The direct and indirect impact of employee benefits on firm performance in China

Based upon social exchange theory, this paper investigates the relationship between employee benefits and firm performance by studying 324 firms of different ownership forms in China. The research proposes three benefit dimensions which are confirmed by the results of factor analysis. In addition, this research finds that a combined employee benefit system produces significant associations with overall firm performance and that the strength of the relationship is mediated by attitudinal and behavioral outcomes, which are generated from a psychological consequence of employees. This paper contributes to the knowledge on the value of employee benefits and has important implications for organizational practices.