the role of culture in the negotiation process marc
TRANSCRIPT
IACM conference Montreal, 2006
The Role of Culture in the Negotiation Process
Marc-Antoine Vachon1 Universtité du Québec à Montréal
Terri R. Lituchy2
Concordia University
1 Marc-Antoine Vachon is a PhD student at Université du Québec à Montréal 2 Terri Lituchy is associate professor of management at John Molson School of Business of Concordia University. Adress correspondence to Terri R. Lituchy, Faculty of Commerce Administration, Concordia University, 1455 de Maisonneuve Boulevard West, Montreal, QC, Canada, H3G 1M8.
The Role of Culture in the Negotiation Process
This paper proposes a framework where the role of culture is examined throughout the negotiation process. The outcomes of cross-cultural negotiation tend to be distributive. Culture is a source of this problem. To be examined, the negotiation has to be separated in three phases: antecedent, concurrent and consequent. The role of culture differs throughout this process. It is explained by the presence of different dimensions having their proper role to play at each step: the preparation, the interaction, the agreement and the outcome. Nine cultural dimensions are included in the framework. Every link included in the negotiation process is discussed. Fifteen hypotheses are proposed to measure the influence of culture throughout the negotiation process. This paper proposes a new approach of the cultural distance, a useful way to consider culture in the preparation of negotiation and a useful set of cultural dimensions to evaluate and to adjust to during the interaction. The ultimate goal is clear: to help the managers reaching distributive outcomes in cross-cultural negotiation by improving the tools to deal with a different culture.
Introduction Finding business partners may be difficult. Finding business partners in
other countries may be even more difficult. In fact, it is often considered a long
term endeavour. Once a partner has been identified, the business negotiations
begin. Many studies have found that negotiations are made differently throughout
cultures (Adler & Graham, 1987; Clark, 1990; Lituchy, 1997; Lituchy & Dahl,
1993). Intra-national negotiations are less complex that international ones
(Graham & Andrews, 1987). Internationalization of firms may cause some
negotiation issues. The importance of culture in international negotiations is well
known (Gannon, 2004) and could be considered as a cause of problems as such
misinformation and misinterpretation (Copeland & Griggs, 1985; Tung 1982). The
purpose of this paper is to explicit the influence of culture throughout the different
parts of the negotiation process.
2
Negotiation is considered as a “process by which a joint decision is made
by two or more parties” (Pruitt, 1981). Negotiations are needed for all types of
internationalization such as cross-national mergers, licensing agreements or
distribution (Graham, Mintu & Rodgers, 1994). To get reach an agreement,
partners must interact and make a joint decision that will be respected. The
outcome of negotiation has been a subject of interest for researchers. It could be
distributive or integrative, in other words, the former means a win-lose situation
and the latter a win-win situation. Lituchy (1997) examined the outcomes that
would be reached in negotiations between Japanese and Americans, two
different cultures. Her principal findings suggest that in cross-cultural context, if at
least a partner is oriented toward distributive outcomes, it is distributive outcomes
that will be reached. This should be considered seriously by managers from
Anglo cultures (e.g. Australia, Canada, UK, and USA) that are considered as
self-interested, competitive and aggressive (Hsu, 1983). Such attitudes might
slow down their global extension. To help managers in their negotiations, a better
understanding of culture’s influence is needed.
This influence has already been studied in some ways (Janosik, 1987;
Graham, 1985). But the role of culture has to be described in more details
(Lituchy, 1997). The objective of this paper is to generate a set of cultural
dimensions that helps to find the causes of cross-cultural negotiation problems.
Its focus will be mainly on business-to-business relationships. Even in B-to-B
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negotiations imply human interaction and stakes could be higher since
transactions are of greater values and of higher significance (Palmer, Lindgreen
& Vanhamme, 2005). Also, business partnerships, as they are ongoing
relationships (Dwyer, Schurr & Oh, 1987) imply necessarily “expected future
interactions” that can influence the level of cooperation (Marlowe & Doob, 1966).
