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  A set-theoretic analysis of negotiations in Japanese MNEs: Opening upthe black box ☆ Ursula F. Ott a, ⁎ , Yuko Kimura b a Loughborough University, United Kingdom b Centre of Labour Market Studies, University of Leicester, United Kingdom a b s t r a c ta r t i c l e i n f o  Article history: Received 1 February 2015Received in revised form 1 June 2015Accepted 1 September 2015Available online 24 October 2015 Keywords: Fuzzy set analysisQCANegotiation analysisMultinational enterprisesCulture This research deals with international negotiations in multinational enterprises (MNEs), in particular the HQ  – subsidiary negotiations. The theoretical part of the intercultural negotiation framework (Ott, 2011) highlightsthe potential for MNE negotiation analysis. An empirical investigation into Japanese MNE negotiationsstrengthens the theory. Different time perceptions and strategies in 󿬂 uence HQ  – subsidiary negotiations. Theoutcome of the fuzzy set Qualitative Comparative Analysis (fsQCA) shows that an integrative approach needs ahigher offer with a margin of at least 20% to cover for relationship building, patience and trust.© 2015 Elsevier Inc. All rights reserved. 1. Introduction Manyinternationalnegotiationsfail,andwhentheysucceed,there-lationshipswhichdevelopcouldfalterlaterandtheoriginsofthefailuremaylieinthepreviousnegotiations.Amismatchinunderstandingbasicnegotiation patterns of different cultures is often the reason for subse-quent failure, as shown in the literature. Salacuse (1999) states that,for Americans, the negotiation ends in a contract, whereas, for culturesfrom theFarEast, thesigning of a contract marks thestartof a relation-ship. There is little systematic analysis of the negotiation behaviorbetween MNEs and subsidiaries. This article deals with opening theblack box of international negotiations in MNEs and in particularthose with Japanese HQs and their subsidiaries.Thisarticlecontributestotheliteratureintwoways.First,theintercul-turalnegotiationframeworkfacilitatestheanalysisofinternationalnego-tiation behavior between the headquarters of MNEs and theirinternationalcounterpartsinsubsidiaries.Second,thearticlelinkstheoryandevidence.TheempiricalfocusuponJapaneseMNEexecutivesregard-ing their international negotiation experience gives a fascinating insightinto the workings of Japanese MNEs (Tokyo HQ  – international subsidi-aries). To ensure con 󿬁 dentiality and adjust to a small number of cases(Ragin, 2000), fuzzy set Qualitative Comparative Analysis (fsQCA)combines an in-depth understanding of ethnographic interviews with aquantitativeapproach.Thetheoreticalanalysisandtheempiricalinvesti-gation provide scienti 󿬁 c evidence for the relevance of the initial offer toanticipate a cooperative strategy, and in this way contribute to knowl-edgeaboutnegotiationswithinMNEsheadquarteredintheFarEast.Fur-thermore, combining negotiation analysis with a fuzzy set QualitativeComparative Analysis shows potential for further research. 2. Negotiating in multinational enterprises (MNEs) Negotiation analysis in an organizational context is relatively young(Putnam,2004)andwouldneedmorefocusonmultinationalenterprises,since social interactions, negotiations and contracts are intertwined inorganizations.  2.1. International negotiation analysis in multinational enterprises An analysis of international negotiations in MNEs needs to considerthe speci 󿬁 c nature of MNEs compared to other forms of organization(Harzing and Sorge, 2003). Harzing and Sorge (2003) highlight that internationalization strategies are overall concepts of extending opera-tions from domestic base to other countries as well as practices of cor-porate control in different cultural contexts in subsidiaries in 󿬂 uenceMNE negotiations. MNEs in the USA, Europe and Japan have differentmodesofcontrolandwaysofcommunicating,organizingandnegotiat-ing. Differences in mental models (Liu, Friedman, Barry, Gelfand, andZhan, 2012) affect intercultural negotiations in MNEs. The speci 󿬁 cs of negotiations within a reactive MNE (with headquarters in a reactive  Journal of Business Research 69 (2016) 1294 – 1300 ☆  The authors thank theanonymous referees andMarek Korczynski,and Ian Hodgkinsonfor their comments. ⁎  Corresponding author at: School of Business and Economics, Loughborough University,United Kingdom. E-mail addresses: (U.F. Ott), (Y. Kimura).