A curvilinear relationship between LMX differentiation and group performance

The Leader-Member Exchange (LMX) literature has established that leaders form dyadic relationships with followers that differ in quality. This study examined whether LMX differentiation within a group (within-group variation in LMX quality) positively or negatively affects group performance. We contend that the relationship between LMX differentiation and group performance resembles an inverted ‘U’ shape. Data from 558 employees working in 75 workgroups of three organizations in China supported our hypothesis that there is an optimal level of LMX differentiation for group performance. Moreover, group LMX (within-group median LMX) moderated the curvilinear relationship such that group performance was highest when LMX differentiation was moderate when group LMX was high, while it was not related to LMX differentiation when group LMX was low. Theoretical contributions and managerial implications are discussed.