Jan 1, 1994 - Legal Negotiations/Arbitration. 5. Interpersonal ... marketplace far exceeds that of the consumer marketplace (Hutt and Speh, 1989, p.
Marketing Negotiations: Theory, Practice and Research Needs Jehoshua Eliashberg University of Pennsylvania Gary L. Lilien Nam Kim Penn State University
ISBM REPORT 8-1994
Institute for the Study of Business Markets The Pennsylvania State University 402 Business Administration Building University Park, PA 16802-3004 (814) 863-2782 or (814) 863-0413 Fax
Marketing Negotiations: Theory, Practice and Research Needs
Jehoshua Eliashberg” University of Pennsylvania Gary L. Lilien** Penn State University Nam Kim*** Penn State University
3 1 January 1994
*Professor of Marketing, The Wharton School, The University of Pennsylvania, Marketing Department, Philadelphia, PA 19104, Tel: 215-898-5246 **Distinguished Research Professor of Management Science, The Pennsylvania State University, University Park, PA 16802, Tel: 814-863-2782 ***Ph.D. Student, Department of Management Science, The Pennsylvania State University, University Park, PA 16802, Tel: 814-865-0608.
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Marketing Negotiations: Theory, Practice and Research Needs
Negotiation is the most prevalent basis for exchange in the global business-to-business marketplace. While the research literature on bargaining is quite large, its pragmatic content is questionable. The problem we address in this paper is how well the characteristics of academic research in this important area match the attributes of applied problems. We address the problem via a methodology that can be viewed as an alternative to meta-analysis. We coded the presence/absence of 30 key characteristics in a sample of 293 research articles and 97 case articles. We then clustered the entire set of articles and found that, with minor exceptions, there was little overlap. Researchers in this area have not given sufficient attention to the behavioral aspects of the negotiation process involving personality, social relations, cultural differences, venue, aspiration level, expectation of future interaction and the like. We conclude with a call for more practitioner-researcher interaction and for the adoption of a more eclectic set of research methods to address the areas of neglect.
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1. Introduction
In one of the most widely cited and influential studies of management education and development, Porter and McKibbin (1988), report, . ..research in a professional school should be directed to the profession, which includes practitioners as well as scholars.... faculty researchers in business schools, however, are writing only (or at least primarily) for other academics rather than attempting to generate research useful to both groups (p. 167). Research being turned out by business schools is largely trivial and irrelevant. It does not address very well or at all the most important problems and issues faced by business. [It] can be safely ignored with little loss to the manager or executive (p. 168). Similar criticisms abound: The research in business administration during the past 20 years would fail any reasonable test of applicability to consequential management problems (Behrman and Levin, 1984, p. 141).
The product supplied by university operations research and management science departments does not match the needs of Corporate America (Daniel Raz, executive search firm principal, quoted in Homer, 1992, p. 26).
You’ll discover more about real problems from reading the New York Times, Time Magazine and The Wall Street Journal that you would from reading our journals. (Yale University Professor Edward Kaplan, also quoted in Homer, p. 26.)
We firmly believe that most business school faculty DO want to work on problems that are both important and that have potential impact on practice. Porter and McKibbin’s prescription is for researchers to have more interaction with the world of business practice (p. 146-147.). That interaction can take place in at least two ways: through personal experience or through systematic study of reports of practice.
Our purpose in this paper is to develop and apply a systematic analysis that can identify research needs that address real business problems. We focus on one area of business research here: negotiations in the business marketplace. Due to the exploratory nature of our approach, our conclusions here will be tentative at best. However, we will show that a systematic procedure, comparing reports of practice with existing research, can be valuable both in identifying research needs and helping to set priorities for satisfying those needs.
We proceed as follows. In section 2, we describe crucial aspects of the problem context. In section 3 we provide a brief overview of the marketing negotiations literature. In section 4, we sketch our research procedure, our data and our plan for analysis. In section 5, we interpret and discuss our results, identifying those areas that are most in need of research attention. We conclude in Section 6, evaluating the relative success of our approach and with a resulting outline of a research program that should be developed to bridge the gaps in this particular area.
2. Marketing Negotiations
Negotiations: A Key Marketing Topic. Almost any human interaction involves some form of give-and-take, i.e., negotiation. In a non-systematic review of the literature on bargaining, we note five main areas of study:
1. Marketing Negotiations 2. Political Negotiations 3. Labor/Management Negotiations 4. Legal Negotiations/Arbitration 5. Interpersonal Negotiations
While there is some overlap in the issues that concern bargaining and negotiations in areas 2 through 5 with those in marketing, marketing problems do have some distinctive characteristics.
By marketing negotiations we limit ourselves to the exchange process between organizational or business decision-making units. While some consumer markets (for houses, automobiles, works of art, some durable goods) do clear via a bargaining mechanism, bargaining is the generally recognized norm in the business marketplace: “Most purchases by institutions, government agencies and commercial businesses are negotiated” (Reeder et al., 1987, p. 475). If we combine Reeder et al’s comment with the observation that the dollar volume of transactions in the business marketplace far exceeds that of the consumer marketplace (Hutt and Speh, 1989, p. 4), it becomes apparent that negotiations phenomena are quite central both to marketing theory and to marketing practice.
Five key journals (Journal of Marketing, Journal of Marketing Research, Marketing Science, Industrial Marketing Management and Management Science) published 441 articles in the 1990 to
1992 period (counting only the marketing or negotiation-related articles from Management Science). Of those 441 articles, 39 or almost ten percent, deal with business marketing negotiation
related issues, with topics such as procurement and channel interactions occurring with the most frequency.
Note that business marketing negotiations take place between individuals within an organizational context. Hence the negotiator’s personality traits, venue, culture and the like are potentially important and relevant. Indeed, culture and learning were among the top four topics covered in the 39 marketing articles cited above. Interpersonal negotiations take place between individuals for their own immediate personal benefit; business marketing negotiations take place, however, between agents of organizations for the benefit of the organization as well as for the personal gain of the individual.
Major Characteristics of Marketing Negotiations. Raiffa (1982) provides a useful starting point for classifying generic bargaining situations. We invoke those below that are relevant for business marketing situations and supplement them for thoroughness. In the process of doing so, we also state whenever possible, our prior expectations with respect to the occurrence frequencies of the various dimensions in marketing negotiations. (We will use the numbering scheme below to refer to the issue throughout the remainder of the paper.)
