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Asia Pacific Journal of Human Resources (2015) 53, 104–123 doi:10.1111/1744-7941.12024

Employer brand management, organizational

prestige and employees’ word-of-mouth
referrals in Taiwan
Jin Feng Uen Sun Yat-sen University, Taiwan
David Ahlstrom Chinese University of Hong Kong, Hong Kong
Shuyuan Chen National United University, Taiwan
Julie Liu Sun Yat-sen University, Taiwan

Word-of-mouth is thought to be an effective external recruitment information source that organiza-

tions are not generally able to do much about. While a number of previous studies have suggested
the effectiveness of word-of-mouth recruitment, few have explored the specific factors enabling
organizations to manage it effectively. This study addresses the cross-level influence of employer
brand management (EBM) and organizational prestige on employees’ word-of-mouth referrals. A
total of 308 survey responses from senior managers and their employees were received from 33 firms
in Taiwan. All hypotheses were supported, which suggests significant relationships between EBM,
organizational prestige, and employees’ word-of-mouth referrals. The study results also suggest
that organizations are able to manage employee word-of-mouth referrals by enhancing EBM and
reinforcing employees’ perceived organizational prestige accordingly.

Keywords: brands, employees’ word-of-mouth referrals, employer brand management (EBM),

recruitment, reputation, Taiwan, talent

Key points
1 This study provides insight into understanding employees’ positive word-of-mouth
referrals and their effect.
2 This study suggests that organizations can effectively control employees’ word-of-
mouth referrals through EBM practices.
3 It also provides additional recruitment solutions and practical insights especially
under conditions of talent shortages, as found in many developing and newly devel-
oped economies today.

Correspondence: Dr Shuyuan Chen, Department of Business Management, National United

University, Miaoli, Taiwan; e-mail: salvia.chen@gmail.com
Accepted for publication 2 October 2013.

© 2013 Australian Human Resources Institute

 Jin Feng Uen et al.

Talent attraction and management are very important, particularly in the current climate
of managerial and technical talent shortages (Frenkel, Sanders and Bednall 2013; Kim,
Froese and Cox 2012; McDonnell, Collings and Burgess 2012). The shortage of skilled
workers in recent years has compelled firms to reconsider their strategies to attract and
manage talented employees (Collings and Mellahi 2009; The Economist 2013; Xiao and
Cooke 2012). In highly competitive labor markets, attracting and retaining superior talent
has become increasingly crucial to building sustainable competitive advantage (Collings,
Scullion and Vaiman 2011; Cooke 2011a; Uen, Ahlstrom, Chen and Tseng 2012) especially
with respect to those hard-to-fill positions (Baum and Kabst 2012; Lawler 2005; Ployhart
2006; Wilden and Lings 2010). Recruitment thus plays a key role in bringing needed talent
into the organization as well as ensuring that its human resources base remains deep and
sufficient (Pearson and Daff 2011; Scullion, Caligiuri and Collings 2008; Wilden and Lings
2010; Yu and Egri 2005).
To attract talent, organizations must put significant and sustained effort in recruit-
ment practices to build and develop efficient labor sources (Pearson and Daff 2011;
Townsend 2007; Yu and Egri 2005). The source through which potential applicants
might find employment information is one of the key factors that influence good
potential applicants’ decisions (Rynes and Cable 2003; Zottoli and Wanous 2000). Word-
of-mouth, as one external recruitment resource, has received attention recently as a
helpful tactic for enhancing organizational attractiveness in the early stages of recruit-
ment (Cable and Turban 2001; Collins and Stevens 2002; Van Hoye and Lievens 2005,
2007). An existing employee’s word-of-mouth referral is often treated as a knowledge-
able and influential reference from a fairly neutral source – one which a potential job
applicant might see as similar and credible (Zottoli and Wanous 2000). Encouraging the
existing employees to deliver credible and meaningful word-of-mouth communication
can thus be beneficial to organizational attractiveness. However, word-of-mouth has
the potential to deliver both positive and negative information, and is thought to not
be directly controllable by organizations (Cable and Turban 2001). This all suggests
that organizations’ proactive facilitation of existing and positive employees’ word-of-
mouth referrals is a crucial component affecting organizational attractiveness. Although
some recent research suggests the efficacy of word-of mouth in the marketing and
recruitment fields (e.g. de Matos and Rossi 2008; Martin et al. 2008), a number of theo-
retical and methodological issues remain to be studied and clarified (Van Hoye and
Lievens 2009).
Prior research on word-of-mouth focused mainly on individual characteristics such as
social ties, expertise, and personality as determinants (Collins and Stevens 2002; Van Hoye
and Lievens 2005, 2007, 2009). With respect to organizational practices that enhance posi-
tive word-of-mouth, research is fairly scarce. In the recruitment field, studies have sug-
gested the influence of employer brand on organizational image, reputation and
attractiveness (Knox and Freeman 2006; Lawler 2005; Wilden and Lings 2010). Employer
brand management (EBM) helps organizations deliver the set of distinctive images as a
prospective employer, which are not only manifest in the minds of potential employees to
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increase organizational attractiveness, but also allow existing employees to internalize