© 2015 Elsevier Inc. All rights reserved. Contents lists available at ScienceDirect  Journal of Business Research  country such as Japan, Korea and China) require further exploration.The research questions derive from the negotiation literature and thespeci 󿬁 cs of the MNE context: How do the MNE negotiations come to acollaborativeoutcomeinlightofdifferencesbetweenHQandsubsidiarycultures? Why do Japanese (reactive) MNEs include higher margins intheir initial offers in negotiations?  2.2. Intercultural negotiation framework and the reactive negotiator  Distinctfrompreviousframeworks,Ott(2011)proposesagamethe-oretical framework for different cultural negotiation styles in order tohighlight co-operation and con 󿬂 ict that relate to activity types (linear-active, multi-active and reactive negotiators — LMR). This approachemphasizes the likely clash of cultures in nine scenarios. Ott (2011)uses buyer – seller experiments to support the analysis. To evaluate thisframework further for organizational situations, cooperation and con- 󿬂 ict between speci 󿬁 c cultural combinations are of particular interest.HQ  – subsidiary negotiations provide a research setting to study howthe relationship between a reactive MNE and LMR subsidiary developsand unfolds. Ott (2011) connects cultural differences in bargainingbehavior to the range of the initial offer. She shows that the players'strategies relate to the frequency of rejection and the valuation of time. The properties of the model comprise the linear-active, multi-active and reactive type of player: (a) The linear-active player has ashort-term perspective  δ L → 0. The player poses a concession with ashort delay and the costs of bargaining c L   are low due to the shorttime horizon. Acceptance and rejection lead to the end of the gameeither with agreement or break-up. (b) The multi-active player has amedium length term orientation δ M  → 1. The bargaining costs are highc H , and the length of negotiations is longer than with the linear-activeplayer. (c) The reactive bargaining type has a long-term perspective δ R → 1. The delay between offers can be long  Δ → 1. The bargainingcosts are high c H (t), and outside options are relevant even after accep-tance t = {0,  ∞ }.This article offers a new perspective by using a MNEHQ  – subsidiary settingin Table 1, insteadof ninebuyer – sellerscenarios(Ott, 2011). The payoffs are MNE (HQ  – subsidiary) utility functions U  ( δ i )=  p ( δ i ) − c  , i = [L,M,R].The international negotiation analysis combines the constructs of anegotiation process with the cultural types of the negotiators in anMNE.Fig.1belowpositionstheMNEheadquartersofareactiveculturalbackground and the respective subsidiary in order to show the culturalin 󿬂 uence on negotiation style, strategy and outcome. The negotiationstyle in case of a reactive negotiator will be patient, win – win- andtrust-oriented. The time horizon contributes to the cooperation andcon 󿬂 icts in terms of initial offers, negotiation strategy (costs, length),concessions, disagreement and cooperation.  2.3. International negotiation analysis of reactive MNEs Thecorrelationbetweenthetrustbuilding,patience,win – winstrat-egyapproachandthelengthofnegotiationsofreactivenegotiatorsisincontrast to a short-term or haggling approach. This strategic approachfor a MNE setting shows the complexities when the analysis adds thecultural negotiation strategies to the equation. In the context of MNEnegotiations, the focus is on reactive types either as HQ of an MNE oras host of an MNE in a negotiation.TheJapaneseHQsendstheirmanagerstothesubsidiaries(HarzingandSorge,2003)inacountryofpredominantlylinear-active(USA),multi-active(MiddleEast)orreactive(FarEast)employees.ThefollowingFig.2showsthemovesoftheplayersandthestrategicoptionsfortheplayers.Thediagramabove shows theinitialproposaloftheMNEHQplayerand the reaction functions of the host player and then the move of theMNE player as a reaction to the second player. The time in the negotia-tionisonthex-axisandtheproposals/offersareonthey-axis.Thecon-cessions and the negotiation process over time re 󿬂 ect the bargainingprocess between different cultures. The agreement points and the out-of-equilibrium paths for the three types of negotiators with a reactiveHQ visualize the cooperation and con 󿬂 ict.The negotiation analysis for a reactive HQ and linear-active, multi-active or reactive subsidiaries shows that at time  δ L  the linear-activehost will accept a proposal of the reactive HQ, whereas it takes  δ M   timeforamulti-activetoacceptareactiveproposal.Theequilibriumoftwore-active negotiators shows how long it would take to build up trust for anacceptable proposal. The 󿬁 rst proposition deals with these paths: Proposition1.  