Organizational Fairness Perceptions, Employee Representation, and Firm Performance

ABSTRACT From a theoretical perspective, employees' fairness perceptions play a vital role in explaining the effect of employee representation on individual and firm‐level outcomes. However, the fairness argument has not been scrutinized in empirical studies yet. Using German longitudinal linked employer‐employee data, we show that particularly central collective bargaining agreements have a positive impact on employees' fairness perceptions, while firm‐level agreements have a lower impact and workplace representation via works councils has an insignificant to negative impact on employees' fairness perceptions. In addition, we demonstrate that higher individual fairness perceptions resulting from central bargaining contribute to the productivity premium at the firm‐level.