Because of its complexity, its significance and its needs in identifying the
causes of cultural issues leading to negotiation problems, the inter-firm cross-
cultural relationship will be studied. This paper includes a literature review on
culture, negotiation and existing sets of dimensions. Then, constructs are defined
and the conceptual links with cultural dimensions are made. Finally, propositions
are presented, limitations debated and managerial implications discussed.
Culture
What is culture? This is a somewhat difficult question to answer.
Researchers do not agree on a general definition of it since over 150 plausible
ones had been reviewed in the 1950s (Kroeber & Kluckholn, 1952). In fact,
culture had been studied from fields including: anthropology, sociology and
psychology. Kluckholn (1951) has defined culture from a anthropological view. Its
well accepted definition is:
“Culture consists in patterned ways of thinking, feeling and reacting,
acquired and transmitted mainly by symbols, constituting the
distinctive achievements of human groups, including their
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embodiments in artefacts; the essential core of culture consists of
traditional (i.e., historically derived and selected) ideas and
especially their attached values.”
This definition is quite comprehensive; culture is composed of both values
and beliefs. According to Bond and Smith (1996), values “tap what is important”
and beliefs “what is true”. But this large spectre makes operationalization of
culture difficult. Hofstede (1980) defines culture as:
“…the collective programming of the mind which distinguishes the
members of one group or society or category or nation from
another.” Culture includes most essential systems of values.
Hofstede is following the direction of the Kluckholn’s pattern and highlight
the importance of values as a part of culture. He categorized them to create its
set of dimensions. With it, he has rated more than fifty countries to identify their
“cultural profile” and giving some cues to explain differences between them. But
one must be cautious using culture-level correlation to interpret individual
behavior (Kim, Triandis, Kagitcibasi, Choi & Yoon, 1994); the ecological fallacy.
This implies that culture must be measured at the individual level. This
measurement should not be only on values or beliefs because they are not
necessarily consistent with actions (Bochner, 1980). If it is an action that culture
is finally traduced, another definition of culture should be adopted. Poortinga
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(1992) assumed that “the same psychological processes are operating in all
humans independent of culture”. So, culture is a set of “shared constraints that
limit the behavior repertoire available to members of a certain…group”
(Poortinga, 1992). This definition is interesting because it introduces the behavior
as part of culture. As written earlier, culture can be beliefs, values and norms but
with this definition, it can be considered as shown through behaviors. This view
of culture is adopted by Bond & Smith (1996) and used in the present study.
Cross-Cultural Negotiation Cross-cultural negotiations had been studied with several approaches:
problem-solving approach (Graham et al, 1994), ethics (Godfrey, 1995)
behaviors in precise settings (Dittloff & Harris, 1996) or integrativeness of
outcomes (Lituchy, 1997). In a business-to-business relationship, all of these
topics are pertinent.
An interesting approach to these relationships is the one of
relationship marketing. Achrol (1997) defines relationship marketing as “the
establishment of long lasting relationships based on the structure of long-term
benefits and mutual affinity between buyer and seller”. In fact, relationship
marketing is quite related to the management of relationships. Generally, the
relationships are business-to-consumer or business-to-business oriented. The
cross-cultural focus of the paper makes the B-to-B more pertinent as this
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relationship seems more common in the internationalization process of a firm.
Many aspects of relationship marketing are connected to the concept of
negotiation. International B-to-B relationships are, in reality, almost always
initiated by people negotiating face-to-face (Graham et al, 1994). The relationship
is in fact a process recognized to have five stages (Heffernan, 2004): (1)Pre-
relationship stage (getting information on a potential partner and choose an
eventual partner); (2) Early interaction stage (the first contact where serious
negotiations take place on the style and structure of the relationship); (3)
Relationship growth stage (there is more interaction between the two parties and
the involvement in the relationship is higher); (4) Partnership stage (the
relationship is at its most mature stage and both parties have a high level of
experience in dealing with the other); and, (5) Relationship end stage (when
partners uncouple the bonds).