organizational values and increase employee identification (Lievens, Van Hoye and Anseel
2007; Maxwell and Knox 2009; Wilden and Lings 2010).
The present study contributes by drawing on conceptualizations of word-of-mouth in
the marketing literature to address effective word-of-mouth communication practices
with respect to the determinants and mechanism of positive word-of-mouth. Social iden-
tity theory (Ashforth and Mael 1989; Dutton and Dukerich 1991; Van Dick 2004) postu-
lates that employer brand practices facilitate cohesiveness between existing employees and
the organization, in terms of fostering a sense of organizational identity, satisfaction and
organizational commitment (Backhaus and Tikoo 2004; Lievens, Van Hoye and Anseel
2007; Maxwell and Knox 2009). These theories help to provide insight into understanding
employees’ positive word-of-mouth referral and its effect. On a practical level, insight into
the determinants of word-of-mouth can provide organizations with valuable suggestions
on how to effectively influence this important recruitment source. This study also contrib-
utes to research on recruitment by showing that EBM practices can be an important
organizational level approach to effectively managing employees’ word-of-mouth refer-
rals. This paper also offers practical contributions in providing additional recruitment
solutions especially under the conditions of talent shortage, as found in many developing
and newly developed economies today (Cooke 2011b; Doh, Tymon and Stumpf 2011;
McDonnell, Collings and Burgess 2012; The Economist 2013).
Considering the cross-level effect of EBM and organizational prestige on employees’
word-of-mouth referrals, we tested our hypotheses by employing hierarchical linear
model (HLM) to examine the cross-level influence in 33 Taiwanese firms. The sample
obtained in Taiwan is relevant for studying recruitment issues because the dramatic finan-
cial downturn in 2008 and major industrial relocations to mainland China have created
challenges for firms in Taiwan in attracting and retaining superior talent (Cooke 2011b;
Cooke and Saini 2012; Lee 2012).

Theory and hypotheses

Word-of-mouth
To identify potential applicants and to persuade them to apply for jobs, organizations use
an array of recruitment practices (Burt et al. 2010; Cable and Yu 2006; Collins and Han
2004; Collins and Stevens 2002; Pearson and Daff 2011). Word-of-mouth is suggested by
previous studies to be an efficient external recruitment information source to organiza-
tional attractiveness (Cable and Turban 2001; Collins and Stevens 2002; Van Hoye and
Lievens 2005, 2007). As a key concept in the domain of social influence also, word-of-
mouth is defined as an interpersonal communication, independent of the organization’s
marketing activities, its products or a specific job (Van Hoye and Lievens 2005). The
source through which potential applicants receive employment information is one of the
key factors that might influence their initial attraction to the organization (Rynes and
Cable 2003; Zottoli and Wanous 2000).
106 © 2013 Australian Human Resources Institute
 Jin Feng Uen et al.

Employees’ word-of-mouth referrals

Word-of-mouth is an efficient recruitment information source but it is not typically under
the direct control of the organization (Cable and Turban 2001), though organizations do
have some ability, such as through employee referrals, to manage it. Employee referrals are
restricted to information provided by an employee in the recruiting organization (Zottoli
and Wanous 2000). Earlier studies suggested that in an employee referral program, current
employees contact qualified people they know and encourage them to apply for a job at
their company (Lockwood and Ansaria 1999). When current employees provide word-of-
mouth referrals about their company, they will tend to report positive information. Based
on the definition of word-of-mouth and the nature of employees’ referrals, we defined
employees’ word-of-mouth referrals as employees referring positive information, recom-
mending the organization to others. Previous research has demonstrated that employee
referrals have a positive effect on pre-hire recruitment outcomes such as the quantity and
quality of the applicant pool and on post-hire outcomes such as job satisfaction, job per-
formance, and (reduced) turnover (Breaugh and Starke 2000; Collins and Han 2004; Saks
2005; Zottoli and Wanous 2000). Current employees’ word-of-mouth referrals, in terms of
positive and reliable information regarding the organization and the job, can serve as one
helpful recruitment tactic for enhancing organizational attractiveness in the early stages of
recruitment (Cable and Turban 2001; Collins and Stevens 2002; Van Hoye and Lievens
2005, 2007). In this study, we focus specifically on employee word-of-mouth referral
rather than on more general word-of-mouth and other secondhand information.

