IACM conference Montreal, 2006

The Role of Culture in the Negotiation Process

Marc-Antoine Vachon1 Universtité du Québec à Montréal

Terri R. Lituchy2

Concordia University

1 Marc-Antoine Vachon is a PhD student at Université du Québec à Montréal 2 Terri Lituchy is associate professor of management at John Molson School of Business of Concordia University. Adress correspondence to Terri R. Lituchy, Faculty of Commerce Administration, Concordia University, 1455 de Maisonneuve Boulevard West, Montreal, QC, Canada, H3G 1M8.

The Role of Culture in the Negotiation Process

This paper proposes a framework where the role of culture is examined throughout the negotiation process. The outcomes of cross-cultural negotiation tend to be distributive. Culture is a source of this problem. To be examined, the negotiation has to be separated in three phases: antecedent, concurrent and consequent. The role of culture differs throughout this process. It is explained by the presence of different dimensions having their proper role to play at each step: the preparation, the interaction, the agreement and the outcome. Nine cultural dimensions are included in the framework. Every link included in the negotiation process is discussed. Fifteen hypotheses are proposed to measure the influence of culture throughout the negotiation process. This paper proposes a new approach of the cultural distance, a useful way to consider culture in the preparation of negotiation and a useful set of cultural dimensions to evaluate and to adjust to during the interaction. The ultimate goal is clear: to help the managers reaching distributive outcomes in cross-cultural negotiation by improving the tools to deal with a different culture.

Introduction Finding business partners may be difficult. Finding business partners in

other countries may be even more difficult. In fact, it is often considered a long

term endeavour. Once a partner has been identified, the business negotiations

begin. Many studies have found that negotiations are made differently throughout

cultures (Adler & Graham, 1987; Clark, 1990; Lituchy, 1997; Lituchy & Dahl,

1993). Intra-national negotiations are less complex that international ones

(Graham & Andrews, 1987). Internationalization of firms may cause some

negotiation issues. The importance of culture in international negotiations is well

known (Gannon, 2004) and could be considered as a cause of problems as such

misinformation and misinterpretation (Copeland & Griggs, 1985; Tung 1982). The

purpose of this paper is to explicit the influence of culture throughout the different

parts of the negotiation process.

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Negotiation is considered as a “process by which a joint decision is made

by two or more parties” (Pruitt, 1981). Negotiations are needed for all types of

internationalization such as cross-national mergers, licensing agreements or

distribution (Graham, Mintu & Rodgers, 1994). To get reach an agreement,

partners must interact and make a joint decision that will be respected. The

outcome of negotiation has been a subject of interest for researchers. It could be

distributive or integrative, in other words, the former means a win-lose situation

and the latter a win-win situation. Lituchy (1997) examined the outcomes that

would be reached in negotiations between Japanese and Americans, two

different cultures. Her principal findings suggest that in cross-cultural context, if at

least a partner is oriented toward distributive outcomes, it is distributive outcomes

that will be reached. This should be considered seriously by managers from

Anglo cultures (e.g. Australia, Canada, UK, and USA) that are considered as

self-interested, competitive and aggressive (Hsu, 1983). Such attitudes might

slow down their global extension. To help managers in their negotiations, a better

understanding of culture’s influence is needed.

This influence has already been studied in some ways (Janosik, 1987;

Graham, 1985). But the role of culture has to be described in more details

(Lituchy, 1997). The objective of this paper is to generate a set of cultural

dimensions that helps to find the causes of cross-cultural negotiation problems.

Its focus will be mainly on business-to-business relationships. Even in B-to-B

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negotiations imply human interaction and stakes could be higher since

transactions are of greater values and of higher significance (Palmer, Lindgreen

& Vanhamme, 2005). Also, business partnerships, as they are ongoing

relationships (Dwyer, Schurr & Oh, 1987) imply necessarily “expected future

interactions” that can influence the level of cooperation (Marlowe & Doob, 1966).

