Understanding and managing the link between firms’ strategic risk-taking and salespeople’s defensive behavior in price negotiations

Abstract

This study investigates how firms’ strategic risk-taking affects salespeople’s defensive behavior in price negotiations with clients, a major performance driver for firms. Despite the importance of firms’ strategy for salespeople’s job activities, research has thus far neglected it as an antecedent of salespeople’s negotiation behavior. Drawing on the expectancy theory, we theorize and test (1) how a firm’s risk-taking strategy affects a salesperson’s defensive behavior in price negotiations and (2) which levers sales managers must handle to control this relationship to the firm’s benefit. To this end, we conduct a multi-method investigation comprising a scenario experiment with 134 business-to-business (B2B) salespeople and an online survey with 377 B2B salespeople. The results reveal that in negotiations with clients, salespeople tend to show lower effort in defending their firm’s position when they perceive the firm’s strategy as risk-oriented. Importantly, sales managers can counteract this negative effect by bolstering salespeople’s instrumentality and expectancy of defending the firm’s position during price negotiations: When salespeople receive outcome-based compensation, particularly combined with pricing authority, the negative impact of the firm’s risk-taking strategy on salespeople’s defensive behavior is reduced.