Because negotiations include “iterations of face-to-face negotiation
interactions initiated by parties” (Karrass, 1970) one can conclude that
negotiations really start at the second stage. At this stage the parties do not have
a high level of experience in dealing with each other and adaptation may be
required. Therefore, the six-step model of negotiation developed by Maddux
(1988) can be applied (Buttery & Leung, 1997): (1) Getting to know one another;
(2) Statement of goals and objectives; (3) Starting the process; (4) Expressions
of disagreement and conflict (not a test of power but an opportunity to reveal
what people need); (5) Reassessment and compromise; and (6) Agreement in
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principle or settlement. Culture can play a role in each of these negotiation steps
and may be a source of conflict if misunderstood. For example, already at the
first step, a North American manager may not care about creating some personal
bonds with its potential partner which is quite important for a South American
(O’Keefe and O’Keefe, 2004).
Another model has been developed for the particular setting of negotiation
between buyers and sellers. It has four basic elements according to Rinehart and
Page (1992): (1) Relationships between the two parties; (2) Personal influence
exerted by each party; (3) Their concession behaviour; and, (4) The outcome
from the negotiation.
These two models are not contradictory and can be used jointly. The
“steps” can be divided in three separate time periods as the literature suggests
(Graham et al., 1994): antecedent, concurrent and consequent. The antecedent
part refers to the pre-interaction phase, the preparation and the information
gathering. It is mostly focused on the parties’ characteristics and situational
constraints as independent variables (Rubin and Brown, 1975; Sawyer &
Guetzkow, 1965). The concurrent phase is the process of negotiation per se.
There is a true interaction between the parties. This is where negotiating
behaviors come into play (Graham, 1985); they act as mediators of the outcomes
following in the consequent phase (Greenhalgh, Neslin & Gilkey, 1985). This one
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refers mainly on the outcomes of the negotiation (Tung, 1988). They are
generally considered as distributive (win-lose) or integrative (win-win).
After having presented some views of the negotiation process and some
others of cultural dimensions, the actual approach must be explained. As
Graham et al. (1994), negotiation is viewed as an ongoing process on three
phases: antecedent, concurrent and consequent. In these phases, four steps are
salient. Presenting the negotiation process, the cultural dimensions chosen and
their different role is explained. These dimensions have been picked up from
Kluckholn and Strodtbeck (1961), Hall (1976), Hofstede (1980, 2001) and the
GLOBE group (House, Javidan, Hanges & Dorfman, 2002). One have been
developed inspired from Hofstede & Bond (1988). All researchers having
developed those sets are aware that other factors may exist. But as stated by
Gannon (2004), they “…are an excellent starting point for understanding cultures
and providing an overall perspective on cultural differences…”. That is why they
are used in this paper, to elaborate a framework that allows cultural
measurement in negotiations.
The antecedent phase comprises one step: the Preparation (Dwyer et al.,
1987; Maddux, 1988; Rinehart and Page Jr., 1992). Before the relationship, it is
suggested to get information on the potential partner. Not only focused on
business, this information must be related to culture too in a cross-cultural
context. This paper is focusing on the cultural aspect. The information must
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prepare the negotiator but not narrow his mind and facilitate false heuristics.
Caution has to be taken toward the information gathered. Four dimensions must
require its attention: Context, Facilitation, Gender Egalitarianism and Power
Distance. It is assumed here that these dimensions are less dependent of
individual differences within a culture. These dimensions would be more
homogeneous throughout the individuals of the culture. Then, by getting
information on these dimensions, the negotiator might be well prepared to meet
the other. Because their evaluation is made without having any contact with the
target (in a negotiation, it is common to employ the source and the target to
identify the partners), they are considered as coming from the source’s
knowledge instead of being absolute values of the reality.
From Hall (1976), Context (CON) refers to the level of information needed
for a good communication. A high level means that business information is
insufficient, personal information and a strong bonding are required. Facilitation
(FAC) is a variable developed inspired from Confucianism (Hofstede & Bond,
1988). It consists of doing favours and giving gifts to establish and maintain a
good relationship. A high level means that facilitating favours may be needed.
These two first dimensions will be present in the next phase to allow individual-
level evaluation. Gender Egalitarianism (GE) is the attitude toward gender as if
there is equality or not. A high level means that genders are considered as equal.
