Journal of Operations Management 32 (2014) 114–126

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Journal of Operations Management

journal homepage: www.elsevier.com/locate/jom

The impact of cultural differences on buyer–supplier negotiations:

An experimental study
Dina Ribbink a,∗ , Curtis M. Grimm b,1
a
Ivey Business School, Western University Canada, 1255 Western Road #3321, London, ON N6G0N1, Canada
b
Robert H. Smith School of Business, University of Maryland, 3437 Van Munching Hall, College Park, MD 20742, USA

a r t i c l e i n f o a b s t r a c t

Article history: In today’s global economy, an ever-increasing number of companies are dealing with international part-
Received 21 June 2012 ners, instigating a need to understand the impact of cultural differences on business interactions. Using
Received in revised form Hall’s distinction of high- and low-context culture, this study investigates the direct and moderating
12 December 2013
effects of cultural differences in dyadic buyer–supplier negotiations. Theory is developed regarding the
Accepted 20 January 2014
impact of culture on joint profits, juxtaposing Transaction Cost Economics and the Relational View. The
Available online 31 January 2014
theory is tested with a negotiation experiment. Participants, classified by their country of origin, nego-
tiate prices and quality levels for three products. This study finds that cultural differences within the
Keywords:
Buyer–supplier relationship
negotiation dyad reduce joint profits when compared to dyads of participants with similar cultural back-
Negotiation grounds. Cultural differences also moderate the impact of trust and bargaining strategy on joint profits.
Cultural differences Overall, this study concludes that cultural differences, as encountered in day-to-day business interactions
Behavioral experiment in global supply chains, significantly impact negotiation outcomes.
Bargaining strategy © 2014 Elsevier B.V. All rights reserved.

1. Introduction
In today’s global economy, it is important for businesses to be
aware of cultural differences, particularly in buyer–seller interac-
tions. As an increasing number of firms are dealing with buyers
and suppliers abroad (Homburg et al., 2002), many are learning
that they need to take different cultural traits into account when
negotiating across borders. These differences impact behavior and
understanding of situations (Gelfand and Christakopoulou, 1999).
Increased awareness of potential issues in a negotiation con-
text allows firms to have more successful interactions in the long
run and helps avoid misunderstandings (Brett and Okumura, 1998).
Furthermore, awareness of the impact of cultural differences can
enable firms to negotiate more effectively, resulting in greater cost
savings and profits. Thus, there is both a business and an academic
need for a better understanding of the impact of cultural differ-
ences arising when buyers and sellers differ in nationality, or when
“cross-cultural dyadic sales interactions” occur (Mintu-Wimsatt
and Gassenheimer, 1996, p.20).
Although a growing body of literature has focused on the influ-
ence of globalization on supply chains (Cannon et al., 2010; Cheung
∗ Corresponding author. Tel.: +1 519 661 3651; fax: +1 519 661 3485.
E-mail addresses: dribbink@ivey.ca (D. Ribbink), cgrimm@rhsmith.umd.edu
(C.M. Grimm).
1
Tel.: +1 301 405 2235.
et al., 2010; Flynn and Saladin, 2006; Naor et al., 2010; Power et al.,
2010), there is a gap in the literature regarding theory on how
cultural differences impact buyer–supplier relationships. Studies
have compared cultures in countries such as the United States and
Germany (Kaufmann and Carter, 2006) and in regions such as Asia
(Naor et al., 2010; Power et al., 2010), but have not developed
or tested theory with regard to how cultural differences impact
buyer–supplier interactions. Therefore, this study addresses this
gap in the extant theory by investigating the following research
questions: Do cultural differences between a buyer and supplier
reduce the joint profit outcome of supply chain negotiations? Do
cultural differences moderate the impact of trust and bargaining
strategy on joint profit outcomes?
More specifically, this paper contributes to the international
operations management literature by juxtaposing two underpin-
ning theories, the Relational View and Transaction Cost Economics.
The paper leverages these theories to develop new hypotheses
regarding the impact of cultural differences in buyer–supplier rela-
tionships. The two underpinning theories provide opposing and
seemingly contradictory perspectives on buyer–supplier relation-
ships. They can be reconciled by incorporating the presence or
absence of cultural differences. In addition, the study addresses
the recommendation of Pagell et al. (2005, p.388), who emphasize
that studies should extend beyond the question of “whether culture
matters” to investigate “how culture matters”, thereby, furthering
the discussion regarding the impact of culture on buyer–supplier
relationships.

