Early work on leader-member exchange (LMX) theory suggested that leaders differentiating followers into in-groups and out-groups leads to superior group performance. However, research on LMX has almost exclusively studied individual outcomes as opposed to group outcomes. In addition, the notion of differentiation suggests that not all group members have high quality relationships with their leaders thereby violating rules surrounding experienced organizational justice. Thus, the purpose of this dissertation is to conceptualize and study LMX at the level of analysis at which it was initially conceptualized (i.e., the work group level), and to examine the effects of LMX level (i.e., mean in group members' LMX scores) and LMX strength (i.e., variance in group members' LMX scores, i.e., differentiation) on group performance (i.e., unit-level customer satisfaction) and group-level fairness perceptions (i.e., justice climates). Drawing on LMX, organizational justice, social comparison theory, and multilevel theory and research, I derived a number of testable hypotheses involving the relationship between LMX level and LMX strength on justice climates and group performance.

There were three major sets of findings regarding (1): the effects of LMX level, (2) the effects of LMX differentiation (later called LMX strength), (3) and the moderating roles of task interdependence and group size on the LMX strength to justice climates relationships. First, LMX level was positively related to justice climates; however, the relationship between LMX level and customer satisfaction was not significant. Second, as predicted, LMX strength was negatively related to justice climates, but, incongruent with the differentiation (strength) hypothesis of LMX theory, there was not a significant relationship between LMX strength and customer satisfaction. Third, consistent with the hypothesis, task interdependence moderated the relationship between LMX strength and justice climates such that justice climates were more favorable when strength was high and task interdependence was high. Collectively, these results suggest that having variability (i.e., differentiation) in the quality of relationships in a work group may have negative effects on justice climates, particularly when individuals must work interdependently; but a negligible direct effect on group performance. Theoretical and practical implications are discussed.