This dimension has been taken from GLOBE (House et al., 2002). Power
distance (PD) comes from GLOBE (House et al., 2002) and Hofstede (2001). It is
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the importance of dealing with a partner of the same hierarchical level. A high
level means it is important for a CEO to deal with another CEO. Gender
Egalitarianism and Power Distance are expected to be considered in the
antecedent phase only where the preparation is made. Managers must be
informed about those dimensions to avoid sending an inappropriate negotiator at
the table. Once it is done, those dimensions, as defined here, are not supposed
to interfere during the concurrent phase
The concurrent phase follows the antecedent phase. This is the
negotiation per se. It includes two steps: Interaction and Agreement. Interaction
can be defined as the physical meeting of the two partners where discussion
takes place. It is where culture plays its most direct role in the negotiation. That is
where most of chosen cultural dimensions (Assertiveness, Context, Facilitation,
Future Orientation Humane Orientation, Individualism, and Uncertainty
Avoidance) might moderate the Interaction. These dimensions can be measured
through the source’s perspective since they are shown through behavior or
transmitted during the communication. At this stage, dimensions are categorized
in two parts in regard to the influence of cultural distance on their effect. The
cultural distance is the difference between two cultures (Pierce, Hannon &
Wilson, 1995). This categorization is necessary because for some dimensions,
the cultural distance have no impact and for some others a difference is needed.
For example, if both parties are aggressive, the cultural distance is low but the
impact on Interaction will be highly negative. Other dimensions such as Context
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require a difference to generate a significant impact. That a party don’t need
personal communication is not good or bad per se. A negative effect will come
from the other party that wants personal communication. That is called cultural
distance.
These three first dimensions presented don’t need the cultural distance.
Assertiveness (ASS), from GLOBE (House et al., 2002), is the attitude of
aggressiveness and confrontation in negotiation (win-lose). A low level meaning
that a cooperative way is adopted (win-win). It refers to being task-oriented or
relationship-oriented. Individualism (IND) is a frequently used dimension
(Hofstede, 2001; House et al., 2002). Its signification here is the one developed
by Kluckholn and Strodtbeck (1961). It is acting in an individual manner. A low
level means that the partner is viewing the relationship as a whole (a group), is
identifying himself to it and considers the benefits of all before deciding. Humane
Orientation (HO) is being fair, generous and altruistic with people (GLOBE in
House et al., 2002). A low level means that the person is frigid and tough with
others. It refers to the humane contact during the encounter.
The following dimensions need a cultural distance to have a negative
impact. Context (CON) continues to be important at the concurrent phase.
Remaining the level of information needed for a good communication (Hall,
1976), the source can now judge at the individual-level the degree of importance
of communication for the target. Facilitation (FAC) is following the same logic.
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Still the importance of favors and gifts in relationships, the source can evaluate
its degree at the individual-level and must adapt or a negative climate could
emerge. Future Orientation (FO) is a new one in the process. Being future-
oriented is planning and investing in the future. A low level means that the
benefits must be at short-term or the relationship will be abandoned. Uncertainty
Avoidance (UA) (Hofstede, 2001, House et al, 2002) is the need to rely on rules
and procedures when dealing with risk. A low level means that a lack of structure
is tolerated.
These dimensions are moderating the Interaction between the source and
the target. This Interaction is mediating the third step of the process: the
Agreement. This step is where the final decision is made. Although it has positive
connotation, this decision includes the reassessment and the compromise as
seen in the literature (Maddux, 1988; Rinehart & Page, 1992) and may not be
seen as positive from both parties. It is assumed here that culture is not
influencing this step directly because the attitude toward compromise depends
on the interaction with the other. The attitude toward reassessment is considered
as influencing directly the final phase.
The consequent phase is the third and final phase. At this phase, the
Outcomes of negotiation, the fourth step, can be evaluated. Two categories of
outcomes are considered: business and relational. The business ones are
considered as distributive or integrative. Relational ones are not as easy to
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traduce quantitatively. But partners can evaluate if negotiation has fostered a
good climate in the relationship or if it has moved in a more negative way.