1. Are there two or more than two narties? While some situations, especially those involving intrafirm negotiations (Harris, Kriebel and Kaviv, 1982), might involve more than two parties, these situations can reasonably be expected to be rare. The dominant paradigm is likely to be interfirm (e.g., buyer-seller) negotiations involving two parties (although more than one such negotiation can be going on at the same time).
2. Are the Dar-ties monolithic? There may be reasons to simplify business marketing negotiations by assuming that all parties are monolithic. However, many business marketing situations involve team buying and selling, with several individuals with differing backgrounds, values and goals involved in both the buying and the selling process (Patton, Puto and King, 1986).
3. Is the negotiation renetitive? “...when the bargaining is repetitive, each disputant must be particularly concerned about his reputation, and hence, luckily for society, repetitive bargaining is often done more cooperatively (and honestly) than single shot bargaining” (Raiffa 1982, p 13). We anticipate that our analysis will confirm the expectation that reputation effects are central to business marketing negotiations (Dwyer, Schurr and Oh, 1987). In addition, the repetitive nature of a negotiation means that participants must
incorporate the value of future opportunities for exchange in the current bargaining arrangement.
4. Are there linkage effects? By this Raiffa means are there precedents (with the same or other
parties) or parallel agreements that should be considered in this negotiation? We suspect that linkages will be shown to exist for many business marketing negotiations as there are often moral or in some cases legal (i.e., Robinson-Patman Act) reasons to relate one agreement to another. For example, one agreement with a channel member will almost always set the stage for another (Stem, Stemthal and Craig, 1973; Schurr and Ozanne, 1985).
5. Is there more than one issue? We note that much of the analytic research in negotiation as well as most textbook examples deal with a single issue--price. Our business marketing experience suggests however, that this is rarely the case in practice, even for commodity type products, where delivery timing, price schedule, timing of payments, etc., add other dimensions to what might appear to be simply a negotiation over price (McFillen, Reck and Benton, 1983).
6. hmeement reauired? In many business marketing negotiations, the buyer and seller can agree to disagree (i.e., there are alternative buyers and sellers). However, there may be some bilateral monopolies--single buyer and a single seller--where a buyer has a unique need and only a single supplier can satisfy that need. This situation is most likely to occur where the fixed cost of supplying the product is high or production expertise is scarce (Fouraker, Siegel and Harnett, 1962).
7. Is ratification reauired? At first glance, this appears to be the type of situation most likely to occur in political or union negotiations; however, ratification may be important, for
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instance, in business marketing situations whenever the terms of the agreement negotiated by a salesperson, say, must be ratified by someone else in the organization (Tung, 1984).
8. Are threats nossible? Threats are key in the development and use of power and we suspect that they will emerge as important in many situations. The marketing literature seems to have recognized the importance of power in interorganizational settings in a rather extensive literature (Dwyer, 1984).
9,10. Are there (91 time constraints or (10) time-related costs? We suspect that the costs of the negotiators’ salaries and expenses are a non-trivial part of many business marketing negotiations (Bird, Clayton and Moore, 1973). In addition, the variations in perceived costs of personal time have been cited as a critical in discussions of international negotiations (Fisher, 1980).
11. Are the contracts legallv binding? There are several ways a contract can be binding: it can be legally binding, it can be self-enforcing or self-binding (Telser, 1980) or it can be binding due to group norms (Bacharach, 1983). Negotiated sales agreements can fall into either category.
Raiffa himself felt that the dimensions outlined above did not provide a comprehensive enough taxonomy for bargaining situations. We therefore supplement the characteristics above with additional characteristics, roughly grouped into two categories: decision making issues, and situational variables.
Decision Making Issues. Decision making units must decide on their objectives, whether they are truly substantive or merely maintaining the relationship (Eliashberg and Michie, 1984, and Fisher and Ury, 198 1). Those objectives (e.g., superordinate or individual unit-based)
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might be in direct conflict with one another, in which case the negotiation is considered a zero sum situation (12). The parties might have objectives that were common (symmetric) or different from one another (asymmetric objectives) (13); those objectives might be commody known or considered private informution (14) of the individual parties; and the objectives might be some form of utility maximization (15) or something else such as maintaining a relationship or meeting some sort of “acceptable” hurdle level. Indeed, this later point, that of aspiration level (16), has received much attention in the bargaining literature (Rubin and Brown, 1975; Ben-Yoav and Pruitt, 1984; McAlister, Bazerman and Fader, 1986; Siegel and Fouraker, 1960, for example). The nature of many complex negotiations, balancing present and future actions, multiple actors with mixed motives suggests that not all of them pursue a single objective; some negotiations may have multiple objectives (17). Relatedly, Fisher and Ury (1981) focus on the cost or risk of no agreement (18), suggesting that well-prepared negotiators need to understand what the noagreement outcome will cost them. Finally, many authors (e.g., Karrass, 1970; Rubin and Brown, 1975) have provided extensive lists of negotiators’personality traits (19) that affect bargaining decision-making and their subsequent outcomes.
Situational Variables. Relative power structure (20) (Svejner, 1986) is almost always critical in the development of bargaining strategies and in evaluating likely outcomes. In particular, power resulting from dependence among parties plays an important role in channel negotiations (Heide and John, 1988; Frazier, Gill, and Kale, 1989; Keith, Jackson, and Crosby, 1990; Hallen, Johanson, and Seyed-Mohamed, 1991; and Butaney and Wortzel, 1988). One way that power manifests itself is through (private) information (21) (Chatterjee and Ulvila, 1982), whether that information concerns a party’s own or that party’s opponent’s preferences, payoff or alternatives.
The nature of the exchange of offers and counter-offers, whether they are simultaneous (22), sequential or free form can have an impact on the process and the efficiency of the bargaining
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process (Chatterjee and Lilien, 1984). Since some evidence suggests that an offer may reveal valuable information (Karrass, 1970), who makes thefirst offer (23) in a non-simultaneous offer bargaining situation could affect both the process and the outcome of the bargaining.
