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Ethnic conflict is a defining characteristic of the post-Cold War era and is prevalent particularly in emerging economies, areas of increasing interest to multinational enterprises. Yet little is known about the international human resource management challenges arising from such societal context. Utilizing social identity theory, we propose that ethnic homophily perceptions in the workplace – an employee's assessment that colleagues prefer working with ethnically similar others – is a reflection of the societal context and can be detrimental to the organization if not managed appropriately. We investigate whether contact theory offers insights to manage such perceptions. Drawing on a sample of 550 managers in Sri Lanka during a period of protracted ethnic conflict, we found that employee sensitivity to ethnic conflict in the societal context is positively related to ethnic homophily perceptions in the workplace, and that both ethnic diversity in workgroups and quality of work relationships serve to reduce perceptions of ethnic homophily.
