The Impact of Team Characteristics on the Course and Outcome of Intergroup Price Negotiations

Abstract

ABSTRACT Purpose and Methodology. Both academic research and managerial practice devote attention to the topic of negotiation, and price negotiations have particular salience in business relations. Despite frequent negotiations between buying and selling centers in practice, the impact of team characteristics on the course and outcome of a negotiation rarely has been researched. This study proposes an integrative framework of the determinants of negotiation outcomes that examines the impact of group characteristics on both the conduct of the negotiating parties and the negotiation outcome. Originality. Unlike most studies, this research integrates the impact of group characteristics on both the course and the outcome of a negotiation. In practice, negotiations occur between teams, so the question of how groups should be designed to perform well in that context is very relevant. Also, in practice, objective outcome measures are often hard to obtain; instead, businesses often must rely on subjective evaluations by negotiators. We therefore measure negotiation outcomes perceived by the negotiating parties, in addition to objective outcome measures, to discern whether the drivers of objective and subjective success differ or coincide. Findings. Team characteristics translate to a certain, albeit limited, extent into between-group negotiation conduct. Cohesive groups and groups with a participative decision-making structure are less likely to engage in contending behavior. Group characteristics unequally affect objective and perceived outcome measures. Groups with a participative decision-making structure achieve a higher joint profit (i.e., higher profit for the whole supply chain) from the negotiation but evaluate the outcome more negatively than do groups with a lower level of participative decision making. Factors that enhance a party's perception of negotiation outcomes do not necessarily benefit objective outcomes and are particularly harmful for joint outcomes. Practical Implications. For business marketing practice, the findings imply that the composition of a buying and/or selling center and the related decision-making mode within that center can influence the negotiation. Furthermore, relying on the negotiator's evaluation of negotiation success might be problematic. Instead, efforts should be made to quantify the negotiation outcome in a more objective fashion.