Given the current emphasis on relationships throughout the corporate world (Johanson, Hallen and Seyed-Mohamed, 1991), it is not surprising that social relations (24) and the expectation of firture interaction (25) (Crosby, Evans and Cowles, 1990; and Noordewier and Nevin, 1990)
may have an impact on the bargaining process and outcome (Greenhalgh, 1987). Anecdotal evidence supported by research (Schurr and Calder, 1986; Rubin and Brown, 1975) suggest that venue (26), the social and physical setting of the negotiation, differences in cultural norms (27),
etc. (Campbell, Graham, Jolibert, and Meissner, 1988; Tse, Lee, Vertinsky, and Wehrung, 1988; Clark, 1990; and Heide and John, 1992), may be quite influential with respect to the negotiating tactics (28), as well as outcomes. A related topic is if and how Zearning (29) (Thomas and Soldow, 1988) occurs during the process of negotiation. The more complex and new the negotiation and the longer the relationship between the bargainers, the more important learning is likely to be to the bargaining situation (Patchen, 1970). Finally, the structure of the reward system, the goals and the information available to the bargaining parties will differ if the negotiation is inter-organizationaZ (30) vs. intra-organizational (Hutt, Reingen, and Ronchetto, 1988; Ronchetto, Hutt, and Reingen, 1989).
We used the above discussed 30 characteristics as classification variables to code various bargaining situations and scenarios from both researchers’ and the practitioners’ perspectives. We included an additional 28 variables for research articles, describing both the research perspective/paradigm and the type of methodology used. We discuss those additional variables as well as our data collection procedure in the next section.
3. Brief Overview of the Negotiations Literature
The negotiations literature can be described from different perspectives. Raiffa (1982) suggests a four-perspectives framework for classifying various approaches to studying negotiations:
(1) Symmetrically descriptive, focusing on what people actually do in negotiation settings. (2) Symmetrically prescriptive, studying what ultra-smart people should do if all people know that everyone else is ultra-smart.
(3)
Asymmetrically prescriptive/descriptive, concerned with advising one party how it should behave, given some probabilistic understanding about how other parties might behave, and
(4
Externally prescriptive or descriptive, focusing on the role of facilitators and other third parties.
Chatterjee (1985) distinguishes between two major approaches to studying negotiations. The first approach focuses on the outcome of the negotiation and thus “abstracts from specific descriptive models of the process by which bargaining proceeds.” The second approach, which does focus on the process of negotiation, analyzes the offers and counter-offers made by negotiators via specific non-cooperative game models.
The literature on negotiations can also be broadly classified into empirical vs. theoretical. The empirical literature can be further subdivided as either anecdotal or erimental.
The anecdotal work or case studies are usually those of experienced practitioners (e.g., Cohen 1980; Nierenberg, 1973) relating negotiation encounters in which they participated or those of
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dispassionate observers (e.g., Douglas, 1962). These attempt to derive (post-hoc) reasons for success or failure of particular experiences. Based upon these anecdotal evidence, by means of a mixture of inductive and deductive reasoning, some researchers have advanced theoretical frameworks (Walton and Mckersie, 1965; Gulliver, 1979).
Experimental studies are concerned mainly with testing, in controlled settings, the role of various factors underlying behavioral theories (Neale and Bazerman, 1985b; Rubin and Brown, 1975; Chertkoff and Esser, 1976) or analytical frameworks (Chattejee and Lilien, 1984; Neslin and Greenhalgh, 1983; Roth and Malouf, 1979). Issues that have been experimentally examined and found to play an important role in negotiation experiences include (1) aspiration level (Bazerman, Magliozzi and Neale, 1985), (2) reservation prices or limits for negotiation (Yukl, 1974), (3) power (Eliashberg et al., 1986, McAlister, Bazerman, and Fader, 1986), (4) time pressure (Camevale and Lawler, 1986), (5) reciprocation (Bartos, 1974), (6) expectations (Pruitt, 1981), and (7) various personality traits (Greenhalgh, Neslin and Gilkey, 1985).
Analytical approaches to negotiations have focused mainly on outcomes and have dealt with the problem mainly in a static fashion. Research of this type emphasizes explanation and/or prediction of the nature of the agreement that will result. The classic examples of this approach can be found in the cooperative game-theoretic literature (Nash, 1950; Shubik, 1982; Young, 1975). Such modeling is axiomatic in nature: the basic goal of this literature is to develop a formal theory that prescribes the outcomes of bargaining games in which constructs such as power, equity and efficiency are important in the context of either negotiation conflicts (Nash, 1950; Kalai and Smorodinsky, 1975; Myerson, 1984; Gupta and Livne, 1988) or arbitration (Ashenfelter and Bloom, 1984; Eliashberg, 1986). However, this literature has resulted in few insights about the details of the process leading to the specified outcome (Gale, 1986).
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Non-cooperative bargaining models, unlike cooperative game-based bargaining models, T h eby nwhich , bargaining a l l occurs. p o s s i b l e construct an extensive form model of the process sequentially rational equilibria are identified, that is, both the optimal behavior in such situations as well as the resulting outcomes (e.g., Rubinstein, 1982). Recent research (Chatterjee, 1985) has incorporated aspects of incomplete information in non-cooperative/non-zero-sum bargaining games. Constructs considered here include: reservation prices (Chatterjee and Samuelson, 1983), type of negotiator (Harsanyi and Selten, 1972), and negotiator’s time preferences (Rubinstein, 1987). In general, the non-cooperative bargaining models (e.g., Myerson and Satterthwaite, 1983) are more concerned with determining conditions under which the equilibrium solutions exist, are unique, and efficient.
There has been interest in achieving other research objectives in developing analytical models of two-party negotiations (Trifon and Landau, 1974; Rao and Shakun, 1974; England, 1975; Fogelman-Soulie, Munier and Shakun, 1983; Gupta, 1989; and Balakrishnan and Eliashberg, 1993). These models have deviated from the approach adopted in standard game theory. Fogelman -Soulie et al., 1983, in particular, have a well-argued exhortation for adopting alternative modeling procedures. Part of the reason for such calls stems from the disenchantment with the applicability of some of the basic axioms to real-world negotiation behavior (Gale, 1986; Sebenius, 1992). For example, a series of recent experiments (e.g., Guth, Schmittberger and Schwarz, 1982; Neelin, Sonnenschein and Spiegel, 1988) indicate that even fundamental concepts such as subgame-perfect equilibrium fail not only as a ” . . .point predictors of observed behavior, [but] also fail to account for observed qualitative differences” (Ochs and Roth, 1989). See Brams, 1990; Chatterjee, 1985; Kreps, 1990; Raiffa, 1982; Roth, 1979, 1985; and Young, 1991 for comprehensive reviews of analytical research on negotiations. See also Evans and Beltramini, 1987, Neale and Bazerman, 1985a; Pruitt, 1981; and Rubin and Brown, 1975 for reviews of empirical behavioral research.