Because of its complexity, its significance and its needs in identifying the

causes of cultural issues leading to negotiation problems, the inter-firm cross-

cultural relationship will be studied. This paper includes a literature review on

culture, negotiation and existing sets of dimensions. Then, constructs are defined

and the conceptual links with cultural dimensions are made. Finally, propositions

are presented, limitations debated and managerial implications discussed.

Culture

What is culture? This is a somewhat difficult question to answer.

Researchers do not agree on a general definition of it since over 150 plausible

ones had been reviewed in the 1950s (Kroeber & Kluckholn, 1952). In fact,

culture had been studied from fields including: anthropology, sociology and

psychology. Kluckholn (1951) has defined culture from a anthropological view. Its

well accepted definition is:

“Culture consists in patterned ways of thinking, feeling and reacting,

acquired and transmitted mainly by symbols, constituting the

distinctive achievements of human groups, including their

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embodiments in artefacts; the essential core of culture consists of

traditional (i.e., historically derived and selected) ideas and

especially their attached values.”

This definition is quite comprehensive; culture is composed of both values

and beliefs. According to Bond and Smith (1996), values “tap what is important”

and beliefs “what is true”. But this large spectre makes operationalization of

culture difficult. Hofstede (1980) defines culture as:

“…the collective programming of the mind which distinguishes the

members of one group or society or category or nation from

another.” Culture includes most essential systems of values.

Hofstede is following the direction of the Kluckholn’s pattern and highlight

the importance of values as a part of culture. He categorized them to create its

set of dimensions. With it, he has rated more than fifty countries to identify their

“cultural profile” and giving some cues to explain differences between them. But

one must be cautious using culture-level correlation to interpret individual

behavior (Kim, Triandis, Kagitcibasi, Choi & Yoon, 1994); the ecological fallacy.

This implies that culture must be measured at the individual level. This

measurement should not be only on values or beliefs because they are not

necessarily consistent with actions (Bochner, 1980). If it is an action that culture

is finally traduced, another definition of culture should be adopted. Poortinga

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(1992) assumed that “the same psychological processes are operating in all

humans independent of culture”. So, culture is a set of “shared constraints that

limit the behavior repertoire available to members of a certain…group”

(Poortinga, 1992). This definition is interesting because it introduces the behavior

as part of culture. As written earlier, culture can be beliefs, values and norms but

with this definition, it can be considered as shown through behaviors. This view

of culture is adopted by Bond & Smith (1996) and used in the present study.

Cross-Cultural Negotiation Cross-cultural negotiations had been studied with several approaches:

problem-solving approach (Graham et al, 1994), ethics (Godfrey, 1995)

behaviors in precise settings (Dittloff & Harris, 1996) or integrativeness of

outcomes (Lituchy, 1997). In a business-to-business relationship, all of these

topics are pertinent.

An interesting approach to these relationships is the one of

relationship marketing. Achrol (1997) defines relationship marketing as “the

establishment of long lasting relationships based on the structure of long-term

benefits and mutual affinity between buyer and seller”. In fact, relationship

marketing is quite related to the management of relationships. Generally, the

relationships are business-to-consumer or business-to-business oriented. The

cross-cultural focus of the paper makes the B-to-B more pertinent as this

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relationship seems more common in the internationalization process of a firm.

Many aspects of relationship marketing are connected to the concept of

negotiation. International B-to-B relationships are, in reality, almost always

initiated by people negotiating face-to-face (Graham et al, 1994). The relationship

is in fact a process recognized to have five stages (Heffernan, 2004): (1)Pre-

relationship stage (getting information on a potential partner and choose an

eventual partner); (2) Early interaction stage (the first contact where serious

negotiations take place on the style and structure of the relationship); (3)

Relationship growth stage (there is more interaction between the two parties and

the involvement in the relationship is higher); (4) Partnership stage (the

relationship is at its most mature stage and both parties have a high level of

experience in dealing with the other); and, (5) Relationship end stage (when

partners uncouple the bonds).