After having defined the conceptual framework and the constructs
composing it, propositions can be presented.
The antecedent is composed by the step called Preparation. As said earlier,
firms must gather information not only on business but also on cultural
characteristics of the foreign partner. This paper is focusing on this cultural
aspect. The most complete and accurate information the negotiator from the
source have, the more prepared he will be. The more prepared he is, the better
will be the Interaction as the parties meet:
P1: There is a positive relationship between the level of Preparation
and the positive climate during the Interaction.
At the concurrent phase, the Interaction takes place. Mediated by the level
of Preparation, this phase is considered as the most central one. That is where
culture will influence the most the entire process. When the parties meet
physically, a complex process is engaged. But one can assume that a good
climate in the interaction is better than a bad one. If a good climate is established
in the relationship, it is assumed that the Agreement step, where there is
reassessment and compromise, will be facilitated.
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P2: There is a positive relationship between the positive climate
during the Interaction and the facilitation of the Agreement.
The conditions of the Agreement are quite important to determine the nature
of the outcomes reached. Once it has been facilitated, the decision taken will
bring the consequent phase. At this phase, there are two kinds of Outcomes. The
business benefits are important and they are considered as distributive or
integrative. It is assumed here that a facilitated Agreement means that benefits
are satisfactory for both parties. But not only business outcomes matter because
it is well-known that relationships need time and resources to be developed.
Then, even if Business Outcomes may be unclear in some situations, Relational
Outcomes may justify the efforts deployed. This is called the relational capital.
P3: There is a positive relationship between the facilitation of
Agreement and the integrativeness of Business Outcomes.
P4: There is a positive relationship between the facilitation of
Agreement and the Relational Outcomes.
The second set of propositions implies the introduction of the cultural
dimensions in the framework. Preparation must be made at least (because other
cultural factors may have to be considered) on four dimensions. Facilitating this
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pre-interaction stage, the knowledge of the culture’s rating or general pattern on
Context, Facilitation, Gender Egalitarianism and Power Distance has a positive
impact on the level of Preparation.
P5: There is a positive relationship between knowledge of target’s
level of Context and the level of Preparation.
P6: There is a positive relationship between knowledge of target’s
level of Facilitation and the level of Preparation.
P7: There is a positive relationship between knowledge of target’s
level of Gender Egalitarianism and the level of Preparation.
P8: There is a positive relationship between knowledge of target’s
level of Power Distance and the level of Preparation.
The climate of the Interaction is moderated by many cultural dimensions. As
said earlier, two categories of dimensions are considered. The first category is
influencing directly the Interaction stage. Because Assertiveness means
confrontation, it is assumed that such an attitude might be avoided for a good
climate.
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P9: There is a negative relationship between Assertiveness and the
good climate in Interaction.
Humane Orientation, as being fair and altruistic, may be considered as a
facilitating agent in relationships. Human being is a social creature and reciprocal
behavior is part of the building of cross-cultural relationships (Zhu, Bhat and Nel ,
2005). One can consider that the generosity of one can be imitated and that it
encourages a good climate in negotiation.
P10: There is a positive relationship between Humane Orientation and
the good climate in Interaction.
The third dimension is Individualism. Even if it has been considered in much
more broader concept in many studies (Triandis, Brislin & Hui, 1988), in this
paper, it is used to measure a clear characteristic: acting in an individual manner
or considering the benefits of the group before deciding. Then, it is assumed that
considering the two partners as a group and thinking of the mutual outcomes
may foster a good climate at the Interaction stage.
P11: There is a negative relationship between Individualism and the
good climate in Interaction.
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The following dimensions need the contact with the other culture to be
positive or negative. In fact, as said earlier, it is considered that the greater is
cultural distance between the partners, more the impact of these dimensions will
be negative. Having a low or a high level of Context is nor positive nor negative
per se. But if a partner needs personal information to commit himself more and
that the other is not providing this type of information, the gap will be deep and
the climate of the Interaction may be altered.
P12: There is a negative relationship between the cultural distance on
Context and the good climate in Interaction.