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4. Data Collection and Analysis In order to get a sample of research articles and case studies, we used the following snow-ball procedure: we started with a well-known and widely-cited set of articles on business marketing negotiations, traced references in those articles, traced the references in the references and so on until we were able to find no new relevant articles. This process resulted in 293 research articles. We drew the case studies from the reference lists as well, but included material we and our colleagues had gathered over the years from teaching materials, texts, monographs and the like, resulting in 97 case articles. In order to be usable each case article had to include a fully developed discussion of the bargaining situation; a major screening criterion for inclusion for both case and research articles was that the coder be able to provide reliable answers to the questions in our coding instrument. (See Appendix 1 for coding instructions.)
Exhibit 1 provides a breakdown of the sources of the research articles. A glance at the number of articles over time suggests that research interest in this area has been growing; the apparent decrease in the 1986-1990 time frame is a result of our having collected the articles during 1986, 1987, and 1988, so only a portion of that latter five-year period is included.
Most of the 97 cases (7 1) come from chapters in books; of the remaining 26 cases, 13 are separately published Harvard Business School cases and the other 13 come from journals such as Industrial Marketing Management and The Negotiation Journal.
Building on the taxonomy in section 2, we attempted to identify the presence or absence of a number of key characteristics of business marketing bargaining situations described in the research articles and in the case studies. We employed three independent coders for each of the articles, all of whom were Ph.D. students with backgrounds in research in bargaining. In each situation, the coder assigned his/her subjective probability to the existence/non-existence of a characteristic of
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the negotiation in the written materials. (For example, Are there more than two parties involved in the negotiation described in this case?) If all three coders assigned a probability greater than 0.5 to the existence of a characteristic, we coded that characteristic as “present” (with a “1”). If all three coders assigned a probability of less than 0.5, we coded the characteristic as “absent” (with a “0”). If, after recoding to O’s and l’s there was disagreement, the coders met and resolved their differences. We encountered relatively little ambiguity in the coding process; for the most part’ the coders were able to resolve differences with minimal discussion. For two issues, however (whether objectives were utility maximizing--item 15, and whether they were symmetric--item13), the coders could not agree and we dropped those items from further analysis.
Our objective with this coding scheme was to create a basic data matrix of articles (97 + 293 = 390) by characteristics of the articles (30 - 2 = 28 characteristics).
Exhibit 2 provides the relative occurrences of our coded characteristics broken down by source: case versus research article. We immediately see from this breakdown that the case articles tend to stress more complex phenomena, characterized by more qualitative items such as linkages, credible threats, time constraints, and power while research articles have focused primarily on simpler, more stylized situations.
Note the divergence in certain overall situations between the cases articles and the research articles. Case articles show a near absence of one time or single issue negotiation situations while many research studies address these topics. In addition, we see single agents (i.e., monolithic parties) as the focus in over half the research articles compared with only 10% of the case articles. And while simultaneous offer bargaining seems to be a popular research topic (77%), it is rarely observed in case articles (16%).
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To develop additional insight into the research approach and methodology used, we also coded the research articles in terms of problem formulation and approach, and methodology; Exhibit 3 displays the results and indicates that about 2/3 of the research articles in our sample are purely theoretical. That is, they do not report any empirical analysis. The articles are split pretty evenly between normative and descriptive analyses and the theoretical papers primarily focus on situations that are deterministic, can be modeled in continuous time, with linear objectives, delayed response and equilibrium analysis. Game theory, utility theory and decision analysis are the main analytical methodologies that see by far the greatest amount of use in analyzing these situations, while analysis of variance (ANOVA), regression and frequency analysis are the statistical methods that are most often used.
Next we wish to investigate the incidence of these overall tendencies more deeply. Conceptually, we want to identify clusters of problems (cases) and clusters of solutions (research) within the space of bargaining situation characteristics. To this end we must develop a measure of association between any pair of articles. We used a matching coefficient (S) (Dillon and Goldstein, 1984) for this purpose, which can range between 0 (most dissimilar pair) and 1 (most similar pair):
S = (# of l/l matches + # O/O matches)/(# possible matches)
(1)
Our distance (dissimilarity) measure is 1-S from equation (1).
The output of this step is a 390 x 390 (symmetric) matrix of dissimilarities, which is the main input to our clustering procedure. For this purpose we first removed outliers (articles close to no others) using the trim (10%) option in SAS (1990) with the control value (k=20) set to the square root of the number of observations (Silverman, 1986). For kth-nearest-neighbor density estimation this eliminated 8 case articles and 31 research articles from further analysis.
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We used four different cluster analytic procedures to group the data: (1) Average Linkage Clustering, (2) the Centroid Method, (3) Wards Method, and (4) Complete Linkage Clustering. All of these are hierarchical methods (Anderberg, 1973; Johnson and Wichem, 1988), building up clusters from individual data elements (i.e., articles). By reviewing pseudo F and pseudo t 2 statistics, we determined that the average linkage clustering procedure generates 11 clusters while the other procedures call for 8 clusters. We adopt the 8 cluster solutions for simplicity throughout the rest of this paper (eliminating three one-member clusters, essentially as outliers, yielded by the average linkage procedure).
To test the robustness of the four clustering algorithms, we performed a convergence test (Exhibit 4), indicating the degree of consistency of classification of the observations. The results of that analysis show that, in each case, the percentage of consistent classification for any pair of methods is significantly higher than chance. There is clearly some considerable fraction of cases whose classification is cluster-algorithm dependent. Finally, Exhibit 5 provides a general summary of the number of case articles and the number of research articles in each of the 8 cluster solutions. We use the results from Wards method as typical of our results in the rest of the paper.
5. Results Appendix 2 gives a complete list of the incidence percentages for all of the variables for each of the clusters from Wards procedure. Exhibit 6 focuses on three typical clusters that reflect our overall results: Cluster 2 (evenly split between research and case articles), Cluster 3 (the largest cluster involving all research articles), and Cluster 7 (the largest cluster dominated by case articles). We highlight some of the more striking differences we see there.