Because negotiations include “iterations of face-to-face negotiation

interactions initiated by parties” (Karrass, 1970) one can conclude that

negotiations really start at the second stage. At this stage the parties do not have

a high level of experience in dealing with each other and adaptation may be

required. Therefore, the six-step model of negotiation developed by Maddux

(1988) can be applied (Buttery & Leung, 1997): (1) Getting to know one another;

(2) Statement of goals and objectives; (3) Starting the process; (4) Expressions

of disagreement and conflict (not a test of power but an opportunity to reveal

what people need); (5) Reassessment and compromise; and (6) Agreement in

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principle or settlement. Culture can play a role in each of these negotiation steps

and may be a source of conflict if misunderstood. For example, already at the

first step, a North American manager may not care about creating some personal

bonds with its potential partner which is quite important for a South American

(O’Keefe and O’Keefe, 2004).

Another model has been developed for the particular setting of negotiation

between buyers and sellers. It has four basic elements according to Rinehart and

Page (1992): (1) Relationships between the two parties; (2) Personal influence

exerted by each party; (3) Their concession behaviour; and, (4) The outcome

from the negotiation.

These two models are not contradictory and can be used jointly. The

“steps” can be divided in three separate time periods as the literature suggests

(Graham et al., 1994): antecedent, concurrent and consequent. The antecedent

part refers to the pre-interaction phase, the preparation and the information

gathering. It is mostly focused on the parties’ characteristics and situational

constraints as independent variables (Rubin and Brown, 1975; Sawyer &

Guetzkow, 1965). The concurrent phase is the process of negotiation per se.

There is a true interaction between the parties. This is where negotiating

behaviors come into play (Graham, 1985); they act as mediators of the outcomes

following in the consequent phase (Greenhalgh, Neslin & Gilkey, 1985). This one

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refers mainly on the outcomes of the negotiation (Tung, 1988). They are

generally considered as distributive (win-lose) or integrative (win-win).

After having presented some views of the negotiation process and some

others of cultural dimensions, the actual approach must be explained. As

Graham et al. (1994), negotiation is viewed as an ongoing process on three

phases: antecedent, concurrent and consequent. In these phases, four steps are

salient. Presenting the negotiation process, the cultural dimensions chosen and

their different role is explained. These dimensions have been picked up from

Kluckholn and Strodtbeck (1961), Hall (1976), Hofstede (1980, 2001) and the

GLOBE group (House, Javidan, Hanges & Dorfman, 2002). One have been

developed inspired from Hofstede & Bond (1988). All researchers having

developed those sets are aware that other factors may exist. But as stated by

Gannon (2004), they “…are an excellent starting point for understanding cultures

and providing an overall perspective on cultural differences…”. That is why they

are used in this paper, to elaborate a framework that allows cultural

measurement in negotiations.

The antecedent phase comprises one step: the Preparation (Dwyer et al.,

1987; Maddux, 1988; Rinehart and Page Jr., 1992). Before the relationship, it is

suggested to get information on the potential partner. Not only focused on

business, this information must be related to culture too in a cross-cultural

context. This paper is focusing on the cultural aspect. The information must

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prepare the negotiator but not narrow his mind and facilitate false heuristics.

Caution has to be taken toward the information gathered. Four dimensions must

require its attention: Context, Facilitation, Gender Egalitarianism and Power

Distance. It is assumed here that these dimensions are less dependent of

individual differences within a culture. These dimensions would be more

homogeneous throughout the individuals of the culture. Then, by getting

information on these dimensions, the negotiator might be well prepared to meet

the other. Because their evaluation is made without having any contact with the

target (in a negotiation, it is common to employ the source and the target to

identify the partners), they are considered as coming from the source’s

knowledge instead of being absolute values of the reality.

From Hall (1976), Context (CON) refers to the level of information needed

for a good communication. A high level means that business information is

insufficient, personal information and a strong bonding are required. Facilitation

(FAC) is a variable developed inspired from Confucianism (Hofstede & Bond,

1988). It consists of doing favours and giving gifts to establish and maintain a

good relationship. A high level means that facilitating favours may be needed.

These two first dimensions will be present in the next phase to allow individual-

level evaluation. Gender Egalitarianism (GE) is the attitude toward gender as if

there is equality or not. A high level means that genders are considered as equal.