IfareactiveMNEHQmakestheinitialofferwithamar-ginofx%toincludethecoverageofthebargaininghorizon,thenthecul-tural values of the host will lead to a dynamic bargaining process with  Table 1 Reactive MNE negotiator with linear-active and multi-active counterpart in subsidiaries.Subsidiary Subsidiary (Player II)Headquarter Linear-active Multi-active Re-active culture HQ (Player I) Linear-activecultureSimilar cultural background with re 󿬁 nements Scenario1 ‘ Time is Money ’ -  ApproachExample :American HQ  – German Subsidiary( U  ( δ L ); U  ( δ L )HQ linear-active and Subsidiary multi-active Scenario 4Example :American HQ  – Brazilian Subs( U  ( δ L ); U  ( δ M  )HQ linear-active andSubsidiary reactive Scenario 5Example :American HQ  –  Japanese Subsidiary( U  ( δ L ); U  ( δ R )Multi-activecultureHQ multi-active and Subsidiary linear-active Scenario 6 Example :Brazilian HQ  – American Subsidiary( U  ( δ M  ); U  ( δ L )Similar cultural background with re 󿬁 nements Scenario 2 ‘ Haggling  ’ -ApproachExample : Brazilian HQ  – Italian Subsidiary( U  ( δ M  ); U  ( δ M  )HQ multi-active and Subsidiary reactive Scenario 7 Example :Brazilian HQ  –  Japanese Subsidiary( U  ( δ M  ); U  ( δ R )ReactiveCultureHQ reactive and SubsidiaryLinear-active Scenario 8Example : Japanese HQ  – American Subsidiary( U  ( δ R ); U  ( δ L )HQ reactiveand SubsidiaryMulti-active Scenario 9Example : Japanese HQ  – Brazilian Subsidiary( U  ( δ R ); U  ( δ M  )Similar cultural background with re 󿬁 nement Scenario 3 ‘ Building trust  ’ -ApproachExample : Japanese HQ  – Finnish Subsidiary( U  ( δ R ); U  ( δ R )Source: Adapted to MNE relationship from Ott (2011).1295 U.F. Ott, Y. Kimura / Journal of Business Research 69 (2016) 1294 – 1300  pre-mature acceptance (linear-active), break-down of negotiations(multi-active) or equilibrium (reactive).Forlinear-activeandmulti-activesubsidiaries,theinitialproposalof a reactive HQdoes not 󿬁 t totheir private values forthebargainingpro-cess.Thereactiveplayerwillnotrejectduetolosingface,but willdelaythe bidding process. It is too costly for the linear-active to continuewhen the margins do not cover the longer time horizon. The multi-active host will have a longer horizon than the linear-active, but willmake moreconcessionsand negotiate more emotionallythan the reac-tive,withpotentialforcon 󿬂 ict.Inanorganizationalcontext,playerscanre-negotiate in these scenarios. Proposition 2.  If the subsidiary moves  󿬁 rst in a host-offer game, thenthe reactive MNE will need to hold out in order to build up trust in anintegrative approach as a signal to the hosts. It pays off to adapt to aninternational strategy for win – win solutions.These propositions highlight the international negotiation patternsfor the empirical investigation and fuzzy set QCA. 3. Method Interviews give insight into the depth of reactive negotiationpatterns in Japanese MNE to discover hidden processes. HQ  – subsidiarynegotiations provide a bigger picture of strategies and outcomes. Eachinterviewee delves into a long negotiation experience and shareshardest negotiation, bargaining strategies and height of initial offerswith the interviewer. The fuzzy set Qualitative Comparative Analysisdetermines the cross-case analysis and the robustness of the results.The set theoretic approach provides a tool to analyze small-N casesand derives insights for the in-depth analysis of complex negotiations.  