knowledge
(Polanyi, 1983) and enhances the degree of acquaintance among employees.
Therefore, shared language and narratives enhance the degree of cognitive comfort
between employees. Moreover, a high level of cognitive comfort increases the
likelihood of future collaboration among employees and substantially reduces
chances of negative opportunism, which in turn increases firm performance (Bosse
et al., 2009).

Organizational justice climate and the development of social capital

Figure 1 depicts the proposed relationship between organizational justice climate
and different dimensions of social capital. According to the model, distributive justice
climate facilitates the development of structural social capital; procedural
justice climate facilitates the development of relational social capital; and
interactional justice climate facilitates the development of cognitive social capital.
Social capital also mediates the relationship between organizational justice climate and
firm performance.

Distributive justice climate and structural social capital

Organizations with strong emphasis on distributive justice are likely to create
more network ties between its employees (Bosse et al., 2009; Lamertz, 2002). This is
because in such organizations more employees are satisfied (i.e. experience high level
 Organizational
Justice Climate
Social Capital Organisational
Structural Social Capital justice climate
Distributive - Network Ties
Justice Climate - Network Configuration

Relational Social Capital

- Trust
Firm 727
Procedural Performance
Justice Climate - Norms and Obligations
- Identification

Figure 1.
A model integrating
Cognitive Social Capital organizational justice
Interactional
Justice Climate - Shared Language climate, social capital and
- Shared Narratives firm performance

of distributive justice) than dissatisfied with their outcomes. It is likely that

employees perceiving high levels of distributive justice will help other employees to
maximize their economic gain. For example, employees that have significant
achievements in their organizations (as opposed to employees who do not have
significant achievements) are likely to be satisfied by the rewards they have received
from their organization (i.e. experience high levels of distributive justice). It is likely
that such employees will be more willing to help other employees achieve their career
goals. Such help may come in the form of helping them connect with influential
members within the organization as well as help in gaining entry into formal
and informal networks outside the organization (Leana and Van Buren, 1999). Put
differently, high levels of shared distributive justice perceptions among employees
create a climate of fairness among them, which in turn helps them to connect with
each other.
Although, a distributive justice climate increases network ties among employees,
such ties are loose in nature (Granovetter, 1973). A loose tie is characteristic of a sparse
network which is more diverse than a dense network. In other words, a loose network
contains more people with unique information. This is useful as more unique
information can be collected and diffused among a wider segment of employees
(Seibert et al., 2001; Nahapiet and Ghoshal, 1998). Therefore, loose connections between
employees can provide access to relevant information in the least amount of time and
help employees achieve their career goals:

P1a. Distributive justice climate will enhance structural social capital by increasing
network ties among employees.

P1b. Distributive justice climate will enhance structural social capital by affecting
network configuration among employees such that employees will be more
loosely connected with each other.

Procedural justice climate and relational social capital

One of the important constituents of relational social capital is trust. Among
factors influencing formation of trust, consistency, integrity, fairness, openness and
reliability of management action strongly influence employee’s trust in their
JMD organization (Butler, 1991; Mayer et al., 1995; Mishra, 1996). Further, several empirical
32,7 studies suggest a positive relationship between procedural justice and trust (Konovsky
and Pugh, 1994; Masterson et al., 2000; Moorman et al., 1998). Acceptance of
organizational norms and mutual obligations toward each other are other attributes of
relational social capital which are strengthened by procedural justice. Research has
found that employees are more willing to accept organizational norms such as a
728 restraint on smoking at the work site if an organization follows fair process in
developing such norms (Greenberg, 1994). Further, procedural justice is important not
only because employees value fair procedures due to the outcomes they receive but also
because fairness in exchange relationships is psychologically rewarding (Tyler, 1989).
In line with the group-value model of procedural justice, employees strive to uphold
fair procedures as it boosts their self-image and provides them with a strong
sense of social identity (Lind and Tyler, 1988; Tajfel and Turner, 1986). Therefore,
employees are more likely to strongly identify with organizations that follow fair
procedures to arrive at decisions. Research has also found that communication climate
that is perceived by employees as open, participative and supportive (strong indicators
of procedural justice) increases employees’ identification with their organization
(Smidts et al., 2001):

P2a. Procedural justice climate will enhance relational social capital by increasing
interpersonal trust between employees.

