Understanding International Business Negotiation Behavior: Credible Commitments, Dispute Resolution, and the Role of Institutions

Abstract

Developed mainly in the broad field of negotiation, the existing literature on international business negotiation has adopted theoretical perspectives that focus on differences between negotiating parties. In this article, we argue that opportunism is more fundamental than differences in our understanding of international business negotiation behavior. Parties’ concerns over how to mitigate opportunism are the fundamental force that drives such negotiation behavior, and the likelihood of opportunism is affected mostly by the economic nature of the asset parties committed to the business exchange. By synthesizing transaction cost economics and new institutional economics, this paper develops an alternative theoretical model that complements the existing negotiation literature to explain negotiation behavior. Our model theorizes relationships between parties’ ex-ante credible commitments and ex-post dispute resolution strategies and explores how institutions moderate such relationships in shaping international business negotiation behavior and process.