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Chapter-16: International Negotiations

I.       What Makes International Negotiations Different?

A.    Environmental Context

1.      Political and Legal Pluralism

a.       Implications for the taxes that an organization pays, the labor codes or standards that it must meet, and the different codes of contract law and standards of enforcement.

b.      Political considerations may enhance or detract from the conduct of business negotiation in various countries at different times.

2.      International Economics

a.       According to Salacuse (1998), the risk is typically greater for the party who must pay in the other country’s currency.

b.      Any change in value of a currency (upward or downward) can significantly affect the value of the deal for both parties.

3.      Foreign Governments and Bureaucracies

a.       Firms in the United States are relatively free from government intervention, although some industries are more heavily regulated than others (e.g. power generation, defense) and some states have tougher environmental regulations than others.

4.      Instability

a.       Instability may take many forms, including:

(1)   A lack of resources that Americans commonly expect during business negotiations (paper, electricity, computers);

(2)   Shortages of other goods and services (food, reliable transportation, potable water);

(3)   Political instability (coups, sudden shifts in government policy, major currency revaluation).

5.      Ideology

a.       According to Salacuse (1988), Americans believe strongly in:

(1)   Individual rights.

(2)   The superiority of private investment.

(3)   The importance of making a profit in business.

6.      Culture

a.       According to Salacuse (1998), people in some cultures approach negotiations deductively (they move from the general to the specific) whereas people from other cultures are more inductive (they settle on a series of specific issues that become the area of general agreement).

7.      External stakeholders

a.       Phatak and Habib defined stakeholders to include:

(1)   Business associations

(2)   Labor unions

(3)   Embassies

(4)   Industry associations

B.     Immediate context

1.      Relative bargaining power

a.       Joint ventures have been the subject of a great deal of research on cross-border negotiations, and relative power has frequently been operationalized as the amount of equity (financial and other investment) that each side is willing to invest in the new venture (see Yan and Gray, 1994 for a review).

b.      The presumption is that the party who invests more equity has more power in the negotiation and therefore will have more influence on the negotiation process and outcome.

2.      Levels of conflict

a.       High-conflict situations, or conflicts that are ethnically, identity, or geographically based, will be more difficult to resolve.

3.      Relationship between negotiators

a.       Negotiators are part of the larger relationship between two parties.

4.      Desired outcomes

a.       Tangible and intangible factors will play a large role in determining the outcomes of cross-borders negotiations.

5.      Immediate stakeholders

a.       Immediate stakeholder negotiations include:

(1)   Managers

(2)   Employers

(3)   Boards of directors (Phatak and Habib, 1996).

b.      Skills, abilities, and international experience of the negotiators themselves clearly can have a large impact on the process and outcome of cross-border negotiations.

C.     How do we explain international negotiation outcomes?

1.      Studies of negotiations in very different contexts suggest that simple, one-variable arguments cannot explain conflicting international negotiation outcomes (see Mayer, 1992).

2.      Schoppa (1993) examined the results of five different discussions between Japan and the United States under the 1989 Structural Impediments Initiative, which focused on changing trade relations between the two countries.

a.       Schoppa found that the results of the five negotiations were quite different, and that no single variable could explain them.

b.      Schoppa also found that different negotiation strategies had different levels of effectiveness across the different issues.

3.      Derong and Faure’s (1995) studied the negotiation process between Chinese companies and the various levels of government in China.

a.       They found that a wide variety of different strategies and tactics were used in the negotiations within China, depending on the goals of the negotiators and the situation.

II.    Conceptualizing Culture and Negotiation

A.    Culture as learned behavior

1.      The first approach to understanding the effects of culture concentrates on documenting the systematic negotiation behavior of people in different cultures.

2.      Rather than focusing on why members of a given culture behave in certain ways, the pragmatic, nuts-and-bolts approach concentrates on creating a catalogue of behaviors that the foreign negotiator should expect when entering a host culture (Janosik, 1987).

B.     Culture as shared values

1.      The second approach concentrates on understanding the central values and norms of a culture and then building a model for how these norms and values influence negotiations within that culture (see Faure, 1999; Sebenuis, 2002a).

2.      Geert Hofstede (1980a, 1980b, 1989, 1991) conducted an extensive program of research on cultural dimensions in international business. Four dimensions could be used to describe the important differences among the cultures in the study: individualism/collectivism, power distance, career success-quality of life, and uncertainty avoidance.

a.       Individualism/Collectivism

(1)   This dimension describes the extent to which a society is organized around individuals or the group. 

(2)   Individualistic societies encourage their young to be independent and to look after themselves.

(3)   Collectivistic societies integrate individuals into cohesive groups that take responsibility for the welfare of each individual.

b.      Power distance

(1)   The power distance dimension describes “the extent to which the less powerful members of organizations and institutions (like the family) accept and expect that power is distributed unequally” (Hofstede, 1989).