P2b. Procedural justice climate will enhance relational social capital by increasing
employee acceptance of organizational norms and mutual obligations toward
each other.

P2c. Procedural justice climate will enhance relational social capital by increasing
employee identification with their organization.

Interactional justice climate and cognitive social capital

Interactional justice climate facilitates the development of cognitive social capital by
contributing to the development of shared language and narratives among employees.
Research done by Bies and colleagues suggests that interactional justice is at the root
of all interpersonal interactions as it conveys a sense of self-respect and dignity for
partners in an exchange relationship (Bies, 2001; Bies and Moag, 1986). Research
also suggests that employees experiencing lack of interactional justice are more likely
to feel a lack of fairness on other accounts (e.g. distributive injustice), show low job
performance and OCBs (Cropanzano et al., 2002; Masterson et al., 2000) and show more
retaliatory behaviors (Skarlicki and Folger, 1997). In another study, Thompson and
Heron (2005) found that the affective commitment of knowledge workers remained
low if the workers perceived low levels of interactional justice. Further, low level of
interactional justice climate is likely to hinder in the voluntary processes of employees
such as forming of groups (Kozlowski and Bell, 2003) and creation of informal
networks (Krackhardt and Hanson, 1993) which are crucial for the development of
shared mental models (Druskat and Pescosolido, 2002; Klimoski and Mohammed,
1994). Klimoski and Mohammed (1994) also highlight the importance of
communication in order to facilitate the development of shared mental models.
According to Bies and Moag (1986), an interpersonal communication process is fair,
if it has elements of truthfulness, respect for each other, propriety regarding solicitation
of information and adequate justification regarding the decision outcome (Bies Organisational
and Moag, 1986). Bies and colleagues argue that interactional justice requires no justice climate
comparison, as it reflects the most fundamental concerns of an individual: dignity and
respect (Bies, 2001; Bies and Greenberg, 2002; Bies and Tripp, 1996). Therefore
interactional justice provides symbolic support to employees by assuring that their
values and concerns are respected by their organization and that the organization is
paying sufficient attention to them. 729
Furthermore, research also suggests that any change in the organizational stance
(e.g. change in policies and procedures) without sufficient reasoning can be perceived
by employees as a form of deception, and may inhibit voluntary behavior of employees
in sharing knowledge with each other (Druskat and Pescosolido, 2002). Therefore it is
reasonable to argue that high levels of interactional justice climate as reflected by fair
communication processes can substantially aid in the development of shared language
and mental models:

P3. Interactional justice climate will enhance cognitive social capital by increasing
shared language and narratives among employees.

Role of social capital as a mediator

Research suggests that social capital is positively related to firm performance
(Andrews, 2010; Leana and Pil, 2006). Several researchers have also argued that
social capital plays a crucial mediating role. For example, Leana and Van Buren (1999)
argue that social capital mediates the relationship between employment practices
and several organizational outcomes. Similarly, Bolino et al. (2002) argue that OCBs
influence firm performance through their effect on social capital. In line with the
arguments of the above researchers, the basic premise of this paper is that social
capital mediates the relationship between organizational justice climate and firm
performance.
The mediation argument is in line with the process model of employee behavior
such as the job characteristics model (JCM; Hackman, 1992; Hackman and Oldham,
1980), which suggests that at an individual level, employee outcomes are affected
by proximal rather than distal stimuli. Using the JCM terminology, job autonomy
(a distal stimulus) increases employee’s responsibility for work outcomes (a proximal
stimulus) which in turn affects employee performance. At a firm level, social
capital is a more proximal stimulus affecting firm performance than employee’s
justice perceptions. This is because organizational policies and procedures are
more likely to directly affect the quality of interpersonal relations employees
share with each other. For example, employees are more likely to work together
to achieve organizational objectives if they share a common perception that
their organization treats them fairly. This in turn increases firm performance
(Akerlof, 1982):

P4. Social capital will positively mediate the relationship between organizational
justice climate and firm performance.

