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Fundamentals of International Negotiation

Remigiusz Smolinski 1

1. Introduction Jan graduated from a leading Polish business school. He had learned a lot about economics, finance, marketing, and strategy and his grades were excellent. Everything indicated that he was well prepared for his starting career. Very soon he found a job he was dreaming of and started applying what he had learned in real business environment. He has been advancing his career rather quickly and taking over new areas of responsibility. Recently, his boss has asked him to identify a company potentially interested in cooperation especially in the area of research and development. Since his company was operating in a niche market

manufacturing very specialized products, very early Jan realized that for a potential partner he would have to look in Southeast Asia, particularly in Japan, Taiwan, and possibly in China. Not without difficulty he came up with a short list of potential partners and scheduled the first meetings with them. Today, his secretary gave him the tickets. Next week Jan and his boss are flying to Asia. Suddenly, he realized that all he knows about Asian culture actually comes from TV and movies. The same was true for his boss. A hundred questions went through his mind. How is he supposed to behave there? What can he say and what not? Will they understand what he has to tell them? How should Jan negotiate with these guys? Within the last few decades the number of international negotiations has been increasing rapidly. This trend is especially evident in Poland. Intensification of trading relationships,

Ph.D. candidate at Leipzig Graduate School of Management, Department for Microeconomics and Information Systems, Jahnallee 59, 04109 Leipzig, email: remigiusz.smolinski@hhl.de, tel. +49 341 9851656.

political and economic integration with the European Union and progressing globalization have caused that international negotiations have become relatively common both in the diplomatic as well as in the business environment. Similar processes occurring worldwide were most likely also the reason for increased interest in this topic among the scholars. Amid all issues connected with the international negotiations the one that has been attracting the most attention has been the influence of culture on negotiation. 2

2. Culture There are numerous definitions of culture in the literature. Kroeber and Kluckhohn (1963), for instance, have collected more than 160 of them. Despite the fact that some researcher consider the concept of culture not well defined 3 , most of the definitions, share three key features: Culture is a group-level phenomenon Although each group essentially consists of individuals and despite the fact that culture is manifested through individuals, culture itself is a phenomenon that can only be observed once it is shared by the vast majority of the individuals belonging to a certain group. Culture is acquired by individuals from the group they belong to either through socialization or acculturation This implies that culture not only has to be shared by the individuals belonging to a certain group but also that it has to be preserved in time and transmitted from one generation to another. 4

2 3

Source: Lewicki, Saunders, Minton, and Barry (2006) p. 413. Zartman (1993), for example, claims that culture is tautological, vague and epiphenomenal. Weiss (1994) points out that culture is neither consistently nor well defined. Similar critique was also expressed by Moran and Stripp (1991) and Usunier (2003). 4 It does not necessarily mean that culture is static and remains invariant over time. On the contrary, Faure and Sjstedt (1993, p. 5) argue that in a short-term perspective culture should be seen as a structure influencing human behavior, whereas in the long-term it is a dynamic social phenomenon.

Culture is a unique set of attributes that subsumes every area of social life These attributes can possess intangible or intangible characteristics. The first group, for instance, includes: meanings, values, beliefs, etc. the second their expressions such as behavior patterns and artifacts. 5

We define culture as the socially transmitted norms, beliefs, and values influencing the behavior of individuals in a given community. 6 This definition possesses all three features listed above and creates a firm foundation for our further analysis. Generally, there are many kinds of cultures e.g. corporate, family and professional cultures and each of them can influence negotiating behavior. 7 It is also important to add that some cultures exist within countries whereas the others extend across the borders (e.g. diplomatic culture). Jans

negotiating behavior is influenced, for instance, by the way of doing business in his company, norms and values he was raised in at home as well as by general management practices taught and pursued in Poland. Much has been written about the meaning of culture in international and cross-cultural negotiation both from a theoretical as well as from practical perspective.8 There is a

noticeable consensus and substantial evidence in the literature that negotiators from different cultures tend to behave differently. Brett (2001) developed a simple conceptual model

illustrating the influence culture may have on negotiators.

Figure 1 How culture affects negotiation.

5 6

Source: Cohen (2004), p. 11 and Lewicki, Saunders, Minton, and Barry (2006), p. 413. This definition is based on the work of Salacuse (1991), p. 45 and Faure and Sjstedt (1993), p. 3. 7 Source: Faure and Sjstedt (1993), p. 5. 8 A complete list of reference would exceed the limitations of this document. The most important positions which should not be omitted include: Binnendijk (1987), Brett (2001), Cohen (2004), Faure and Rubin (1993), Fisher, Schneider, Borgwardt and Ganson (1997), Foster (1992), Gelfand and Dyer (2000), Habeeb (1988), Hendon and Hendon (1990), Mautner-Markhof (1989), Reynolds, Siminitiras and Vlachou (2003), Salacuse (1998 and 1999), and Weiss (1994).