Consider Cluster 2, the one cluster in which there appears to be both case studies (real-world problems) and research associated with those problems. This cluster reflects low overlap between
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case and research articles, with: multiple issue, multiple agents, multiple time periods, credible threats, power, bargaining tactics, and a risk of no agreement as important negotiations issues.
Comparing Cluster 3 (the largest cluster with research articles only) with Cluster 7 (the largest cluster dominated by case studies), we see what issues that appear important in the case studies are missing from the research articles. Almost all of the case studies report the incidence of linkages/precedences, credible threats, legal issues, time constraints, explicit aspiration levels and behavioral issues such as personality, social relations, venue, culture, specific bargaining tactics and the expectation of future interaction as major characteristics of importance. Research articles tend to under-represent the importance of these issues.
Looking back at the overall results (Exhibit 2), at the results from other clusters in this solution, and at the results of other cluster-solutions, leads to essentially the same qualitative conclusion: while researchers have addressed many of the issues that case-writers have indicated are important . in practice, that research does not reflect the richness of bargaining phenomena that appear in actual bargaining circumstances.
The key things that are missing from the attention of researchers are those items that are hard to quantify and operationalize: personality, social relations, venue, differences in cultures, etc. One can argue that those items are missing because they are hard to deal with in either the experimental, laboratory settings that characterize the behavioral research in negotiations or in the highly stylized quantitative models that characterize the analytic research in this area.
Does this limitation of our key research tools excuse us for overlooking what appear to be key realworld phenomena in this area? We think not; we need new research approaches in this area; ethnography, neural network analyses, content analysis, and artificial intelligence or rule-based systems research, for example, are approaches come to mind. These are approaches that do not
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appear in Exhibit 3 and they must be brought to the fore. We cannot afford to overlook important real-world problems simply because our traditional research methods and tool kit are not amenable to them.
We thought perhaps that our conclusions were too severe, that perhaps the gap was indeed closing and that we were reflecting on a situation that was in the process of correcting itself. Exhibit 7 shows unfortunately that this is not the case. Indeed, many of the “hard to quantify” phenomena that we referred to above (such as aspiration level, personality, bargaining cost, learning and the risk of no agreement) appear to have been given LESS emphasis in recent research than in earlier periods.
6. Conclusions
We began this paper with a discussion of the need to bridge the gulf between research and realworld problems. Such a gulf appears to exist in the bargaining arena and the gap between the issues that research is focusing on and those that emerge in a review of case studies involving realworld bargaining issues does not appear to be closing. Research articles and case materials that reflect actual bargaining issues overlap to a disappointing degree.
We need more researcher-practitioner interaction to allow researchers to better understand the important elements of the problems they are researching. Such interaction may induce researchers truly interested in the problem domain (and not just looking for a convenient place to apply their favorite research methods) to adopt a more eclectic set of research tools to address these problems. Practitioners who are really interested in finding solutions to their bargaining problems must become partners: they must be open to researchers who want to observe and record the complete process of negotiations so that the two cultures gap can be bridged.
We see two contributions of this paper. The first is substantive: we have tried to identify a real gap between the incidence of issues that emerge as critical in case studies involving business marketing negotiations and those issues that researchers have addressed in the academic literature. Unlike other literature reviews-based studies, we have used a systematic, quantitative procedure to document both the existence and the source of the gap.
Our second contribution is the methodology we have employed to document the gap. Our procedure involved the following five steps:
(1) A snowball technique to identify an exhaustive set of relevant articles. That technique identifies “contiguous articles”--those referenced in one or more of the existing set of articles. While this procedure may miss some articles, those articles would not have been referenced elsewhere, and hence, are unlikely to be seminal or influential. Therefore, this sampling procedure, while not exhaustive, should identify the important, influential articles in the field.
(2) A literature review to identify a systematic coding scheme for the articles. We used the negotiations literature itself to identify those issues that both researchers and practitioners deemed important. We then developed operational definitions and a systematic procedure to implement the coding scheme.
(3 Multiple coders per article to provide convergent measures. We used multiple, expert coders (Ph.D. students with background in negotiations) to identify the incidence of issues and we supervised the resolution of inconsistencies.
(4 Multiple cluster-analytic methods for grouping. We used several independent clustering algorithms and tested for the consistency and robustness of the classifications and grouping of articles.
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(5)
Profile analysis of clusters to identify gaps. We profiled the different clusters and tested for significant differences between incidence levels of key characteristics.
The procedure is far more elaborate and systematic than the typical literature review. And, like the increasingly popular meta-analyses, used to generalize the results of response models (Farley and Lehmann, 1986), this procedure has the potential to provide quantification of a heretofore subjective process of gap evaluation and analysis.
There are a number of limitations to our research. As we have not been able to locate other systematic procedures for identifying research gaps, we had to develop the one described above. As with any first trial of a procedure, it should be improved and tuned after testing. While we tried to be exhaustive in our selection of articles concerning business marketing negotiations, there may be some bias in our selection process that we have not been able to identify. Our identification of issues, our coding system and our measure of inter-article association might also be further improved. We attempted to condense the set of issues via cluster analysis and no clear grouping occurred, leaving us with the original set of issues, rather than with a smaller set of issuegroupings that we had hoped for. We coded the incidence of issues (rather than importance of those issues); it is possible (though unlikely) that the issues researchers have been neglecting have been unimportant. The practitioner literature suggests that all of these issues are “important,” but it is not clear under what circumstances that importance varies.
To conclude, in our ideal world, we would find that all of the clusters of research articles would have at least a modest number of parallel research articles. For that to happen we need an active research agenda focusing on the missing issues like personality, social relations, venue, cultural differences, time constraints, learning and the like. It is unlikely that such research will occur without expanding our set of research tools beyond stylized theoretical models and equally
19
narrowly focused laboratory experiments. We need to embrace creative methods of electronic data capture (computer-as-intermediary; video-taping the negotiation process, etc.) as well as ethnographic procedures (Van Maanen, 1983), neural network models, and the whole range of artificial intelligence/expert system approaches (Rangaswamy, 1993) to help bridge the gap.
Bargaining has been a main mechanism for exchange for as long as the exchange process has existed. Embracing new methods to examine issues that have largely been unexplored will pay important dividends to researchers and academics alike. We hope that the approach we outline here will be useful in stimulating research that spans the theory/practice gap in the business marketing area and that that general procedure can be improved and adapted to other areas of research in business.