Employer brand management

The concept of brand, with its origins in marketing research, is a creation of an impression
or image through a process to change or reinforce what people say or believe (Campbell
2002; Wilden and Lings 2010). In the context of employer marketing, the employer brand
is to be understood as the set of distinctive images of a prospective employer which are
manifest in the minds of potential employees (Fombrun and Shanley 1990; Van Hoye and
Lievens 2009). It allows the organization an opportunity to distinguish itself from com-
petitors and to develop a recognizable reputation identity through practices that are per-
ceived as desirable to employees and the public (Fombrun and Shanley 1990; Love and
Singh 2011).
Employer brand management holds that organizations build and manage their brand
as an employer to maximize salience to both potential and existing employees. Earlier
studies suggested that employer branding can help an organization attract, retain and
motivate those employees who deliver the company brand promise (Uncles and Moroko
2005). To more fully understand EBM practices, it is important to characterize employer
brand. Past studies suggested that employer brand should reveal the true image of the
organization, which differs from competing employers, and attract the target audiences
(Ambler and Barrow 1996; Backhaus and Tikoo 2004). A few scholars have also suggested
that the components of employer knowledge such as employer familiarity, reputation and
image are critical for employer brand equity and will have an influence on applications
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and job choice decisions (Cable and Turban 2001; Collins 2007). Those employer brand
characteristics are related to different early recruitment practices (Cable and Yu 2006;
Collins and Stevens 2002). For example, employer familiarity and reputation both can
help create favorable perceptions of the company’s reputation as an employer to attract
potential applicants (Cable and Turban 2001, 2003; Collins and Han 2004). Employer
image will influence beliefs regarding the company as a whole, the attributes of the job
itself, and characteristics of people within the company so as to distinguish itself from
other competing employers (Rynes, Bretz and Gerhart 1991). Therefore, based on the
employer branding and the related characteristics of employer brand, we defined EBM as
organizational practices facilitating employer familiarity, reputation and image to attract
prospective employees and existing employees.
The importance of employer brand is shown in a number of studies at both the stra-
tegic and the human resources levels (Fombrun and Shanley 1990; Lawler 2005). For
example, previous studies found a positive effect of employer branding on organizational
attractiveness for prospective employees (Knox and Freeman 2006; Wilden and Lings
2010). One line of research further suggests that the employer brand not only influences
organizational attraction for prospective employees but also helps existing employees
internalize organizational values and build employee identification (Lievens, Van Hoye
and Anseel 2007; Maxwell and Knox 2009). The paradigm shift of employer brand implies
that employer brand can extend its influence from the initial organizational attraction to
influencing existing employees. EBM social identity theory (Joo and McLean 2006) is
helpful in explaining the link between EBM and employees’ organizational identity. Social
identity theory is based on the notion that people place themselves into social categories
based on various factors such as the organization they work for and the relevant influences
on individual self-concept (Joo and McLean 2006). As social identify theory implies,
the more positively existing employees perceive the employer brand, the more likely
they would become part of the collective membership with the organization based on the
reinforced sense of self-image that this membership promises (Backhaus and Tikoo 2004).
The existing employees with high level of identity show higher job satisfaction, organiza-
tional commitment, and motivation (Ngo et al. 2013) as well as extra-role performance
(Podsakoff et al. 2000; Riketta 2005; Van Dick 2004). Marketing research suggested that
consumers spread more positive word-of-mouth when they have high product identifica-
tion and commitment (Brown et al. 2005). In a similar vein, when organizations imple-
ment EBM so as to reinforce existing employees’ identification, existing employees tend to
have more positive word-of mouth referrals about the organization. Accordingly we
hypothesize,
Hypothesis 1: Organizations’ EBM positively relates to existing employees’ word-of-
mouth referrals.
Organizational prestige
Organizational prestige concerns existing employees’ shared perception of how the
outside world views their organization (Bartels et al. 2007). The more positively employees
108 © 2013 Australian Human Resources Institute
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think that the status and prestige of their organization is viewed by the outside world, the
more cohesive they are towards their organization and the stronger they identify with it.
Studies have suggested the positive influence of individual perception of organizational
prestige that strengthens employees’ organization identification and employee self-esteem
(Bergami and Bagozzi 2000; Carmeli 2005; Carmeli and Freund 2002; Smidts, Pruyn and
van Riel 2001).
Perceived organizational prestige is generally treated as an individual-level variable
that concerns individuals’ interpretations and assessments of a firm’s prestige based on
their own exposure to information about the organization (Smidts, Pruyn and van Riel
2001). However, employees structured into an organization experience the same events
and therefore develop similar perceptions (Payne and Pugh 1976). Social information pro-
cessing theory also holds that individuals in social contexts use information gathered from
others to form judgments about organizational practices, values, and norms (Salancik and
Pfeffer 1978). The employees’ shared perceived organization prestige therefore shapes
the solid image of the organization and forms a strong organizational climate influencing
the members’ attitudes and behaviors. Smidts and colleagues (2001) also suggested that
organizational prestige should be treated as an organizational-level variable when
members appear to be homogenous in their perception of it. In this vein, we manipulated
organizational prestige as an organization-level variable in this study to examine its pos-
sible impacts on employees. We first test the congruence of the data from the same sample
companies and then aggregate the data appropriately from individual level to organization
level. The details are addressed in the methods and results sections of this paper.
Dutton and Dukerich (1991) suggested that individual perceived organizational pres-
tige may result from various sources of information, such as the opinions of reference
groups, word-of-mouth, publicity, external company-controlled information, and even
internal communication about how the company is perceived by outsiders. When organ-
izations implement EBM, they are communicating employer knowledge information
including employer familiarity, reputation and image (Cable and Turban 2001; Collins
2007). The EBM information can be regarded as an important source of employees’ per-
ceived organizational prestige because it helps create an employer’s favorable reputation
(Cable and Turban 2001, 2003; Collins and Han 2004) and thus deliver beliefs regarding
the company as a whole, the attributes of the job itself, and characteristics of people
within the company (Rynes Bretz and Gerhart 1991). We therefore hypothesize that an
organization can increase its organizational prestige by implementing EBM. Accordingly,
Hypothesis 2: EBM is positively related to organizational prestige.
A number of studies have indicated that individual perceived organizational prestige
influences employees’ organizational identification. As organizational members see their
organization regarded as more respected or prestigious by important outsiders, the greater
the potential increase in organizational members’ self-esteem through organizational
identification (Bhattacharya, Rao and Glynn 1995; Fisher and Wakefield 1998). In
other words, more positive organizational prestige can increase organizational members’
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identification. Social identity theory argued that the existing employees are more likely to
engage in word-of-mouth referrals if they perceive more positive organizational prestige
which reinforces their organizational identification. We, therefore, hypothesize,
Hypothesis 3: Organizational prestige positively relates to employees’ word-of-
mouth referrals.