Interests and priorities

Potential for integrative agreement

Interests and priorities

Culture A negotiator

Type of agreement

Culture B negotiator

Strategies

Pattern of interaction

Strategies

Source: Brett (2000), p. 102.

According to this model cultural values have a noticeable influence on negotiation interests and priorities, while cultural norms affect negotiation strategies and patterns of interactions. The fundamental methodological conclusion for that can be drawn from this model is quite discouraging for the scholars dealing with this topic. If culture affects such basic elements of negotiation as: interests, priorities or strategy selection and also given that the influence of culture is mostly subconscious, all differences in any observable aspects of cross-cultural negotiation can always be ascribed to cultural differences between the negotiators. Each individual is emerged in many cultures which influence his negotiating behavior. At the same time, there are many other variables beside culture that also have similar effects. These include individual variables such as negotiators personality, as well as structural or process variables. As pointed out by Elgstrm (1994), it is very difficult to assess correctly the relative influence of each variable and it is inappropriate to treat culture as the unique explanatory variable of the negotiation process and outcomes. Therefore, the studies using culture as the only independent variable explaining the differences in any aspects of negotiation are of limited use and in some cases can even be tautological allowing the

researchers to demonstrate what they established at the outset of their premise. 9 Moreover, as pointed out by Avruch (2000) and Sebenius (2002a), not every member of a culturally homogeneous group equally shares all characteristics of this culture. Rubin and Sander (1991) emphasized that the variety of behavioral differences within cultures can be as wide as in cross-cultural comparisons. All these and other difficulties have led Zartman and Berman (1982, p. 224) to label the linkage between culture and negotiation a most troublesome question especially in international negotiation research. Although cultural factors undoubtedly play an important role, it is essential not to overestimate their influence on international negotiation. 10 This suggestion becomes especially vital in the context of the research result obtained by Dialdin, Kopelman, Adair, Brett, Okumura and Lytle (1999) who claimed that there is a general tendency to ignore the importance of situational factors in favor of cultural explanations which they called cultural attribution error.

3. Perception Perception is generally defined as the process of screening, selecting, and interpreting stimuli so that they gain meaning to the individual. Although the beginnings of perception research date back to 1950s, 11 it was only in the late nineties that this topic drew attention and interest of the negotiation theorists and practitioners who concentrated mostly on perceptual distortions. 12 Figure 2 illustrates a general model of the perceptual process in bilateral

negotiation. According to this model the behavior of one negotiator serves as a stimulus for

This is precisely the case in studies attempting to separate structural and cultural effects in international negotiations. It is quite easy to find support for a given structural or cultural hypothesis by appropriately selecting the object of the study. A more detailed discussion on this topic can be found in Faure and Rubin (1993) pp. 222-224. 10 This topic is discussed in more detail in Rubin and Sander (1991), Sebenius (2002a), Weiss (2003). 11 The most influential pioneers in this field were: Gibson (1950), Bruner and Tagiuri (1954), and Broadbent (1958). 12 One of the precursors in this field was Thompson (1995).

the other negotiator who then screens it, selects its key elements and tries to interpret them. In international negotiation the complexity of this process is significantly greater than in other cases. Culturally influenced behavior of Negotiator A is perceived through the cultural lens of Negotiator B who then acts based on his interpretation of that behavior which then is perceived by Negotiator A and the whole process repeats. As a consequence, the cultural differences can lead to misinterpretation of the actual negotiators behavior and their underlying motivation such as interests and objectives. This misinterpretation in turn may result in inappropriately adjusted reactions and given the interactive and repetitive character of this process the final solution to the negotiated problem may in fact be based on incorrect inferences and therefore prove suboptimal.

Figure 2 Perceptual process in bilateral negotiation.

Translation

Attention

Recognition

Behavior Negotiator A

Behavior Negotiator B

Recognition

Attention

Translation

Source: Authors.

Accepting this statement leads us to the conclusion that perceptual processes tend to magnify cultural differences in international negotiation. Due to these cultural and perceptual

differences, however, international negotiation processes possess higher value generating

potential, particularly when the parties acknowledge the differences and use them as basis for creating value.