(2)   Cultures with low power distance are more likely to spread the decision making throughout the organization, and while leaders are respected, it is also possible to question their decisions.

c.       Career success/quality of life

(1)   Cultures promoting career success were characterized by “the acquisition of money and things, and not caring for others, the quality of life, or people.”

(2)   Cultures promoting quality of life were characterized by concern for relationships and nurturing.

d.      Uncertainty avoidance

(1)   Uncertainty avoidance “indicates to what extent a culture programs its members to feel either uncomfortable or comfortable in unstructured situations.”

(2)   Edwin Hall (1959; 1976; Hall & Hall, 1990) specified a limited number of cultural values that could be used to understand differences between cultures, and two of them have been applied to international negotiations:

(i)     Communication context - Hall argued that cultures can be differentiated on the basis of whether they engage in low- or high-context communication.

(ii)   Time and space –refers to differences between cultures in how they relate to, manage, and schedule events.

e.       The culture-as-shared-value perspective provides explanations for why cross-cultural negotiations are difficult and have a tendency to break down.

C.     Culture as dialectic

1.      The third approach to using culture to understand global negotiation identified by Janosik (1987) recognizes that, among their different values, all cultures contain dimensions or tensions that are called dialectics.

2.      According to Janosik (1987), the culture-as-dialectic approach has advantages over the culture-as-shared-values approach because it can explain variations within cultures.

3.      Recent theoretical work by Gelfand and McCusker (2002) provides a similar way to examine the effects of culture on negotiation but through examining cultural metaphors rather than dialectics. Cultural negotiation metaphors help people understand things that happen in negotiation and “make sense” of them.

D.    Culture in context

1.      Proponents of the fourth approach to using culture to understand negotiations across borders recognize all behavior may be understood at many different levels simultaneously, and a social behavior as complex as negotiation is determined by many different factors, one of which is culture.

2.      Tinsley, Brett, Shapiro, and Okumura (2004) proposed cultural complexity theory in which they suggest that cultural values will have a direct effect on negotiations in some circumstances and a moderated effect in others.

3.      The culture-in-context models are becoming more and more complex in order to explain nuanced differences in cross-cultural negotiations, thus are becoming less useful for practitioners.

III.  The Influence of Culture on Negotiation: Managerial Perspectives

A.    Definition of negotiation

1.      The fundamental definition of negotiation, what is negotiable, and what occurs when we negotiate can differ greatly across cultures (see Ohanyan, 1999; Yook and Albert, 1998).

B.     Negotiation opportunity

1.      Cross-cultural negotiations will be influenced by the extent that negotiators in different cultures have fundamental agreement or disagreement about whether or not the situation is distributive or integrative.

C.     Selection of negotiators

1.      Different cultures weigh the criteria to select negotiators differently, leading to varying expectations about what is appropriate in different types of negotiations.

D.    Protocol

1.      Cultures differ in the degree to which protocol, or the formality of the relations between the two negotiating parties, is important.

E.     Communication

1.      Cultures influence how people communicate, both verbally and nonverbally. There are also differences in body language across cultures.

F.      Time Sensitivity

1.      Other cultures have quite different views about time.

2.      The opportunity for misunderstandings because of different perceptions of time is great during cross-cultural negotiations.

G.    Risk propensity

1.      Negotiators in risk-oriented cultures will be more willing to move early on a deal and will generally take more chances.

2.      Those in risk-avoiding cultures are more likely to seek further information and take a wait-and-see stance.

H.    Groups versus individuals

1.      The United States is very much an individual-oriented culture, where being independent and assertive is valued and praised.

2.      Group-oriented cultures, in contrast, favor the superiority of the group and see individual needs as second to the group’s needs.

I.       Nature of agreements

1.      Cultural differences in how to close an agreement and what exactly that agreement means can lead to confusion and misunderstandings.

J.       Emotionalism

1.      Culture appears to influence the extent to which negotiators display emotions (Salacuse, 1998). These emotions may be used as tactics, or they may be a natural response to positive and negative circumstances during the negotiation (see Kumar, 2004).

IV.  The Influence of Culture on Negotiation: Research Perspectives

A.    Negotiation outcomes

1.      Researchers initially explored the fundamental question of how culture influences negotiation outcomes. Two approaches were taken to explore this question.

a.       Intracultural - researchers compared the outcomes of the same simulated negotiation with negotiators from several different cultures who only negotiated with other negotiators from their own culture.

b.      Cross-cultural - researchers investigated this by comparing negotiation outcomes when negotiators negotiated with people from the same culture with outcomes when they negotiated with people from other cultures.

2.      Research has found, however, that negotiators in collectivist cultures are more likely to reach integrative outcomes than negotiators in individualist cultures.

a.       Research has found that negotiators in collectivist cultures are more likely to reach integrative outcomes than negotiators in individualist cultures (Lituchy, 1997, Arunachalam et al.. 1998).

b.      Brett, Adair, Lempereur, Okumura, Shihkirev, Tinsley, and Lytle (1998) compared intracultural negotiators in six different cultures (France, Russia, Japan, Hong Kong, Brazil, United States) and found differences in joint gains achieved.

