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Joural of Management 1991, Vol. 17, No.2, 273-308 Negotiations James A. Wall, Jr. ‘Michael W. Blum University of Missouri-Columbia This article reviews the impact of the (a) negotiator's characteris- tics, (b) negotiator-opponent interaction, (c) constituencies (the parties represented by the negotiator), (d) third parties, and (e) situational’ environmental factors on the negotiation process and its outcomes. We offer suggestions to researchers for enhancing the external and inter- nal validity of their studies, And for practicing managers, we provide recommendations to improve their negotiations. On Friday afternoon, May 18, 1990 President Mikhail Gorbachev sat in the Kremlin reviewing the dispute with the U.S. over how many bombers should be allowed to carry cruise missiles. Soviet and U.S. negotiators had deadlocked, and neither side would budge. ‘Af listening impatiently, he looked straight at James Baker, U.S. Secretary of State and said, “How about if we split the difference?” “You've got a deal,” replied Baker. They rose, shook hands, and left the confer- ence room. This happened again with the negotiation over limits on the number of sea- launched cruise missiles. The U.S. wanted 1,000 and the Soviets 760. “Split the difference?” asked Gorbachev. “You've got a deal,” said Baker, and agreement was struck on the seemingly odd number of 880 missiles. A similar deal was cut on the range of the air-launched cruise missiles. The So- viets wanted a reduced range and the U.S. would accept this only if their work were allowed to continue on Tacit Rainbow — a non-nuclear cruise missile. “Fine,” said Gorbachev. “Deal,” from Baker (Kaplan, 1990). Thus in 90 minutes of arms-control discussions Gorbachev and Baker cut three deals that saved both countries billions, reduced the potential destruction in a nu- clear exchange, and perhaps most importantly, convinced the two leaders that the Cold War is over. Negotiation worked! That same day, labor and management negotiators in this country bargained over their labor contracts. Purchasing agents attempted to ‘The authors wish to express their appreciation to Rod Kramer and three anonymous reviewers for their help- to James A. Wall, J, Department of Management, Middlebush Hall, University of Missa Columb, MO GSI Copyright 1991 by the Souther Management Association 0149-2063/91/52.00, mB Copyright © 2001. All Rights Reserved. m4 JAMES A. WALL, JR. AND MICHAEL W. BLUM strike accords with their firm's suppliers. Production managers sought the assis- tance of engineers. And in court, attorneys negotiated settlements of their clients” disputes. In these assorted negotiations people agreed, people disagreed, conflicts arose, some were settled, some weren’t. In short, negotiation was at work here just as in Moscow on that historic Friday. It is an omnipresent process that affects our lives day-in and day-out. And like it or not, we all find ourselves negotiating. ‘Because negotiation is so prominent, it seems worthwhile to examine the cur- rent research in the area. We will attempt to do so in this article, providing infor- mation for managers as well as researchers. Managers should find this overview and the negotiation suggestions beneficial because effective negotiation is essen- tial for their success (Lax & Sebenius, 1986). For researchers, this review should be useful as it provides an update of research in this area and suggests guidelines for future research. Initially we will define negotiation and lay out the structure — paradigm — in which it takes place. With the definition and structure as starters, we look closely at the literature from the past 5 years. (On occasion, we will drop back farther to build a complete picture of our current knowledge.) ‘As we do so, we will draw from gaming studies, laboratory research, labor- management investigations, international studies, and investigations of negotia- tions within and between organizations. Due to space constraints we will not be able to cover all fields thoroughly; nor will we be able to cover the conflict man- agement literature. Therefore, we suggest that readers interested in game theory read “Noncooperative Game Theory for Industrial Organization: An Introduction and Overview” by Fudenberg and Tirole (1989). For those interested in labora- tory research we suggest Smith’s (1987) “Conflict and Negotiation: Trends and Emerging Issues.” For an overview of coalition negotiations, please look at