Mediation effects of organizational prestige

Employer brand is also suggested to influence outsiders’ (i.e. potential applicants) per-
ceived image (Knox and Freeman 2006; Lawler 2005; Wilden and Lings 2010). While man-
aging employer brand creates an organizational image in public (Ahlstrom, Bruton and
Yeh 2008), it also delivers the same unique value proposition to existing employees
(Caplan 2004), which, in turn, strengthens employees’ identity and fosters organizational
prestige and further facilitates employees’ positive word-of-mouth. referrals Social identity
theory postulates that both EBM and organizational prestige positively associate with
existing employees’ word-of-mouth referrals through reinforcing employees’ organiza-
tional identification. In sum, EBM positively influences employees’ word-of-mouth refer-
rals through the mediation effect of organizational prestige. Therefore we hypothesize,
Hypothesis 4: Organizational prestige mediates the relationship of EBM and existing
employees’ word-of-mouth referrals.

Methods
Research design
This study focuses on the influence of EBM on employees regarding the relationship
between EBM, organization prestige and employees’ word-of-mouth referrals as well
as the mediating effect of organization prestige. EBM and organization prestige are
organization-level variables and employees’ word-of-mouth referral is an individual-level
variable in this study. Therefore, we discuss the cross-level influence of EBM and organiza-
tion prestige on employees’ word-of-mouth referrals as illustrated in Figure 1.

Organizational Employer
brand Organizational
level prestige
management

Individual
Employees’
level
WOM referrals

Figure 1 Research framework

110 © 2013 Australian Human Resources Institute
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Participants and procedure