20
Exhibit 1 Source and Publication Date Distribution of the Sampled Research Articles
r’
Year 1971-75 14
Pre 1970 7
Books
1976-80 16
1981-85 45
1986-90 1
Total 83
Name of Journal Academy of Management Rev Accountancy Advances in Exper. Social Psychology American Bar Association Journal American Bar Found Research Journal American Behavioral Scientist Behavioral Science California Management Review Columbia J. of World Business Communication Monographs Conflict Resolution Discussion or Working Papers Econometrica Harvard Business Review Industrial Marketing Digest (UK) Industrial Marketing Management International J. of Game Theory International J. of Public Administration International Marketing Review (UK) International Organization J. of Business Communications J. of Business Research J. of Conflict Resolution J. of Consumer Research J. of Economic Behavior & Organization J. of Economic Theory J. of Experimental Social Psychology J. of Intemat’l Business Studies J. of Legal Education J. of Marketing J. of Marketing Research J. of Mathematical Psychology J. of Personality & Social Psychology J. of Policy Analysis & Management J. of Psychological Studies J. of Purchasing & Materials Management Law Office Economics & Management Law Reviews Litigation Management Accounting Management Decisions Management Science Negotiation Journal Operations Research Organizational Behavior and Human Decision Processes Psychological Review RAND J.-bf Economics Review of Economic Studies Sloan Management Review The American Economic Review The Business Lawyer . The Journal of Business The Quarterly J. of Economics Theory and Decision Total
1 1 1 1
1
1 1
6
1 1
I
2
1 2 2
1
4 9 1
1
1 1 1
3
4
3 1 1
1
12
1 7 2 1 1
: 2 3
1 2 1 1 1
1 3 1
2 1 3 2
1 2
I
2
1
1
3
5
.
1 1 4
1 4
1
3
1 10 2 2
1 4 19 5
1
I 1 1 1 1 26
34
21
50
1 1 1 2 1
1 124
59
: 2 2 5 15 2 1 1 10 1 1 1 1 3 22 5 1 1 1 2 2 7 10 2 2 1 1 3 1 14 1 1 10 29 5 7 1 2 5 1 1 1 1 1 1 1 293
Exhibit 2 Incidence of Key Characteristics Characteristics 1. Two Parties
2. Single Agents ”
‘ Z
3. One Time 4. Linkage/Precedents 5. Single Issue 6. Agreement Required 7. Ratification Required 8. Credible Threats 9. Time Constraints 10. Bargain Cost Important 11. Contracts Binding Legally 12. Zero Sum 13. Svmmetric Obiective** , J 14. Obiecnves Private* 15. Utilitv Maximization** 16. Aspiration Level Explicit 17. Single Objective 18. No Agreement Risk Important 19. Personality Important 20. ___ Power _ _ __ Imnortant ___~ _~__.~~_ 2 1. Private Information Important 22. Simultaneous Offers 23. First Offerer Important 24. Social Relations Important 25. Expect Future Interaction 26. Venue Important 27. Cultures Different 28. Tactics Important 29. Learning Important 3 0. Inter-Organizational J---
t t
--
.
75% 75% 92% 62% 59% 97% 85% 100% n = 97
n = 293
93%*** 10% 9% 63% 1% 25% 67% 97% 62% 76% 100% 3% -25% _92% 5% 89% 83% 98% 66%
t
t
16% i
1
-
Research Articles Mean 74% 53% 40% 16% 34% 13% 4% 23% 24% 16% 26% 28% __ 24% __ 22% 39% 17% 15% 27% 44% 77% 13% 15% 19% 3% 10% 41% 18% 74%
Case Articles Mean
I
-
* The mean are NOT significantly different at the 1% level; all other percentages ARE significantly different-at that level. ** Not reported due to inconsistency amongst coders. *** Read as “93% of the 97 research articles represented negotiations between two parties.”
22
Exhibit 3 Key Characteristics of Research Articles: Formulation and Methodology Formulation/Approach: 1. 2. 3. 4. 5. 6. 7. 8.
Theoretical (68.3%) Process oriented (59.4%) Normative (55.6%) Deterministic (86%) Continuous (74.7%) Linear (86.3%) Delayed response (82.6%) Equilibrium (85.7%)
Empirical (31.7%) Outcome oriented (40.6%) Descriptive (44.4%) Stochastic (14%) Discrete (25.3%) Nonlinear (13.7%) Instant response ( 17.4%) Non-equilibrium ( 14.3 %)
vs. vs.
vs. vs. vs. vs. vs. vs.
Methodology: 9. 10. 11. 12. 13. 14. 15. 16. 17.
Game theory (47.1%) Control theory (0.7%) Utility theory (18.8%) Dynamic programming (0.3%) Linear and non-linear (1.4%) Decision analysis (47.1%) Conjoint analysis (0.3%) ANOVA (43%) Cluster Analysis (3%)
18. 19. 20. 21. 22. 23. 24. 25. 26.
n = 293
23
Conjoint Analysis (1%) Content Analysis (6%) Discriminant Analysis (1%) Factor Analysis (5%) Regression ( 14%) Simple Frequency (14%) Simulation (3%) Structural Equation (1%) Others (9%)
Exhibit 4 Test of Convergence of Alternative Clustering Algorithms Using 8-Cluster Solutions with Chance Proportion in ( )‘s. All convergence statistics significantly different from chance at .OOl level.
Average
Ward
Centroid
Average Ward
44.7% (13.6%)
Centroid
92.9% (52.4%)
41.6% (13.5%)
Complete
48.4% (17.1%)
60.7% (14.4%)
24
43.3% (17.4%)
Complete
Exhibit 5 General Results of Cluster Analysis
Clu ;ter Clustering Method
1
2
3
4
5
6
7
8
Ward
R54
R17 Cl5
R69
R31
R58
R14
Rl c70
R18 c4
Average*
R132 c2
R13 C79
R98
RlO
R5 c3
R2 Cl
c2
Rl c2
Centroid
R239 c9
R17 C86
R2
Rl c2
Rl
Rl
Rl
Cl
Complete Linkage
R63
RS c50
R45 Cl
R42
R91
RS C8
Rl c30
R4
~ 1
R = # of research articles in cluster C = # of case articles in cluster *3 one-member clusters eliminated as outliers for consistency with other methods.