Facilitation is measuring if gifts and favours can be needed to establish and
maintain a good climate between the partners. If both are not expecting some, no
problem may arise from this dimension. But if two are not seeing the role of gifts
the same way, frictions may alter the relationship during negotiation.
P13: There is a negative relationship between the cultural distance on
Facilitation and the good climate in Interaction.
The time orientation of the partners may influence also their interaction. One
can think at short or medium term and wanting quick benefits as another is ready
to absorb some losses to assure a long-term relationship. These two objectives
are contradictory and may cause a bad impact on negotiation.
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P14: There is a negative relationship between the cultural distance on
Future Orientation and the good climate in Interaction.
The last dimension to integrate in the framework is the Uncertainty
Avoidance. Relying on structures (such as legal ones) is not bad in itself. But at
the international, those structures may not be available. That is why the risk may
be greater. The attitude toward this risk may interfere in the Interaction as one
may want guarantees in case of unpredicted event and the other do not have
some to offer. If the two partners do not have the same meaning of the structure
of the future relationship, some problems may arise.
P15: There is a negative relationship between the cultural distance on
Uncertainty Avoidance and the good climate in Interaction.
The link from the cultural dimensions to the outcomes is considered as
made through the negotiation process as more the Interaction is positive and
Agreement is facilitated and satisfactory for both, the Business Outcomes will be
integrative and the Relational Outcomes will be high.
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Figure 1:
H
H
P
ConteKnowled
Gender EgalitariaKnowled
A
Conceptual framework and proposi
H11 (-)
H10 (+)
H6 (+) 5 (+)
H9 (-)
H1 (+)
7 (+) H8 (+)
reparation
xt ge
Facilitation Knowledge
n. ge
Power Distance Knowledge
A
I
ASS
HO
IND
NTECEDENT CONC
tions attached
Cultural Dis
H12 (-)
H13 (-)
H2 (+)
greement
CON
FAC
nteraction
URRENT
tance
H14 (-)
H15 (-)
H3 (+) H3 (+)
H4 (+)
FO
Relational Outcomes
UA
Business Oucomes
CONSEQUENT
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Discussion and conclusion
This proposal have some limitations. First, because it is decomposing
culture in defined dimensions, other factors may influence the partners (e.g.
saving the face for Chinese and Japanese). This limitation can be reduced by a
good preparation at the antecedent phase where many sources of information
may be quite insightful. Second, because it is implying a cultural distance, the
measurement must be done with both sides of the table of negotiation. This
exercise may be hard to do considering the numerous possible origins of targets.
The perception of the source may be a satisfactory evaluation. This implies that
the source would evaluate the cultural rating of its partner. This might not be the
most accurate measurement but may be useful. But this one-side measurement
imply another issue. How to really know what the other party thinks of the
agreement and how does he evaluate the outcomes of the negotiation. One side
perception may be not representative of the other side’s perception. Third,
maybe the interaction may influence directly the outcomes. Even with a mutual
agreement obtained, if it has been so hard to get, relational outcomes may be
altered even if the integrativeness of business outcomes are acceptable. Then,
some development of the negotiation process may be needed. Fourth, relational
outcomes may be modified in relational capital. Its outcomes could be more
tangible and easily measured. Finally, the framework has been developed in a
Western perspective. So, its generalization to other cultures may be
compromised.
Although these limitations, this proposal have some interesting managerial
implications. First, the dimensions suggested for the Preparation step can be
helpful for managers and negotiators to plan the future negotiation. Also, this
development can be used by intermediaries or government agencies in the
writing of preparation guides for exporting firms. Second, the dimensions
proposed can be used to prepare an auto-diagnosis for internationalizing firms.
Having an immediate feedback on potentially right or wrong attitudes, they can
adjust to improve their chance of success. Third, the integration of Relational
Outcomes may be useful to evaluate early an internationalization attempt. As
negotiations may be on a long period, a lot of patience may be required. During
this unproductive time, outcomes may not be evaluated as distributive or
integrative but more as if the relationship is developing in a satisfactory way.
Then, it can help to encourage managers to continue as they have tools to
evaluate their progression in other means that with financial profits.
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