In order to understand the EBM, organization prestige and employees’ word-of-mouth
referrals in companies, we invited one HR senior manager and ten existing employees in
each sample firm to fill out the questionnaires in this study. The participating companies
in our sample are small to medium enterprises (SMEs) in manufacturing and service
industries in Taiwan since SMEs are the major enterprise type in Taiwan (97.77%) (CLA
2012). The participant qualification was prescreened based on the selection criteria to par-
ticipate the survey. HR senior managers were selected from those who have been in an HR
management position for at least five years in their companies. The employee participants
were selected from those who have been working in their firms for at least three years. The
HR department provided the list of qualified employees and we picked ten employees
randomly from the list and asked HR to help contact those ten employees. HR senior
managers were invited to fill out the EBM survey and existing employees were invited to
fill out the organization prestige and employees’ word-of-mouth referrals survey to pair a
dyad sample for a company.
The survey package included one HR survey and ten employee surveys for each
company. The survey packages were distributed in 2011 to 42 companies in Taiwan
divided evenly between the manufacturing and service industries. Thirty-five HR surveys
and 316 employee surveys, with 3 to 10 employees’ cases in each company, were returned.
In order to develop the appropriate fixed and random parameter estimates in cross-level
research design, Kreft and De Leeuw (1998) suggested that 30 groups is the smallest
acceptable number and a group size of five was suggested as the lowest level (Maas and
Hox 2005). We deleted two company cases, one which had an invalid HR senior manager
and one which did not have the suggested minimum group size of five, giving a final valid
sample of 33 organizational cases (HR senior manager samples) and 308 individual cases
(employee samples) with groups ranging from 5 to 10 employee cases. The response rate
was 79% for HR senior managers’ samples and 73% for employees’ samples.
Of the sample companies, 56% are listed or over the counter companies, 30% are tra-
ditional manufacturers, 27% high-tech manufacturers, and the remainder in service
industries (including high-tech services, financial services and other services).
Measures
EBM practices
The EBM practices measurement was developed based on Collins’ (2007) 16-item
Employer knowledge scale. The original items were developed based on job seekers’ per-
spectives to understand employer familiarity, reputation and image. The items were
revised to be more from a management perspective to measure the EBM practices that
employers manage employer brand from employer familiarity, reputation and image. The
sample items are: ‘My company puts a lot of effort to increase company familiarity;’ ‘My
company tries hard to improve company reputation in public’ and ‘My company provides
above average salary’. The Cronbach’s alpha is 0.79, which shows high internal consistency.
We also ran a confirmatory factor analysis (CFA) to test the factor structure and construct
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validity of the six EBM practices represented by our items. This CFA (n = 309) had a
model chi-square of 33.71 (df = 9; CFI = 0.96, GFI = 0.97; RMSEA = 0.06, and
SRMR = 0.04). From these results, we concluded that the items were a reasonable measure
of EBM.

Organizational prestige
We adapted Mael and Ashforth’s (1992) organizational prestige scale which was devel-
oped for the school and alumni context. To apply this scale to organization studies, we
revised the wording from ‘our school’ to ‘our company’ and, where necessary, other
wording (i.e. people, alumnus) accordingly. In addition, the original items ‘A person
seeking to advance his career in (conference academia) should downplay his association
with (name of school),’ and ‘When other (conference schools) are recruiting new stu-
dents, they would not want students from (name of school)’ did not fit in organizational
context. Therefore, we selected out those two items and kept the other six items. The
sample items included ‘Colleagues in my company think highly of our company’, ‘It is
considered prestigious in our community to be an organization member.’ The Cronbach’s
alpha of the six selected items is 0.86, which shows high internal consistency. We also ran
a confirmatory factor analysis (CFA) to test the factor structure and construct validity of
the six organizational prestige represented by our items. This CFA (n = 309) had a model
chi-square of 39.66 (df = 9; CFI = 0.98, GFI = 0.96; RMSEA = 0.06, and SRMR = 0.03).
From these results, we concluded that the items were a reasonably valid measure of
organizational prestige.

Employees’ word-of-mouth referrals

We adapted Srinivasan, Anderson and Ponnavolu’s (2002) four-item word-of-mouth scale
which was originally developed for an e-commerce context. To apply to organizational
studies, we revised the wording of ‘website’ to ‘my company’. A sample item is ‘I say posi-
tive things about this company to other people.’ The Cronbach’s alpha is 0.85, which
shows high internal consistency. We also ran a confirmatory factor analysis (CFA) to test
the factor structure and construct validity of the six organizational prestige represented by
our items. This CFA (n = 309) had a model chi-square of 4.59 (df = 2; CFI = 0.99,
GFI = 0.99; RMSEA = 0.06, and SRMR = 0.02). From these results, we concluded that the
items were reasonable measure of employees’ word-of-mouth referrals.1
In addition, we further examined the discriminant validity between each of the two
variables. The result indicated that, compared to the three-factor model (χ2 = 205016***,
df = 101, CFI = 0.97, GFI = 0.92, RMSEA = 0.005), the constrained model 1 with fixed cor-
relation coefficient to 1 between EBM and organizational prestige (χ2 = 982.50***,
df = 102, CFI = 0.83, IFI = 0.72, RMSEA = 0.017) has a significant change in the chi-square
value and supports significant discriminate validity between factors (Δχ2 ⬎ 3.84)
(Anderson and Gerbing 1988). All comparison model results are shown in Table 1. The
results suggested that the three measurement scales have appropriate construct validity
and discriminant validity.
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Table 1 CFA results construct validity