3.1. Sample and data collection The participants are senior executives with experience as negotia-torsatthe various functional and hierarchical levels in theHQ and sub-sidiaries.22participantsfromtheHQandsubsidiariesmakeup16casesof HQ-host negotiators and 6 cases from host-HQ perspectives. The re-search process addresses the dif  󿬁 culty of getting access to sensitivedata in a Japanese MNE. An interviewer from within the  󿬁 rm opens upinformationchannelsandsupportstrust-buildingwithanethnographicstyle interview. The majority of MNE managers abroad are Japanese,and their subsidiaries are in the USA (linear), UK, Germany (linear-active), France, Italy (multi-active) and China (reactive). The researchconsiders the cultural background in two questions about the inter-viewees' srcinal and target culture: a) where the respondents werecoming from and b) in which country they are working. JapaneseMNEsmostlysendtheirownstaffintotheirsubsidiariesonamanageri-allevel.Thisobservationisrelevantforthewaytheculturalandlearnedbehavior unfolds. To keep theorganizational culture constant is impor-tantand,therefore,thecaseanalysisisinoneMNEtostudytheculturalactivity types, ceteris paribus.The participants answered questions connected to the framework(Ott, 2011) and highlighted the importance of international negotia-tions,theirhardestnegotiations,theirstrategies,theheightofinitialpro-posal (+5% – 10%; +10 – 20% or +50%) and whether they use emotion,logic or patience.The coding of the answers transfers the theoretical constructs andquestions into the following conditions for the fsQCA: adaptation to anInternational Strategy compared to domestic negotiations; win – winstrategy; patience as a strategy; initial offer – outcome correlation.The data of the cases are anonymous. The cases represent the in 󿬂 u-ence of culturefrom a homeandhostcountry perspective.This classi 󿬁 -cation goes both ways as there are managers who grew up in the USA,Germany, Belgium and China and who now work for this MNE in thesubsidiaries.  3.2. Fuzzy set analysis Fuzzy-set Qualitative Comparative Analysis (fsQCA) based on Ragin(1987, 1994, 2000, 2008) is ideal to show the causal effects between 󿬁 rst offer, strategy, bargaining process and patience. This method com-binesqualitativeandquantitativemethodologytoimprovetheanalysisofcaseswithsmall-Norlarge-Nnumbers.Geckhamer(2011)andKvist MNE reactive types Strategy: CultureNegotiation Style  Win-Win Cooperation/Conflict Patience AgreementInitial Offers International DisagreementConcessionsSubsidiary linear-, multi-activeor reactive types Fig. 1.  MNE – subsidiary negotiation concept. Proposals MNE HQp R Host  p L P R p M  L δ    M  δ    R δ    Time δ   Fig. 2.  Reactive MNE negotiates with LMR host.1296  U.F. Ott, Y. Kimura / Journal of Business Research 69 (2016) 1294 – 1300  (2007) use fsQCA to analyze and classify types. Woodside et al. (2011)and Woodside and Zhang (2013) use it for consumer behavior andprovide new insights into behavioral issues. The results of recent ar-ticles (Geckhamer, 2011, Kvist, 2007; Pajunen, 2008; Schneider,Schulze-Bentrop and Paunescu 2010) show the strength of a con 󿬁 g-urational approach. Palmer (2006) emphasizes that qualitativemethodsareappropriateforthosedimensionsoforganizationalbehav-iorwhich researchers 󿬁 nddif  󿬁 cult to measureand that rigorous proto-cols now exist for conductingqualitative research (Ragin, 2000). Davis, Morrill, Hayagreeva and Soule (2008)similarlysuggestthatfsQCAmayhelpgenerateknowledgeoftheorganizationofinformationandpeopleacross time and space.In international business, Pajunen (2008) and Schneider et al. (2010) usefsQCAforinvestigationsintotheinstitutionalsideofforeigndirect investment and institutional capital of high-tech  󿬁 rms withregard to export performance. These insights into fsQCA strengthenthe analysis of the negotiation model of MNE HQ  – subsidiary relation-ships. The con 󿬁 guration of cultural types in Japanese MNE negotiations 󿬁 ts into the fsQCA approach.  