Ko- morita’s (1984) “Coalition Bargaining” or Mumighan’s (1978) “Models of Coali- tion Behavior: Game Theoretic, Social, Psychological, and Political Perspec- tives.” Weiss’ (1990) recent work gives a fine overview of international negotiation. For managers we suggest Lax and Sebenius’ (1986) book, The Man- ager as Negotiator. And for readers interested in conflict management, we rec- ommend Rahim’s (1990) and Tjosvold’s (1991) recent works. Negotiation: The Prevalent, Valuable Process Negotiation, most people admit, has proved valuable in many arenas. For ex- ample in labor-management exchanges, several NLRB rules are predicated on the assumed value of negotiation. One of these specifies that workers have the right to organize and negotiate with management. Likewise, management has the re- sponsibility to negotiate with workers. In the legal arena, negotiation serves numerous functions. Readers addicted to “LA Law” will instinctively think of plea-bargaining, but negotiation contributes in additional ways. As Strauss (1978), Eisenberg (1976) and others point out, laws are developed through negotiation. Negotiation is relied upon to change them, and often it is central to their enforcement. For example, in some victim-of- JOURNAL OF MANAGEMENT, VOL. 17,NO.2, 1991 Copyright © 2001. All Rights Reserved. NEGOTIATIONS 2s fender cases the court allows the convicted offender to negotiate with the victim over the sentence to be handed down. And in all civil cases, the disputing parties can negotiate an out-of-court settlement. As the courts, organizations are replete with negotiations. Traditionally schol- ars have focused on negotiations in industrial relations and collective bargaining areas (Bazerman & Lewicki, 1985; Kochan & Verma, 1983). But with a wider lens, they now note that managers negotiate with suppliers and customers (Heide & John, 1990; Provan & Skinner, 1989), competitors (Porter, 1980, 1985), audi- tors (Murnighan & Bazerman, 1990) and creditors. Looking at negotiations within organizations, there is evidence leaders negoti- ate with the subordinates (Dansereau, Graen, & Haga, 1975). Committees negoti- ate as they assist in the management of complex organizations (Benson & Homsby, 1988; Gronn, 1985), and division heads parlay with their counterparts (Chalos & Haka, 1990). Likewise executives must negotiate up, down, and side- ways to balance the numerous demands bearing on them (Rand, 1987). How much do they negotiate? The answers differ, but it has been held that managers spend 20% of their time negotiating and this 20% probably affects the other 80% of their activities (Byres, 1987; King, 1981). The prevalence of negotiation in so many arenas not only attests to its impor- tance, but simultaneously raises a question: What do we know about negotiation? As we will find in this review, we know pretty much; namely, we can identify which factors influence the negotiation, and we understand many of their effects. Before looking at these, consider the structure in which negotiation takes place. The Negotiation Paradigm A simple-minded but common-sense starting point is to ask: what is negotia- tion? Every negotiation maven has his or her pet definition, but the one we'll prof- fer is the following: Negotiation is a process in which two or more parties exchange goods or ser- vices and attempt to agree upon the exchange rate for them (Wall, 1985). Negotiators take their inputs (i.e., goods and services) into a negotiation and use tactics, strategies, demands, threats, concessions, give-and-take, stonewalling or whatever to exchange these for another's (the opponent's) goods or services. As the negotiator and opponent interact, each can bargain on his or her own be- half or can represent others (constituents). Consequently, the negotiation structure can have 4 sets of players and 6 relationships (Figure 1). Ifa third party is present, there are 5 sets of players and 10 relationships. Specifically, the players include the negotiator(s), the opponent(s) (opposing negotiator), the negotiators’ con- stituent(s), the opponents’ constituent(s), a third party (mediator, arbitrator, etc.), and the relationships among them. This abbreviated paradigm provides a good base point for reviewing the cur- rent negotiation literature. As we use this structure, we will look first at the man- ner in which the 1. Negotiator’s (and opponent’s) characteristics affect their negotiation. JOURNAL OF MANAGEMENT, VOL. 17,NO.2, 1991 Copyright © 2001. All Rights Reserved.