Scale df χ2 GFI CFI RMSEA

Three-factor model 101 205.16 .92 .97 .06

Constrained model 1(EBM vs Organizational prestige) 102 982.50 .72 .83 .17
Constrained model 2(EBM vs WOM) 102 846.62 .74 .84 .16
Constrained model 3(Organizational prestige vs WOM) 102 613.59 .80 .90 .13

Control variables
As company size and ownership style may influence the EBM and existing employees’
years of service might affect their intention to make word-of-mouth referrals, we included
company size (above 200 vs others), which was coded ‘1’ for above 200 headcounts and ‘0’
for others, and ownership style (local vs foreign owned), which was coded ‘1’ for local
owned and ‘0’ for foreign owned at the organization level. Those two variables were
treated as dummy variables for further analysis. The existing employees’ years of service
was selected at the individual level as a control variable.
All survey items were measured using a 5-point Likert scale ranging from 1 (‘very
strongly disagree’) to 5 (‘very strongly agree’). As this study focuses on the cross-level
influence of EBM and organizational prestige on the existing employees’ word-of-mouth
referrals, the data regarding organizational prestige were collected on an individual level.
Therefore, data aggregation was necessary to develop organizational-level variables for
organizational prestige. To further justify aggregation of the individual-level data, we
checked the viability of the group-level variables of organizational prestige by examining
the within-group agreement (Rwg) (James, Demaree and Wolf 1993), intraclass correlation
(ICC(1)) and reliability of the mean (ICC(2)). We computed Rwg values for organizational
prestige and obtained median values of 0.96 which ranged from 0.9 to 0.99, meeting the
acceptable level of 0.70. In addition, we obtained the ICC(1) and ICC(2) values: the results
are 0.57 and 0.83. Both ICC(1) values and ICC(2) values met the acceptance level of 0.12
(James 1982) and 0.60 (Glick 1985). We concluded that aggregation was justified for these
variables and thus 33 organization-level and 308 final valid individual-level samples for
further analysis were included.

Results
Descriptive statistics and correlations
The means, standard deviations, and correlations for all variables are shown in Table 2.
Because EBM, organizational prestige and employees’ word-of-mouth referrals are consid-
ered to be variables of different levels, we utilized hierarchical linear modeling (HLM)
(Raudenbush and Bryk 2002) for analysis. All variables are entered into HLM equations by
grand-mean centered computation.
The hypotheses predicted that EBM and organizational prestige would significantly
relate to employees’ word-of-mouth referrals. In order to test the hypotheses, we firstly
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Table 2 Descriptive statistics and correlations

Mean SD 1 2 3 4 5

Organization level
1 Company size .91 .29
2 Ownership .73 .45 −.19
3 EBM 3.70 .50 .10 −.19
4 Organizational prestige 3.67 .38 .12 −.02 .43*
Individual level
5 Year of service 1.56 .88
6 Employees’ WOM referrals 3.77 .63 .09
* p ⬍ 0.05.

computed the between-group variance in employees’ word-of-mouth referrals. Using

HLM, we estimated a null model to test the significance level of employees’ word-of-
mouth referrals. (τ00 = 0.06, p ⬍ 0.001), and the ICC(1) was 0.15, which met the accep-
tance level of 0.12 (James 1982), indicating that appropriate variance in employees’
word-of-mouth referrals existed between-group.

EBM, organizational prestige and employees’ word-of-mouth referrals

The null model test results suggested that employees’ word-of-mouth (WOM) referrals
was showed to have significance variance across different companies f. The intercept-as-
outcome model will further assess whether this variance is significantly related to the EBM
and organizational prestige from each company. The HLM model would take the follow-
ing form:
HLM model 1 (EBM)
Level-1: Employees’ WOM referrals ij = β0j + β1j(year of service) + rij
Level-2: β0j = γ00 + γ01 (company size) + γ02 (ownership) + γ03 (EBMj) + U0j
β1j = γ 10 + U1j

HLM model 2 (Organizational prestige)

Level-1: Employees’ WOM referrals ij = β0j + β1j(year of service) + rij
Level-2: β0j = γ00 + γ01 (company size) + γ02 (ownership) + γ04 (organizational
prestigej) + U0j
β1j = γ 10 + U1j

The intercept-as-outcome model in model 1 of Table 3 showed that EBM did have a
significant positive relationship with employees’ word-of-mouth referrals (γ03 = 0.16,
t = 2.17, p ⬍ 0.05). Therefore, hypothesis 1 was supported. In addition, results in
model 2 of Table 2 also showed that organizational prestige had a significant and positive
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Table 3 Results of cross-level analysis of effects of EBM and organizational prestige on employees’
referral word-of-mouth
Variables Employees’ word-of-mouth referrals

Model 1 Model 2 Model 3

Organizational level
Intercept γ00 3.78 3.77 3.77
Company size γ01 .09 .02 .02
Ownership γ02 .05 .03 .03
EBM γ03 .16* .01
Organizational prestige γ04 .56*** .56***
Individual level
Year of service γ10 .07 .05 .05
σ2 .33 .33 .33
τ00 .06 .02 .02
* p ⬍ 0.05 *** p ⬍ 0.001.