3.3. Calibration of conditions and outcome The calibration of the responses of the interviews into fuzzy setproperties and conditions follows in the next step. Table 2 shows theclassi 󿬁 cation of the conditions into the membership of the sets( b 0.25; 0.25 to 0.55; 0.55 to 0.8 and 0.8 N ). The break-points showwhether the condition belongs to an empty set  b 0.25 to a medium0.25 to 0.55; 0.55 to 0.8 or to a full set 0.8 N , as appropriate for a fuzzy-set approach.The answers of theinterviews belong tocases of negotiationbehav-ior and show the degree of the membership in a set of each condition.The conditions re 󿬂 ect the coding of the interviews. Geckhamer (2011)emphasizes that cases with strong membership in a con 󿬁 guration arethe most relevant consistent and inconsistent cases. The coverage re-lates to the overlap of the conditions of the joint sets. Consistency andcoverage help the interpretation of results (Ragin, 2008; Greckhamer,2011).Therefore,theconsistencymeasureshouldbecloseto1toenableinferencesthatasubsetexists,indicatingthatallcasesthatshareacon-dition also share the outcome. The consistency benchmark is 0.90 fornecessary and suf  󿬁 cient condition (Greckhamer, 2011) which is higherthanRagin's(2008)consistencybenchmarkof0.85.Rawcoverageistheoverall coverage of a combination that may overlap with other combi-nations and should be below 0.50. 4. Results 4.1. Qualitative results In the cases of negotiations between the Japanese HQ and cross-culturalsubsidiary,theHQ  – subsidiarynegotiationsfeaturepatience,lis-tening, collaborative strategies and consensus (see direct quotesbelow):  “ When we had a consensus built a scheme of global organiza-tion together with US, EU, Japan and Asia. I tried to understand mutualpower-balance and our thought, led them to desirable meeting point ” (C12 Japan/USA). “ Almostallnegotiationsseemquitehardinthebeginning,however,reasonablelogic,consistencyandgoodfaithcansolvealmosteveryverytough looking negotiation. ”  (C13 Japan/USA, France, Italy).  “ Extreme ‘ Patience ’  is important. I started higher offer, but  󿬁 nally reach agree-ment that is close to counterpart. (Case 9 Japan/Singapore). When youdo not fully understand the view of the other party, then listen, askopen question, create atmosphere where they speak, open up, furtherfacilitate the discussion ”  (C 20 Germany, USA/Japan, USA). 4.2. FsQCA results In line with previous research (Ragin, 2008; Pajunen, 2008;Schneider et al., 2010), the causal conditions (INTSTRAT, WINSTRAT,PAT) are necessary conditions for the outcome,  󿬁 rst offer (FOFFREA).Table 3 below shows the outcome. The consistency and raw coveragelevels are signi 󿬁 cant.With the “ 󿬁 rst offer including20% margin ” asanoutcome, there isahigh consistency of 0.96. A high consistency measure (score between0.91and1)meansthataconditionoracombinationofconditionsisnec-essary or almost always necessary (Ragin, 2008). The model considersthe  󿬁 rst offer as dependent on adaptation to an international strategy,win – win strategy and patience, such that  󿬁 rst offer = f (patience, int.strat,win – win).BoththeHQ  – subsidiaryandthesubsidiary – HQnegoti-ations need this approach. 4.2.1. Truth table analysis The truth table analysis shows consistency of 0.86 and coverage of 0.80 as a logical remainder with intermediate, parsimonious and com-plex solution. These strong results show clear evidence that  ‘ adaptingto an international strategy ’  is necessary for the outcome. The truthtable analysis reveals higher consistency for the negation of win – win(0.9)andthenegationofpatience(0.96)leadingtoanoverallconsisten-cy of 0.87 when adopting an international strategy (Table 4).  Table 2 Break-points for calibration.Variable (and label) De 󿬁 nition for coding and role in theoretical model Coding gradations BreakpointsWin – win strategyWINWINThe strategy is one condition which is a common feature of  Japanese negotiation styles and explains the length of negotiations0 none,0.2  󿬂 at hierarchy0.5 mid level0.8 hierarchical,1 fully0.25; 0.5; 0.8Adaptation to international strategyINTSTRATThis part of a reactive style assumes that the Japanese negotiatorbehaves differently in International negotiations than in domesticnegotiations0 none,0.25 collectivist0.5 mid level,0.8 individualist1 high0.25; 0.5; 0.8PatiencePATPatience is consequence of Japanese long bargaining horizon 0 none,0.2 femininity,0.5 mid level,0.8 masculinity1 high0.25; 0.5; 0.8Bargaining process starting with ahigh offer of 20%P R  FOFFREAThe initial price P R   is a function of patience displayed over thebargaining horizon, the co-operative strategy and an internationalstrategy to cover costs of negotiating.0 none,0.2 femininity,0.5 mid level,0.8 masculinity1 high0.25; 0.5; 0.81297 U.F. Ott, Y. Kimura / Journal of Business Research 69 (2016) 1294 – 1300
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