3.      The other approach to exploring cultural effects on negotiation outcomes compared the negotiation outcomes of intracultural and cross cultural negotiations.

a.       Cross-cultural negotiations will result in poorer outcomes compared to intracultural negotiations, at least some of the time.

4.      Research suggests that culture does have an effect on negotiation outcomes, although it may not be direct, and it likely has an influence through differences in the negotiation process in different cultures.

5.      There is some evidence that crosscultural negotiations yield poorer outcomes than intracultural negotiations.

B.     Negotiation process

1.      Graham and his colleagues found significant differences in the negotiation strategies and tactics in the cultures they studied (also see Graham, Evenko, and Rajan, 1992)

2.      Cai (1998) demonstrated how individualism/collectivism influenced negotiation planning: Negotiators from a more collectivist culture (Taiwan) spent more time planning for longterm goals, while negotiators from a more individualistic culture (the United States) spent more time planning for short-term goals.

3.      Adair, Brett, Lempereur, Okumura, Shikhiriv, Tinsley, and Lytle (2004) found considerable difference in direct information sharing, with negotiators from the United States most likely to share information directly. In addition, they found that while U.S. and Japanese negotiators both maximized their joint gains, they took different paths to do so:

a.       direct information exchange

b.      indirect information exchange

4.      Adair (2003) found that culture led to different communication patterns in intracultural negotiations, with negotiators from low-context cultures tending to use direct communication while negotiators from high-context cultures used more indirect communication.

5.      The Rosette et al. (2004) study suggests that culture has an effect on the process of e-mail negotiations, which in turn appears to influence negotiation outcomes.

C.     Effects of culture on negotiator cognition

1.      Researchers are working to understand how culture influences the way that negotiators process information during negotiation and how this in turn influences negotiation processes and outcomes

a.       Gelfand and Realo (1999) found that accountability to a constituent influenced negotiators from individualistic and collectivistic cultures differently.

b.      Gelfand, Nishii, Holcombe, Dyer, Ohbuchi, and Fukuno (2001) suggests that there are some universal ways of framing conflict (e.g., compromise-win) but there are also significant culturally specific ways.

2.      Another way to explore the influence of culture on negotiator cognition is to examine the extent to which well-known cognitive effects identified in Western cultures occur in other cultures.

3.      Gelfand and Christakopoulou (1999) found that negotiators from an individualistic culture (the United States) were more susceptible to fixed-pie errors than were negotiators from a more collectivist culture.

D.    Effects of culture on negotiator ethics and tactics

1.      Researchers have recently turned their attention to examining ethics and negotiation tactics in cross-cultural negotiations by exploring the broad question of whether negotiators in different cultures have the same ethical evaluation of negotiation tactics.

E.     Effect of culture on conflict resolution

1.      Research findings suggest that culture has important effects on several aspects of negotiation, including planning, the negotiation process, information exchange, negotiator cognition, negotiator perceptions of ethical behavior, and preferences for conflict resolution.

V.    Culturally Responsive Negotiation Strategies

A.    Several factors suggest that negotiators should not make large modifications to their approach when negotiating cross-culturally, however:

1.      Negotiators may not be able to modify their approach effectively.  It takes years to understand another culture deeply, and negotiators typically do not have the time necessary to gain this understanding before beginning a negotiation.

2.      Even if negotiators can modify their approach effectively, it does not mean that this will translate automatically into a better negotiation outcome.

3.      Research suggests that negotiators may naturally negotiate differently when they are with people from their own culture than when they are with people from other cultures (Adler and Graham, 1989; Natlandsmyr and Rognes, 1995).

4.      Research by Francis (1991) suggests that moderate adaptation may be more effective than “acting as the Romans do.”

B.     Recent research findings have provided some specific advice about how to negotiate cross-culturally. Rubin and Sander (1991) suggests that during preparation, negotiators should concentrate on understanding three things:

1.      Their own biases, strengths, and weaknesses;

2.      The other negotiator as an individual;

3.      The other negotiator’s cultural context.

C.     Weiss’s (1994) culturally responsive strategies may be arranged into three groups, based on the level of familiarity (low, moderate, high) that a negotiator has with the other party’s culture. Within each group there are some strategies that the negotiator may use individually (unilateral strategies) and others that involve the participation of the other party ( joint strategies).

1.      Low familiarity

a.       Employ agents or advisers (unilateral strategy).

b.      Bring in a mediator (joint strategy).

c.       Induce the other party to use your approach (joint strategy).

2.      Moderate familiarity

a.       Adapt to the other party’s approach (unilateral strategy).

b.      Coordinate adjustment (joint strategy).

3.      High familiarity

a.       Embrace the other negotiator’s approach (unilateral strategy).

b.      Improvise an approach (joint strategy).

c.       Effect symphony (joint strategy).