Table 4 Regression analyses of EBM and organizational prestige

Organizational prestige

Model 1 Model 2

Control variables
Company size .12 .09
Ownership .004 .09
EBM .43*
F .21 2.32
R2 .01 .19
* p ⬍ 0.05.

relationship with employees’ word-of-mouth referrals (γ04 = 0.56, t = 5.02, p ⬍ 0.001), so

hypothesis 3 was also supported.
We employed hierarchical regression to test hypothesis 2. The result (see Table 4)
indicated that EBM did positively relate to organizational prestige (β = 0.43, t = 2.54,
p ⬍ 0.05); hypothesis 2 was accordingly supported.

Mediating effect of organizational prestige

To examine the mediation effect of organizational prestige, we followed Baron and
Kenny’s (1986) suggestions to implement mediation effect analysis. The result in model
3 of Table 3 showed that the effect of EBM on employees’ word-of-mouth referrals
significantly decreased (β = 0.01, t = 0.14, ns) which indicates a strong mediation effect of
organizational prestige. We further employed Preacher, Zyphur and Zhang’s (2010)
suggestions to estimate indirect effects in multilevel mediation models for approximate
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significance tests for the indirect effect of the higher level independent variable on the
lower level dependent variable via the higher level mediator. The results indicated that
organizational prestige has a mediation effect (confidence interval, 0.25∼0.44) between the
relationship of EBM and employees’ word-of-mouth referrals.

Discussion
Contributions
In identifying and testing key organizational level determinants leading to employees’
word-of-mouth referrals, this study makes three main contributions. In terms of theory,
we enrich word-of-mouth studies in identifying EBM as the important organizational
level antecedent of employees’ word-of-mouth referrals EBM to fill out the gap in earlier
studies of word-of-mouth which mainly emphasized determinants of individual charac-
teristics (Cable and Turban 2001; Van Hoye and Lievens 2005, 2007). This study also con-
tributes to our understanding of EBM that can manage positive word-of-mouth referrals
more effectively. The results further identified the importance of EBM which enhances
our understanding of its potential influence in recruitment issues (e.g. Li, Ahlstrom and
Ashkanasy 2010).
In addition, this study contributes by identifying organizational prestige as a crucial
mediator between EBM practices and word-of-mouth. The results add new knowledge
regarding the mechanism of employees’ organizational prestige which is fostered by strong
organizational identity connecting the relationship between EBM and word-of-mouth.
Employer brand was argued to influence outsiders’ (i.e. potential applicants) image in past
studies (Knox and Freeman 2006; Lawler 2005; Wilden and Lings 2010). The results
further suggested that effective EBM can create an organizational image in public and also
deliver the same unique value proposition to employees (Caplan 2004), which in turn
strengthens employees’ identity and fosters organizational prestige and lead to further
positive word-of-mouth referrals.
In terms of empirical contribution, by collecting survey data from 308 individual
samples of 33 companies in two of Taiwan’s main industries, we provide additional
empirical evidence to support the cross-level influence of EBM and organizational pres-
tige significantly improving employees’ word-of-mouth referrals. With all hypotheses sup-
ported, the results indicate that improving EBM and increasing organizational prestige
may positively increase the opportunities for employees’ word-of-mouth referrals. The
study also contributes empirically by studying recruitment/HR management issues in a
range of organizations in Taiwan. Although the shortage of skilled workforce is a global
issue, the dramatic financial downturn in 2008 and major industries moving over to
mainland China made recruitment even more difficult. The fast economic development
and internationalization of Chinese firms in recent years has attracted much overseas
talent to China and other parts of East Asia (Cooke 2011a, 2011b; Cooke and Saini 2012).
Employers in Taiwan that fail to provide competitive compensation packages compared to
mainland China or other parts of Asia will face problems in recruiting needed top-flight
116 © 2013 Australian Human Resources Institute
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employees. Our research suggests that EBM practices can help solve in this problem by
directly influencing current employees’ positive word-of-mouth referrals. The findings of
our study further reinforce research within social influence regarding the value of third-
party (perceived) neutral sources of information in providing a balanced view and
enhancing the source’s credibility, authority, and subsequent influence on the receiver of
the information (Cialdini et al. 2006; Dunbar and Ahlstrom 1995).
In terms of contributions to practice, we suggest effective strategies that organizations
can employ to influence positive word-of-mouth referrals. The organization can have
direct influence on employees’ word-of-mouth referrals by employing EBM practices. In
addition, through EBM practices, organizations not only increase the organizational
attractiveness but also enhance the existing employees’ identification (cf. Lievens, Van
Hoye and Anseel 2007; Maxwell and Knox 2009). Moreover, fostering positive organiza-
tional prestige through strong identification of organizations, employees tend to make
word-of-mouth referrals to others.
This study also provides practical suggestions to organizations to manage effective
and meaningful employee word-of-mouth referrals via proactive EBM. The results
suggest that organizations should place more effort on managing employer brand. This
can help to create a value proposition delivered both to existing employees and the
public while further increasing the cohesiveness of employees to deliver word-of-mouth
referrals.

