Navigating Culture in Negotiations

New research from Jeanne Brett, a professor of management and organizations at the Kellogg School of Management, suggests that cultural attitudes toward interpersonal trust explain the differences in negotiating styles. She and co-authors Brian C. Gunia, a doctoral candidate at the Kellogg School, and Amit Nandkeolyar and Dishan Kamdar, both professors at the Indian School of Business in Hyderabad, India, found that American managers were more likely than their Indian counterparts to believe that an opposing negotiator was being honest with them. They also found that the information-first style of negotiating favored by American negotiators produced higher-value deals. Negotiators who share information gain insights into what the other side wants, and this insight enables negotiators to structure deals of greater benefit to both parties.

“When Indian or American negotiators do not trust each other, they negotiate via many offers and much substantiation, which interferes with insight and achievement of high joint gains,” Brett says. “Conversely, when Indian or American negotiators trust each other, they share information and make tradeoffs that generate high joint gains. In our studies of Indian and American managers, all with substantial work experience, Indians were less likely to trust in negotiations than the Americans, resulting in lower joint gains among Indian than American negotiators.”

Cultural Influence

Brett’s research relies on work of Toshio Yamagishi of Hokkaido University, Japan, who describes cultures that have either an institutional or interpersonal basis for trust. In countries with relatively few social constraints, such as the United States, interpersonal trust governs behavior. People in these “loose” cultures tend to extend interpersonal trust easily, until their trust is violated. Countries with strong social norms and sanctioning systems—such as India, where social groups are aligned by family, language, caste, religion, and geography—rely on institutional trust to control behavior and sanction deviance. As long as institutions remain in force, interpersonal trust is unnecessary in “tight” cultures.

Institutional trust has little influence at the bargaining table, Brett says. This leaves individuals from countries with “tight” cultures, such as India, with little basis to trust the behavior of others. Thus, Indian negotiators rely on a technique described in the study as “substantiation and offer,” in which negotiators present single- or multi-issue offers and use logic, morality, threats, flattery, or other appeals without revealing too much about what they really want.

In choosing schools in India and the United States for her research, Brett relied on a 33-nation ranking of cultural “tightness” and “looseness” developed by Michele J. Gelfand, of the University of Maryland, and colleagues. On Gelfand’s scale, India ranked third in tightness, ahead of Japan, while the United States ranked 22^nd.

Brett’s research consisted of three studies. In the first, Brett and colleagues surveyed 135 Indian and 143 American MBA students to test that hypothesis that Indians are less trusting than Americans in negotiations. Students were asked if they agreed or disagreed with such statements as, “The other party will try to be someone who keeps promises and commitments” and “The other party will do what they say they will do.”

The research found, as expected, that Indian students were less likely than their American counterparts to trust the other party in negotiations. The second study explored the relationship between culture, trust, negotiation strategy, insight into the other party’s needs and objectives, and joint gains. Brett and colleagues recruited 78 American and 56 Indian managers enrolled in executive MBA programs. Participants in each country were grouped in pairs. One person in each pair was randomly assigned to represent a TV station and the other person was assigned to represent a film company in a simulated negotiation over rerun rights for a cartoon. The TV station was interested in how many times the cartoon could be shown; the film company cared more about how quickly it would get paid. Negotiators could decide whether to include a second cartoon in the deal or devise a contingent contract that would provide a rebate to the TV station if ratings fell.

Following the simulation, Brett and colleagues used questionnaires to determine negotiating styles and negotiators’ insights into their counterparts’ priorities. To assess the outcome, they calculated whether an agreement was a win for one party or both.

Results showed that American dealmakers who shared information had greater insight into their counterparts’ thinking and negotiated higher joint gains. Negotiators who did not trust overwhelmingly used the substantiation-and-offer strategy and negotiated poorer joint gains. But, surprisingly, researchers found only a weak link between trust and the question-and-answer negotiation style. This may be because some negotiators who did not trust at the beginning nevertheless shared enough information during the negotiation to gain insight and realize high joint gains, Brett speculates.

“Negotiators who are prone to trust nevertheless understand that trusting the other party makes them vulnerable to exploitation. Therefore they share slowly and carefully. If the other party fails to reciprocate with truthful information, or starts to use the shared information in a self-serving way, they will no longer continue to share the information,” Brett says.

The third study featured the cartoon-negotiation simulation with different groups of American and Indian executive MBA students, whose conversations were recorded. Brett and her colleagues assessed the recordings to determine whether participants negotiated in the manner they reported, and whether that was by trading information about their priorities and interests or by trading offers. The results confirmed that Indian negotiators’ reliance on offers—and their less frequent use of information-exchange strategies—resulted in lower joint gains.

Different Ways of Thinking

In their paper, the researchers conclude: “With these studies, we provide causal evidence that culture promotes more or less trust, with material and substantial consequences for negotiation.” Brett says the study opened related areas for research. For one thing, she is exploring the impact of a negotiator’s mindset (linear versus holistic) on the successful use of the substantiation-and-offer strategy to negotiate joint gains. Linear thinkers tend to settle one issue at a time, while holistic thinkers delay agreement on single issues until they can see how all of the issues fit together.

Her research has important lessons for international dealmakers, Brett says. “Global negotiators need to anticipate whether the party across the table is likely to be trusting and therefore comfortable with the question-and-answer strategy,” she says. “If they are not, then global negotiators need to know how to use the substantiation-and-offer strategy and avoid being anchored and leaving valuable joint gains on the negotiation table. How to do so is what we are teaching negotiators at Kellogg.”

Related reading on Kellogg Insight

Cultural Intelligence in Global Teams: A fusion model of collaboration

Successful Mediators Wanted: No Robe Required—Skill should trump judicial experience when choosing a mediator?

Sight Over Sound: Mode of communication matters in negotiations