This dimension has been taken from GLOBE (House et al., 2002). Power

distance (PD) comes from GLOBE (House et al., 2002) and Hofstede (2001). It is

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the importance of dealing with a partner of the same hierarchical level. A high

level means it is important for a CEO to deal with another CEO. Gender

Egalitarianism and Power Distance are expected to be considered in the

antecedent phase only where the preparation is made. Managers must be

informed about those dimensions to avoid sending an inappropriate negotiator at

the table. Once it is done, those dimensions, as defined here, are not supposed

to interfere during the concurrent phase

The concurrent phase follows the antecedent phase. This is the

negotiation per se. It includes two steps: Interaction and Agreement. Interaction

can be defined as the physical meeting of the two partners where discussion

takes place. It is where culture plays its most direct role in the negotiation. That is

where most of chosen cultural dimensions (Assertiveness, Context, Facilitation,

Future Orientation Humane Orientation, Individualism, and Uncertainty

Avoidance) might moderate the Interaction. These dimensions can be measured

through the source’s perspective since they are shown through behavior or

transmitted during the communication. At this stage, dimensions are categorized

in two parts in regard to the influence of cultural distance on their effect. The

cultural distance is the difference between two cultures (Pierce, Hannon &

Wilson, 1995). This categorization is necessary because for some dimensions,

the cultural distance have no impact and for some others a difference is needed.

For example, if both parties are aggressive, the cultural distance is low but the

impact on Interaction will be highly negative. Other dimensions such as Context

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require a difference to generate a significant impact. That a party don’t need

personal communication is not good or bad per se. A negative effect will come

from the other party that wants personal communication. That is called cultural

distance.

These three first dimensions presented don’t need the cultural distance.

Assertiveness (ASS), from GLOBE (House et al., 2002), is the attitude of

aggressiveness and confrontation in negotiation (win-lose). A low level meaning

that a cooperative way is adopted (win-win). It refers to being task-oriented or

relationship-oriented. Individualism (IND) is a frequently used dimension

(Hofstede, 2001; House et al., 2002). Its signification here is the one developed

by Kluckholn and Strodtbeck (1961). It is acting in an individual manner. A low

level means that the partner is viewing the relationship as a whole (a group), is

identifying himself to it and considers the benefits of all before deciding. Humane

Orientation (HO) is being fair, generous and altruistic with people (GLOBE in

House et al., 2002). A low level means that the person is frigid and tough with

others. It refers to the humane contact during the encounter.

The following dimensions need a cultural distance to have a negative

impact. Context (CON) continues to be important at the concurrent phase.

Remaining the level of information needed for a good communication (Hall,

1976), the source can now judge at the individual-level the degree of importance

of communication for the target. Facilitation (FAC) is following the same logic.

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Still the importance of favors and gifts in relationships, the source can evaluate

its degree at the individual-level and must adapt or a negative climate could

emerge. Future Orientation (FO) is a new one in the process. Being future-

oriented is planning and investing in the future. A low level means that the

benefits must be at short-term or the relationship will be abandoned. Uncertainty

Avoidance (UA) (Hofstede, 2001, House et al, 2002) is the need to rely on rules

and procedures when dealing with risk. A low level means that a lack of structure

is tolerated.

These dimensions are moderating the Interaction between the source and

the target. This Interaction is mediating the third step of the process: the

Agreement. This step is where the final decision is made. Although it has positive

connotation, this decision includes the reassessment and the compromise as

seen in the literature (Maddux, 1988; Rinehart & Page, 1992) and may not be

seen as positive from both parties. It is assumed here that culture is not

influencing this step directly because the attitude toward compromise depends

on the interaction with the other. The attitude toward reassessment is considered

as influencing directly the final phase.

The consequent phase is the third and final phase. At this phase, the

Outcomes of negotiation, the fourth step, can be evaluated. Two categories of

outcomes are considered: business and relational. The business ones are

considered as distributive or integrative. Relational ones are not as easy to

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traduce quantitatively. But partners can evaluate if negotiation has fostered a

good climate in the relationship or if it has moved in a more negative way.