Limitations and future research

Certain limitations and avenues for future research should be noted. First, a moderately
sized sample resulted from the strict sample selection criteria. However, the hypotheses
supported in this study still have significant implications with substantive effects. In addi-
tion, the sample was collected in Taiwan and organizations in Taiwan have recently been
facing difficult talent recruitment issues. Lee (2012) indicated that the organizations in
mainland China have become increasingly attractive as the economy there develops and
foreign investment continues to come in. In such a case, recruitment issues are crucial in
the intensely competitive labor market and this study provides insight into recruitment-
related issues in ethnic Chinese communities in that region. Future research can be con-
ducted in the major developed cities in China (e.g. Beijing, Shanghai) to further advance
our understanding of word-of-mouth as a key recruitment source, especially in societies
where personal relations and informal communication are particularly crucial.
In addition, this study mainly focused on cross-level influence of EBM practices on
organizational prestige and employees’ word-of-mouth referrals. Though all hypotheses
were supported, this study might neglect other important outcome variables as well as
mediators and mechanism between EBM practices and employees’ word-of-mouth refer-
rals. Employees’ word-of-mouth referrals was suggested as a knowledgeable and influen-
tial reference from a fairly neutral source – one which a potential job applicant might see
as similar and credible (Cialdini et al. 2006; Zottoli and Wanous 2000). Future studies can
consider other individual-level outcome variables such as organizational identification
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Asia Pacific Journal of Human Resources 53

and job satisfaction and explore the possibility of other mediators as well. In addition, this
study did not consider any moderation effects in this study. Taking into account more
related individual outcome variables, mediators and moderators can provide a more holis-
tic view of EBM issues. Future research can seek to move beyond the demonstration of
main effects to an examination of how and why EBM practices are related to employees’
word-of-mouth referrals.
Lastly, this study proposes EBM as one of the effective strategies organizations can
utilize to promote employees’ word-of-mouth referrals. In addition to considering the
positive influence of EBM practices on spreading employees’ word-of-mouth referrals, the
possible downsides should be considered as well. For instance, the credibility of word-of-
mouth referrals might be undermined if potential applicants perceive employees as having
too strong a self-interest in promoting the organization and thus not seen as credible
sources (Wirtz and Chew 2002). Overall, organizations that are able to manage employee
word-of-mouth referrals can enhance their ability to recruit and retain employees, which
is particularly important given the ongoing competition for employee talent.

Note
1
The scales in this study are available from the authors upon request.

Jin Feng Uen (PhD, National Sun Yat-sen University) is a professor at National Sun Yat-sen Univer-
sity. His research interests include strategic human resource management, management in high-tech
industry, and HR role’s transformation in an organization. He has published over 40 peer-reviewed
articles in various international journals.

David Ahlstrom (PhD, New York University) is a professor at the Chinese University of Hong Kong.
After having spent several years in SMEs and start-ups, he moved to academia. His research interests
include management in Asia, entrepreneurship and innovation, and management history. He has
published over 80 peer-reviewed articles in a range of management and business journals. He also
co-authored International management: Strategy and Culture in the emerging world, and recently
stepped down as editor-in-chief of Asia Pacific Journal of Management.

Shuyuan Chen (PhD, National Sun Yat-sen University) is currently an assistant professor at Depart-
ment of Business Management of National United University in Taiwan. Her research interests
include HR roles and influence, HR strategic participation, HR power, strategic talent management,
and recruitment issues. She has published 4 peer-reviewed articles in management journals.

Julie Liu (MBA, National Sun Yat-sen University) currently works in ChinaTrust Commercial Bank
Head Office in Taipei, Taiwan.

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