Implications and directions for future research

The framework presented in this paper is a beginning point to link organizational
justice climate, social capital and firm performance. The purpose was to understand
the process through which organizational justice climate influences firm performance.
JMD Drawing extensively from the fields of sociology, social psychology and strategic
32,7 management, this paper developed a conceptual framework in order to explain the
process through which organizational justice climate facilitates the development of
structural, relational and cognitive aspects of social capital. Being a more proximal
stimulus to firm performance, social capital mediates the relationship between
organizational justice climate and firm performance. This paper makes several
730 contributions to the growing body of literature on organizational justice climate and
social capital.
First, there exists a large body of research on the relationship between
organizational justice and several individual-level outcomes such as job
satisfaction, work performance, OCBs, organization commitment and trust (Cohen-
Charash and Spector, 2001; Colquitt et al., 2001). However, research is mute on the
influence of organizational justice climate on firm performance. Even within the field
of strategy, the emphasis has largely been on fairness in strategy formulation (Kim
and Mauborgne, 1993b, 1995) and studying its effect on generating compliance and
other positive managerial behavior (Kim and Mauborgne, 1991, 1993a). This paper
addresses this omission by suggesting an indirect relationship between organizational
justice climate and firm performance. The relationship of organizational justice climate
and firm performance is strengthened as organizational justice climate leads to the
development of social capital, which in turn enhances firm performance.
Second, previous research on organizational justice has either focussed on
the antecedents and consequences of procedural justice or has largely ignored the
combined effect of distributive, procedural and interactional justice on organizational
outcomes (Colquitt et al., 2001). The underlying principles governing each justice
dimension has also received less attention (Cohen-Charash and Spector, 2001).
The theoretical framework presented in this paper is among a few studies to explore
the combined effect of different justice types on firm performance. This paper also
underscores the importance of distributive justice in an organizational context
and hence furthers Greenberg’s (1990) line of argument of giving due importance to
distributive justice along with other justice types.
Finally, research on social capital has largely been restricted to a single level of
analysis and shows a lack of interdisciplinary approach (Adler and Kwon, 2002; Bolino
et al., 2002). This paper addresses this limitation by integrating research from several
disciplines and using multiple levels of analysis. Using social exchange as a central
theme, this paper demonstrates the process through which organizational justice
climate at a group level contributes to the formation of social capital which in turn
influences firm performance at an organizational level.
As this paper presents an initial framework to integrate concepts such as
organizational justice climate, social capital and firm performance, there are several
directions for future research. First, empirical testing of the propositions mentioned in
this paper not only will validate the theoretical relationship proposed in this paper, but
also will demonstrate the importance of organizational justice from a strategic
perspective. Second, future research might also benefit by including other dimensions
of justice (i.e. interpersonal and informational justice) and integrating it with social
capital. Colquitt et al. (2001) have also highlighted the need for more research on
the interpersonal and informational forms of justice. Third, the present model does
not take into consideration antecedents of organizational justice climate. In future, the
present model can be extended by including the antecedents that influence
organizational justice climate and then considering its effect on social capital and
firm performance. For example, cultural dimensions such as power distance, Organisational
individualism-collectivism can be considered as possible antecedents of justice climate
organizational justice climate (Kirkman et al., 2006). Another line of extension
could be to consider the reciprocal effect of social capital on the formation of
organizational justice climate. It is likely that initially fairness in social exchange
might be critical for the development of social capital but as the organization
progresses through its life cycle, existing social capital might also impact the nature 731
of future exchange (Cropanzano and Mitchell, 2005). Lastly, other moderating
variables can also be introduced in the present model. For example, the strength of
organizational justice climate (i.e. within-unit variance; Schneider et al., 2002) can
moderate the relationship between organizational justice climate and social capital.
In lieu of organizational justice climate strength, individual-level justice perceptions
can also be used as a moderator.

Conclusion
The theoretical framework presented in this paper is an attempt to explain the
relationship between organizational justice climate and firm performance. Using social
capital as a bridging resource, this paper suggests that a climate of organizational
justice facilitates the development of social capital which in turn affects firm
performance. Three forms of justice climates, distributive justice, procedural justice
and interactional justice, are used to explain the process through which each of these
help in the formation of social capital. Because social capital is a more proximal factor
affecting firm performance than justice perceptions of employees, it is argued that
social capital is a key-mediating variable explaining the relationship between justice
climate and firm performance.

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Corresponding author
Ashish Mahajan can be contacted at: amahajan@uwindsor.ca

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