After having defined the conceptual framework and the constructs

composing it, propositions can be presented.

The antecedent is composed by the step called Preparation. As said earlier,

firms must gather information not only on business but also on cultural

characteristics of the foreign partner. This paper is focusing on this cultural

aspect. The most complete and accurate information the negotiator from the

source have, the more prepared he will be. The more prepared he is, the better

will be the Interaction as the parties meet:

P1: There is a positive relationship between the level of Preparation

and the positive climate during the Interaction.

At the concurrent phase, the Interaction takes place. Mediated by the level

of Preparation, this phase is considered as the most central one. That is where

culture will influence the most the entire process. When the parties meet

physically, a complex process is engaged. But one can assume that a good

climate in the interaction is better than a bad one. If a good climate is established

in the relationship, it is assumed that the Agreement step, where there is

reassessment and compromise, will be facilitated.

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P2: There is a positive relationship between the positive climate

during the Interaction and the facilitation of the Agreement.

The conditions of the Agreement are quite important to determine the nature

of the outcomes reached. Once it has been facilitated, the decision taken will

bring the consequent phase. At this phase, there are two kinds of Outcomes. The

business benefits are important and they are considered as distributive or

integrative. It is assumed here that a facilitated Agreement means that benefits

are satisfactory for both parties. But not only business outcomes matter because

it is well-known that relationships need time and resources to be developed.

Then, even if Business Outcomes may be unclear in some situations, Relational

Outcomes may justify the efforts deployed. This is called the relational capital.

P3: There is a positive relationship between the facilitation of

Agreement and the integrativeness of Business Outcomes.

P4: There is a positive relationship between the facilitation of

Agreement and the Relational Outcomes.

The second set of propositions implies the introduction of the cultural

dimensions in the framework. Preparation must be made at least (because other

cultural factors may have to be considered) on four dimensions. Facilitating this

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pre-interaction stage, the knowledge of the culture’s rating or general pattern on

Context, Facilitation, Gender Egalitarianism and Power Distance has a positive

impact on the level of Preparation.

P5: There is a positive relationship between knowledge of target’s

level of Context and the level of Preparation.

P6: There is a positive relationship between knowledge of target’s

level of Facilitation and the level of Preparation.

P7: There is a positive relationship between knowledge of target’s

level of Gender Egalitarianism and the level of Preparation.

P8: There is a positive relationship between knowledge of target’s

level of Power Distance and the level of Preparation.

The climate of the Interaction is moderated by many cultural dimensions. As

said earlier, two categories of dimensions are considered. The first category is

influencing directly the Interaction stage. Because Assertiveness means

confrontation, it is assumed that such an attitude might be avoided for a good

climate.

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P9: There is a negative relationship between Assertiveness and the

good climate in Interaction.

Humane Orientation, as being fair and altruistic, may be considered as a

facilitating agent in relationships. Human being is a social creature and reciprocal

behavior is part of the building of cross-cultural relationships (Zhu, Bhat and Nel ,

2005). One can consider that the generosity of one can be imitated and that it

encourages a good climate in negotiation.

P10: There is a positive relationship between Humane Orientation and

the good climate in Interaction.

The third dimension is Individualism. Even if it has been considered in much

more broader concept in many studies (Triandis, Brislin & Hui, 1988), in this

paper, it is used to measure a clear characteristic: acting in an individual manner

or considering the benefits of the group before deciding. Then, it is assumed that

considering the two partners as a group and thinking of the mutual outcomes

may foster a good climate at the Interaction stage.

P11: There is a negative relationship between Individualism and the

good climate in Interaction.

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The following dimensions need the contact with the other culture to be

positive or negative. In fact, as said earlier, it is considered that the greater is

cultural distance between the partners, more the impact of these dimensions will

be negative. Having a low or a high level of Context is nor positive nor negative

per se. But if a partner needs personal information to commit himself more and

that the other is not providing this type of information, the gap will be deep and

the climate of the Interaction may be altered.

P12: There is a negative relationship between the cultural distance on

Context and the good climate in Interaction.

