The Light and Shadow of LMX: The Dynamics of Differentiation and Discrimination

[Purpose]This study aims to resolve the conceptual ambiguity that has long surrounded the literature on leader–member exchange(LMX) differentiation. Specifically, we distinguish between competence-based differentiation and attribute-based discrimination to explain why previous studies on LMX differentiation have yielded inconsistent findings regarding team outcomes. [Methodology] Building on LMX theory, social categorization theory, and stigma theory, we conduct a conceptual review of prior LMX differentiation studies to identify sources of inconsistency. From this review, we develop a refined conceptual framework that distinguishes competence-based LMX differentiation (rooted in members’ performance and organizational citizenship behavior) from attribute-based LMX discrimination (rooted in characteristics such as race or gender). We further propose a set of propositions that specify the distinct antecedents, underlying processes (role-making versus stigma), and team-level consequences of these two constructs. [Findings]Our framework suggests that competence-based LMX differentiation is generally perceived as legitimate and fair, thereby fostering a stronger justice climate and enhancing team performance. In contrast, attribute-based LMX discrimination is perceived as biased and unfair, undermining justice climate and ultimately weakening team performance. Justice climate emerges as the central mediating mechanism that explains these divergent effects and clarifies why prior research has produced inconsistent results. [Implications]The study contributes to LMX, workplace discrimination, and justice climate literatures by offering conceptual clarity and integrating cross-disciplinary insights. Practically, it highlights the importance of leader training, bias-reduction initiatives, and organizational systems that enhance fairness and inclusivity to promote effective team functioning.