25
Exhibit 6 Mean Incidence of Characteristics from 3 Key Clusters from Ward’s Method Variable 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30.
Two Parties Single Agents One Time Linkage/Precedents Single Issue Agreement Required Ratification Required Credible Threats Time Constraints Bargain Cost Important Contracts Legal Zero Sum Symmetric Objective* Objectives Private Utility Maximization* Aspiration Level Explicit Single Objet tive No Agreement Risk Important Personality Important Power Important Private Information Important Simultaneous Offers First Offerer Important Social Relations Important Expect Future Interaction Venue Important Cultures Different Tactics Important Learning Important Inter-Organizational
Cluster 3 (R oniv. 691
Cluster 7 (R 1. c 702
.84 .13 .09 .56 .06 .13 .38 .91 .56 .78 .88 .19
.55 .26 .25 .06 .06 .lO .Ol .09 .03 .lO .19 .lO
.94
.08 .08 .61 .oo .28 .70 .97 .65 .80 1 .oo .oo
.78
.G
.G
.;2 .09 .63 .44 .97 .78 .69 .50 .59 .63 .16 .25 1.00 .94 1.00
.09 .03 .oo .lO .26 .lO .99 .03 .06 .04 .oo .06 .19 .03 .90
.G .oo .96 .90 .99 .66 .ll .79 .82 .97 .75 .66 .99 .89 .99
Cluster 2 17. c 15)’
*Not reported due to inconsistency amongst coders. R = Research Article c = Case S tudv
26
-
Exhibit 7 Time Trends in the Incidence of Characteristics in Research Articles Cited in Exhibit 1 Variable 1. Two Parties Smgle Agent . One Time 47 Linkage/Precedents . Single Issue* 6 . AgIeement Reauired 7. Ratification Reauired Credible Threats L 9 Time Constraints* 10: Bargain Cost Important 11. CorLXts Legal* 12. zerosum 13. Svmmetric Obiective** 14. Objectives Private 15. Utility Maximization** 16. Aspiration Level Explicit 17. Single Objective 18. No Arrreement Risk Imoortant Is). Personahtv Imoortant 20. Power Important 2 1. Private Information Important* .
I
t I
.
72% 53% 22% 48% 10%
53% 40%
34% 46% 25%
48% 14% 23%/ 1% 14% 27% 23%
51% 50% 11% 42% 17% 1% 32% 22% 13%
20%
40%
28%
294 39; 22% 15% 25% 72% 72% 15% 6% 15% 1% 1% 43% 2 0% 72%
35% 40% 35% 18% 18% 53% 83% 18% 23% 23% 5% 5% 53% 23% 87%
1%
I
23 First Offerer Important 24: Social Relations Important 25 . Expect Future Interaction 26. Venue lmportant 27. Cultures Different 28 . Tactics Important 29 . Learning Important 0. Inter-OrGnizational
I t Sample Size=
26
I 1
,
/
20% 48% 17% 13% 27% 50% . 85% m . 9% I . 11% 16% 1% 13% 44% 18% I I t 82% t I
34
*Trend in incidence of characteristics significantlynegative at a = .l level; all other trends m significant. **Not reported due to inconsistency amongst coders.
50
47% 31% 15% 30% 15% 8% 21% 24% 21%
I
59% 43% 17% 32% 12% 05% 16%
29%
13%
25%
16% 40%
37% 18% 15% 35% 40% 71% 17% 17% 29% 4% 10% 39% 24% 61% 124
11% 19% 38% 74% 14% 14% 5% 9% 34% 11% 76% 59
Marketing Neg: Theory.Prac,Research-7
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36
Appendix 1 Coding Procedures for Cases and Articles 1. Two Parties (1) vs. More than two parties (0) Always Rule: restrict to negotiation situation alone. Unless explicitly stated that more than two parties take active part in negotiation under study always code as (1). Even if we do not find a statement of the number of parties it is reasonable to assume that a minimum of two is required and then look for multi-party evidence. 2. Single (1) vs. Multiple Agent (0) Look Rule: for participating members in the process of negotiation, and if even one party has multiple agents code as (0). If explicitly stated that each party is represented by a sole agent throughout the process then code as (1).
3. One Time (1) vs. Repetitive/Reputation (0) Are Rule:there continued negotiation sessions--if yes then code (0). Code as (1) only if explicitly stated that the negotiation was viewed as being one-shot.
4. Linkage/Precedents Rule:
Yes (1) No (0)
Restrict to the two party negotiation situation. There must be explicit mention of
Linkage Effects to code as (1) or (0).
5. Single Issue (1) vs. Multiple Issue (0) Rule: Again look for what issues could have been debated and resolved. Similar to Item 3.
6. Agreement Required
(Yes (1) No (0)
If Rule: solution alternatives, next “best” competitors are explicitly mentioned, then (0). If explicitly stated that no such alternatives exist , then (1).
7. Ratification Required
Yes (1) No (0)
If Rule: explicit statement is made that the negotiator went to a higher authority not involved directly in negotiation or that the negotiators decision-making capacity (role) is limited then code as (1) otherwise look for statements relating to negotiators authority in making offers and finalizing the contracts.
37
8.