Facilitation is measuring if gifts and favours can be needed to establish and

maintain a good climate between the partners. If both are not expecting some, no

problem may arise from this dimension. But if two are not seeing the role of gifts

the same way, frictions may alter the relationship during negotiation.

P13: There is a negative relationship between the cultural distance on

Facilitation and the good climate in Interaction.

The time orientation of the partners may influence also their interaction. One

can think at short or medium term and wanting quick benefits as another is ready

to absorb some losses to assure a long-term relationship. These two objectives

are contradictory and may cause a bad impact on negotiation.

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P14: There is a negative relationship between the cultural distance on

Future Orientation and the good climate in Interaction.

The last dimension to integrate in the framework is the Uncertainty

Avoidance. Relying on structures (such as legal ones) is not bad in itself. But at

the international, those structures may not be available. That is why the risk may

be greater. The attitude toward this risk may interfere in the Interaction as one

may want guarantees in case of unpredicted event and the other do not have

some to offer. If the two partners do not have the same meaning of the structure

of the future relationship, some problems may arise.

P15: There is a negative relationship between the cultural distance on

Uncertainty Avoidance and the good climate in Interaction.

The link from the cultural dimensions to the outcomes is considered as

made through the negotiation process as more the Interaction is positive and

Agreement is facilitated and satisfactory for both, the Business Outcomes will be

integrative and the Relational Outcomes will be high.

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Figure 1:

H

H

P

ConteKnowled

Gender EgalitariaKnowled

A

Conceptual framework and proposi

H11 (-)

H10 (+)

H6 (+) 5 (+)

H9 (-)

H1 (+)

7 (+) H8 (+)

reparation

xt ge

Facilitation Knowledge

n. ge

Power Distance Knowledge

A

I

ASS

HO

IND

NTECEDENT CONC

tions attached

Cultural Dis

H12 (-)

H13 (-)

H2 (+)

greement

CON

FAC

nteraction

URRENT

tance

H14 (-)

H15 (-)

H3 (+) H3 (+)

H4 (+)

FO

Relational Outcomes

UA

Business Oucomes

CONSEQUENT

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Discussion and conclusion

This proposal have some limitations. First, because it is decomposing

culture in defined dimensions, other factors may influence the partners (e.g.

saving the face for Chinese and Japanese). This limitation can be reduced by a

good preparation at the antecedent phase where many sources of information

may be quite insightful. Second, because it is implying a cultural distance, the

measurement must be done with both sides of the table of negotiation. This

exercise may be hard to do considering the numerous possible origins of targets.

The perception of the source may be a satisfactory evaluation. This implies that

the source would evaluate the cultural rating of its partner. This might not be the

most accurate measurement but may be useful. But this one-side measurement

imply another issue. How to really know what the other party thinks of the

agreement and how does he evaluate the outcomes of the negotiation. One side

perception may be not representative of the other side’s perception. Third,

maybe the interaction may influence directly the outcomes. Even with a mutual

agreement obtained, if it has been so hard to get, relational outcomes may be

altered even if the integrativeness of business outcomes are acceptable. Then,

some development of the negotiation process may be needed. Fourth, relational

outcomes may be modified in relational capital. Its outcomes could be more

tangible and easily measured. Finally, the framework has been developed in a

Western perspective. So, its generalization to other cultures may be

compromised.

Although these limitations, this proposal have some interesting managerial

implications. First, the dimensions suggested for the Preparation step can be

helpful for managers and negotiators to plan the future negotiation. Also, this

development can be used by intermediaries or government agencies in the

writing of preparation guides for exporting firms. Second, the dimensions

proposed can be used to prepare an auto-diagnosis for internationalizing firms.

Having an immediate feedback on potentially right or wrong attitudes, they can

adjust to improve their chance of success. Third, the integration of Relational

Outcomes may be useful to evaluate early an internationalization attempt. As

negotiations may be on a long period, a lot of patience may be required. During

this unproductive time, outcomes may not be evaluated as distributive or

integrative but more as if the relationship is developing in a satisfactory way.

Then, it can help to encourage managers to continue as they have tools to

evaluate their progression in other means that with financial profits.

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