4. National Negotiating Styles Negotiators culture is expressed in their negotiating style. Generally, negotiating style is defined as the way persons from different cultures behave in negotiations. 13 This definition implies that: There is a strong link between a persons culture and his negotiating style. A negotiating style of a certain person can only be evaluated through an analysis of that persons behavior in several negotiation settings. To identify cross cultural differences in negotiating styles the scholars typically focus on selected aspects of negotiators behavior called negotiation factors or traits. These traits are usually selected based on their relevance and potential variability across different cultures. Various traits have been used by various scholars in their research on identifying the influence of culture on negotiation or on measuring negotiating styles. In this document we would like to present the approach pursued by Jeswald Salacuse together with the results of his seminal study on international negotiating styles (Salacuse 1998). Table 1 lists ten negotiation factors he used in his survey together with the range of possible cultural responses to each of them. This selection is based on the work of Hendon and Hendon (1990), Moran and Stripp (1991), Salacuse (1991) as well as on the interviews with practitioners.

Source: Salacuse (1999), p. 221. This definition of the negotiating style, however, poses some difficulties. First, it is very general and embraces all aspects of negotiating behavior also the ones related to individual and situational factors. Second, it does not allow us to capture context specific adjustments of negotiating behavior.

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Table 1 Research framework for determining the negotiating styles.

Negotiation Factor

Range of Responses

Goal Attitude Personal Style Communication Time Sensitivity Emotionalism Agreement Form Agreement Building Team Organization Risk Taking

Contract Win/lose Informal Direct High High Specific Bottom Up One leader High

Relationship Win/win Formal Indirect Low Low General Top Down Consensus Low

Source: Salacuse (1998), p. 223.

Based on the framework illustrated in Table 1, a survey questionnaire was developed and distributed it to over 300 business executives, lawyers, and graduate students from twelve countries Argentina (ARG), Brazil (BRZ), China (CHN), France (FRN), Germany (GER), India (IND), Japan (JPN), Mexico (MXC), Nigeria (NGR), Spain (SPN), United Kingdom (UK) and USA. All respondents were asked to rate their own attitudes toward each of the traits on a five-point scale. Table 2 summarizes the results of this study. The numbers in the table denote the percentage of respondents from each country who submitted the highest or the second highest evaluations of indicated polar extremes of each trait. The differences in national negotiating styles among the analyzed countries are quite evident.

Table 2 The evaluations of national negotiating styles (in percent).

Negotiation Factor

Direction

ARG

BRZ

CHN

FRN

GER

IND

JPN

MXC

NGR

SPN

UK

USA

Goal Attitudes Personal Styles Communications Time Sensitivity Emotionalism Agreement Form Agreement Building Team Organization Risk Taking

Contract Win/Win Formal Indirect Low High General Top Down One Leader High

46 81 35 4 15 85 27 70 58 73

67 44 22 11 0 89 22 42 100 56

45 82 46 18 9 73 27 54 91 82

70 80 20 20 40 60 30 67 40 90

54 55 27 9 36 36 45 54 55 72

33 78 22 11 44 56 44 74 44 89

55 100 27 27 9 55 46 45 55 18

42 50 42 0 33 83 17 33 91 50

47 47 53 0 7 60 20 47 40 73

74 37 47 0 21 79 16 46 58 47

47 59 35 12 6 47 11 54 65 88

54 71 17 5 15 74 22 47 63 78

Source: Authors based on Salacuse (1998).

What can Jan expect from his Asian counterparts? First, he should be prepared to experience completely different negotiating styles than the ones he has been exposed to so far. Second, most likely he will have to deal with different negotiating styles in each country he visits. His Japanese counterparts will probably suggest a rather general agreement, demonstrate very high win/win attitude, somewhat indirect communication, low emotionalism, rather high time sensitivity, and risk aversion. He can be also nearly sure that different negotiating styles await him at the negotiation tables in Taiwan and in China.

5. Advice for International Negotiators Although a lot has been written on international and cross-cultural negotiation, not much attention has been devoted to giving prescriptive advice to those facing the challenge of international negotiation. Several contributions stand out as universally practical and

particularly effective. We will quote two of them here. Initially, many negotiation scholars advised the practitioners to follow the approach attributed to Saint Augustine: When in Rome, do as the Romans do. 14 Currently, there is a

widespread consensus that this advice is oversimplified and therefore rather impractical. 15 In 1994 the need for a new approach was finally addressed by Stephen Weiss. In his seminal paper Negotiating with Romans he identifies eight culturally responsive strategies which can be pursued in international negotiation. As demonstrated in Figure 3, culturally

responsive strategies can be organized according to: 14 15

The negotiators level of familiarity with the counterparts culture. The counterparts familiarity with the negotiators culture.

A detailed discussion on this topic can be found in Francis (1991) and Weiss (1994). Many contributions referring to this problem are listed in Lewicki, Saunders, Minton, and Barry (2006) pp. 430-433.

The possibility for explicit coordination of approaches.