Credible Threats Possible
Yes(l) No (0)
If Rule: threat is credible and so mentioned and if threat is used in a stated sense, then code as (1). If reason to believe that threats are not credible, then (0). 9. Time Constraints
Yes (1) No (0)
Explicit Rule: mention of time pressure--code (1). If mentioned that negotiations are protracted “for years,” then code (0). 10. Bargaining Costs Important
Yes (1) No (0)
If Rule: (a) it exists and (b) is critical, then (1) 11. Contracts Binding: Legally
Yes (1) No (0)
Use Rule:(0) only if mentioned that no legal papers are dealt with or if a “gentlemen’s” agreement was reached. 12. Zero Sum (1) vs. Non-Zero Sum (0) View Rule: this as being distributive vs. integrative. Zero sum (1) only if it is stated that there is no trade-off between issues and at least one of the parties tries to get the best deal on even one issue. Non-zero sum (0) if trade-offs stated to exist. 13. Objectives:
Symmetric (1) vs. Asymmetric (0)
Need Rule: “a priori” descriptive statements of each party’s objectives to determine symmetry vs. asymmetry. 14. Objectives:
Common Knowledge (1) vs. Private Information (0)
Reinterpret Rule: as Revealed vs. Non-revealed. Need explicit statements about each. 15. Objectives:
Utility Max (1) vs. Other (0)
Consider Rule: explicit statements such as a “satisficing” rule or less than optimum decision being made as an indicator of the other category. 16. Aspiration Level Explicit
Yes (1) No (0)
If Rule: mentioned that aspiration level was known to either party then code as (1). If mentioned that the aspiration levels of the two parties were not known to the two parties, then code (0). 38
17. Objectives:
Single Objective (1) vs. Multiple (0)
Look Rule: for statements or inferences as to the number of objectives being sought to fulfill via negotiation. Code as (1) if explicitly stated and code as (0) if several issues mentioned for even one party. Often after a series of negotiations the last negotiation session may be on a single issue--do not confuse with objectives. Take objectives in a holistic sense. 18. No Agreement Risk Important
Yes (1) No (0)
If Rule: (a) it exists and (b) is critical, then (1). If no mention, then (0). 19. Personalities Important
Yes (1) No. (0)
If Rule: any party acted as if personalities are important then code as (1). If both did not, then (0).
20. Power Important
Yes (1) No (0)
If Rule: there is dependence of one party on another in terms of “volume of product exchanged,” number of “alternative” suppliers or buyers, tendency to “do as told” then infer (1). Otherwise look for explicit statements of relative power, size, etc., to be able code (0). 21.
Private Information Important
Yes (1) No (0)
If Rule: (a) it exists and (b) is critical, then (1). Otherwise if not critical, then (0). 22.
Simultaneous Offers
Yes (1) No (0)
Are Rule:the offers made in “package” in each round? If yes, then (1). 23. First Offerer Predetermined
Yes (1) No (0)
If Rule: there is reference to who sought an offer first then (1). If there is an exchange of “possible sets” of offers by both parties until a real offer is made then (0). 24. Social Relations Important
Yes (1) No (0)
If Rule: (a) it exists and (b) is critical then (1). Extra negotiation relations can be mentioned in such terms as “informal” negotiations, etc. 25. Expect Future Interactions
Yes (1) No (0)
If Rule: high likelihood is mentioned then (1). If low likelihood is mentioned then (0).
26. Venue Important
Yes (1) No (0) 39
If Rule: (a) exists and (b) is critical then (1). thus “place” must be mentioned and must be critical to negotiation process or outcome, e.g., “all in one setting” etc. 27. Cultures Different
Yes (1) No (0)
Cultures Rule: different if negotiators come from different countries, or if explicitly stated that cultures are different (not in organizational culture sense). 28. Tactics Important
Yes (1) No (0)
If Rule: (a) it exists and (b) is critical then (1). See each party’s actions as moves to achieve a goal. Thus see if moves matter at all. 29. Learning Important
Yes (1) No (0)
If Rule: in the process of information exchange there is an improvement in the quality of the offers, i.e., one party is now able to place the other party’s perspective and also seek to alter its negotiation style, and this critically affects the outcome then code (1). If a statement can be found that says that such learning did not affect the situation then code (0). 30. Inter-Organizational Do Rule:negotiations occur between different organizations?
40
Appendix 2 Variable Means for Clusters by Ward’s Method Cluster 1 Variable
Cluster 2
.
Cluster 3
Meat-l
Mean 4 f Chsus.5 1 CI~1sus6 Cluster
Ma
Cluster 7 1 Cluster 8 M&Xl
I
94% 8%
I
I
1. Two Parties 2. Single Agent 3. OneTime 4. Linkage/Precedents 5. Single Issue 6. Agreement Required 7. Ratification Required 8. Credible Threats 9. Time Constraints 10. Bargain Cost Important 11. Contracts Binding Legal 12. Negotiation Private 13. Zero Sum 14. Symmetric Objective* 15. Objectives Private 16. Utility Maximization* 17. Aspiration Level Explicit 18. Single Objective 19. No Agreement Risk Important 20. Personality Important 21. Power Important 22. Private Information Important 23. Simultaneous Offers 24. First Offerer Important 25. Social Relations Important 26. Expect Future Interaction 27. Venue Important 28. Cultures Different 29. Tactics Important 30. Leaming Important 3 1. Inter-Organizational
72% 37% 20% 0%
31% 4% 2% 13% 13% 17% 0% 20%
33%
9% 56% 6% 13% 38% 91% 56% 78% 88% 94% 19%
55% 26% 25% 6% 6% 10% 1% 9% 3% 10% 19%
.
.
.
.
.
.
.
.
.
0%
10%
32% 19% 10% 45% 97% 19%
29%
13%
96%
.
94%
100% 77% 6% 45% 16%
.
9% 20% 2% 4% 15% 13% 0%
6% 13% 2% -2%._
9% 7% 17%
*Not report4 due to inconsistency amongst coders.
72% 9% 63% 44%
97% 78% 69% 50% 59% 63% 16% 25% 100% 94% 100%
.
.
.
.
.
.
.
.
.
.
I
.
.
.
.
.
,
,
.
.
m
,
1 I 0%
I
9% 3% 0% 10% 26% 10% 99% 3% 6% 4% 0%
0%
6% 19% 3%
32% 97% 10% 97%
I
.I
58% 71% 32% 10% 23% 77% 100% 19% 3% 32%
12%
90%
t
I
I 16% 38% 2% 16% 95% 48%
t4
.
0%
tb
t4
.
78%
t
71% 97% 91% 12% 74% 19%
86% 100% 7% 64% 100% 21%
86% 23% 18% 14% 4% I 1 5% I 5% I 32% 36% 9% 68% 91% I 9%
I
36% 7% 50% 0% 100% 79%
8% 61% 0% 28% 70% 97% 65% 80% 100% 99% 0%
0%
20%
23%
36% 100% 14%
99% 0%
23% 9% 27% 45% 55% 50% 73% 23%
0%
I
Ma
t&
t& 7% 98% 16% -5% 10% 67% 88% 19% 3%
0% 14% 5% 78%
t
0%
21% 86% 100% 36% 0% 64% 0%
0% 57% 14% 86%
96% 90% 99% 66%
I I
11% 79% 82% 97% 75% 66% 99%
89% 99%
I
I
32% 45% 64%
27% 95%
