Abstract
Although differentiated relationships among leaders and their followers are fundamental to Leader–Member Exchange (LMX) theory, research provides limited knowledge about whether employees’ responses to individual perceptions of LMX differentiation are uniform. In a field study, we examined whether individual‐level psychological empowerment buffers the negative relationship between perceived LMX differentiation and job satisfaction and found that the negative relationship is strongest under low employee psychological empowerment conditions, as compared to high psychological empowerment. Furthermore, in a multi‐wave field study and an experiment, we extended these initial findings by investigating employees’ perceptions of supervisory fairness as a mediator of this moderated relationship. We found that the indirect effect between perceived LMX differentiation and job satisfaction, through supervisory fairness perceptions, is strongest under low employee psychological empowerment, as compared to high psychological empowerment. Collectively, our findings showcase the importance of psychological empowerment as a tool for employees to use to counteract the negative effect of perceived differentiated contexts.