The strategies in brackets denote joint strategies, which require close coordination with counterpart. At each level of familiarity, a negotiator can choose the strategies designated at that or any lower level.

Figure 3 Culturally responsive strategies.

High

Induce counterpart to follow ones own approach

Improvise an approach [effect symphony]

Counterparts familiarity with negotiators culture

Adapt to the counterparts script [coordinate adjustment of both parties]

Low

Employ agent or adviser [involve mediator]

Embrace the counterparts approach

Low

Negotiators familiarity with counterparts culture

High

Source: Weiss (1994), p. 55.

What advice can we give to Jan and his boss? Their familiarity with Asian culture is certainly very low. They have never been to Asia before, they do not know the language, and they have never interacted with the Asians. However, the choice of an appropriate culturally responsive strategy they should pursue depends also on the familiarity of his potential Asian

partners with Polish culture. Let us assume their familiarity level is low. In this situation, the best advice we could give to our negotiators based on the above model is to hire a cultural expert, a translator, an outside attorney, or a financial adviser who is familiar with the cultures of all parties. This person can either act as an agent conducting the negotiation on behalf of our friend or an advisor providing information and recommending most suitable actions. This strategy can be selected unilaterally and its implementation can be fully controlled by our negotiators. However, if both parties familiarity levels with each others culture are low they can decide jointly to involve a mediator a mutually accepted person whose task is to facilitate the interactions between the parties. This role is usually played by interpreters or introducers who brought the negotiators together. The task of the mediator is very difficult as he is responsible for educating each party about the counterparts culture and bring out ideas and behavior from each side that make their interactions coherent. It is absolutely

fundamental that his task is fulfilled without losing respect and trust of the involved parties. 16 Another comprehensive set of advices for international and cross-cultural negotiators is given by Brett (2001) and Thompson (2005). They recommend that such negotiators should: 17 1. Anticipate differences in strategy and tactics that may cause misunderstandings Negotiators culture affects their negotiating behavior and style and the differences in culture also result in differences in negotiating style. Anticipating these differences is a source of advantage in international negotiation. Awareness of cultural differences reduces the negative attributions about the negotiation partner and helps view the differences as an inherent part of international negotiation process. 2. Analyze cultural differences to identify differences in priorities that create value Value in negotiation is created by differences rather than similarities. High level of
16 17

A detailed description of all culturally responsive strategies can be found in Weiss (1994), pp. 51-61. Source: Thompson (2005), pp. 267-272.

cultural differences in international negotiation implies also high potential for integrative, or win/win agreement. 3. Recognize that the other party may not share your view of what constitutes power Power, defined as the ability to influence other peoples decisions, is perceptual and therefore context dependent and highly subjective. International negotiators should be aware that the other partys estimate of power may be based on completely different factors that may even seem unimportant (e.g. power of alternatives vs. power of status). Engaging in a power contest may reduce the probability of an integrative agreement. 4. Avoid attribution errors Attribution error occurs when people assume that a persons behavior is based more on what "kind" of person he is, rather than on the social and environmental forces that influence that person. Interculturally sensitive negotiators should view their partners behavior as a result of cultural and situational norms and not attribute it to their underlying personality. 5. Find out how to show respect in the other culture It is very important to show respect for the other party before starting negotiation. However, it is wrong to assume that respect is shown the same way in each country. 6. Know your options for change Berry (1980) distinguished four choices negotiators have when their cultures clash. These are: Integration occurs when each group maintains its own culture and also maintains contact with the other culture. Assimilation occurs when a group or person does not maintain its culture but does maintain contact with the other culture.

Separation occurs when a group or individual maintains its culture but does not maintain contact with the other culture.

Marginalization occurs when neither maintenance of the groups own culture nor contact with the other culture is attempted.

6. Summary and Conclusions The international negotiations are much more complex than the ones conducted domestically. The main reason why this is the case lies in the differences in negotiators cultures. These differences have a great impact on negotiators behavior and in international negotiation become even intensified by the perception of the participants. As demonstrated by various research results, the differences in cultures are manifested in distinct differences between negotiating styles typical for these cultures. This does not mean that all members of a particular culture negotiate in the same way but rather that there are patterns of behavior which are typical for most of them. To be successful in the international negotiation arena, negotiators need to develop high sensitivity to cultural factors, identify and pursue a culturally responsive strategy most appropriate in a given negotiation setting but at the same time acknowledge and consider also individual and structural aspects occurring in this setting. Armed with this knowledge and advice Jan can sigh in relieve and relax a bit. Although he is about to take off and start the negotiation process with potential partners from distant and almost unknown cultures, he feels much better prepared now. Jan realizes that the road to a successful agreement is still very long and rocky but at least he knows how to avoid intercultural traps waiting for the unprepared.

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