0272-6963/$ – see front matter © 2014 Elsevier B.V. All rights reserved.
http://dx.doi.org/10.1016/j.jom.2014.01.004
 D. Ribbink, C.M. Grimm / Journal of Operations Management 32 (2014) 114–126
The new theory, in the form of hypotheses regarding the direct
and moderating effects of cultural differences on buyer–supplier
negotiation outcomes, is tested through the use of a behavioral
experiment. Building on a design by Pruitt and Lewis (1975),
a negotiation scenario is developed that mimics a common
buyer–supplier environment with information asymmetry and the
resulting potential for one party to behave opportunistically. The
use of dyads provides the opportunity to assess joint profits. This is
important because joint profits, defined as the sum of the individ-
ual profits realized by the two parties involved in the negotiation,
are a measure of overall supply chain performance. The pairings of
buyers and suppliers are formed based on the national background
of the participants resulting in same- (from similar cultural back-
grounds) and mixed-cultural (from different cultural backgrounds)
context dyads.
In sum, this study contributes to the field of operations man-
agement in three ways. First, juxtaposing two prominent theories
regarding buyer–supplier relationships, the Relational View and
Transaction Cost Economics, yields important new insights. Each
of these theories has been used in isolation with regard to a wide
range of supply chain questions. Positioning them side-by-side is a
valuable exercise. Second, a foundation-based model to address the
impact of culture in an international buyer–supplier relationship
is developed and grounded in the Relational View and Transac-
tion Cost Economics theory. The theoretic model provides testable
hypotheses regarding the impact of cultural differences on sup-
ply chain joint profits. Third, the study tests theory on the impact
of cultural differences in buyer–supplier dyads, a topic that has
not yet received attention in the international operations manage-
ment literature. As suggested by Bendoly et al. (2006), the current
study goes beyond traditional methodologies by using an exper-
imental simulation to capture behavioral aspects in the global
buyer–supplier relationship as well as to draw inferences about
causality in this context. This provides an important alternative
perspective to the literature and contributes to the growing body
of research using experimental data as methodology (Siemsen,
2011).
In the following section, a brief review is provided of Trans-
action Cost Economics and the Relational View in the context of
negotiations. Based on this foundation, the model is formulated and
hypotheses relating to cultural differences are derived. In Section
3, the research methodology is explained, followed by results in
Section 4. Section 5 discusses the study’s findings, including man-
agerial implications and limitations, followed by a conclusion in the
final section.
2. Theory and hypotheses
2.1. The Relational View and Transaction Cost Economics in
buyer-supplier negotiations
The current study juxtaposes two overarching theories, Dyer
and Singh’s (1998) Relational View (RV) and Williamson’s (1975)
Transaction Cost Economics (TCE), as a foundation for development
of hypotheses regarding cultural differences in buyer–supplier
relationships. RV and TCE have each been used individually as
an explanatory theory to ground hypotheses in the context of
buyer–supplier relationships. However, each theory on its own
only provides an incomplete justification for the expected behav-
ior in international buyer–supplier negotiations. The two theories
together provide a more powerful grounding for hypotheses
regarding buyer–supplier relationships. This is because RV and TCE
each offer a different perspective and in combination are critical to
positioning and understanding the impact of cultural differences in
negotiations.
115
More specifically, the Relational View is an extension of the
Resource-Based View and argues that a firm can best develop com-
petitive resources through relationships with other firms, such as
buyers and suppliers. RV therefore emphasizes the close, collab-
orative relationships between buyers and suppliers as the key to
sustainable competitive advantage. Transaction Costs Economics,
on the other hand, views buyer and supplier relationships as adver-
sarial and emphasizes the costs and problems of such market
interactions. Transaction costs are the costs associated with sourc-
ing in the market as opposed to producing the good or service in
house (Waldman and Jensen, 2007). Originating with the work of
Coase (1937), when a firm purchases an input for production in the
marketplace, there are costs beyond those attached to the price of
the input itself. These transaction costs include the search for the
appropriate supplier, the contract negotiation, quality control and
the actual delivery of the product (Waldman and Jensen, 2007). This
study focuses specifically on the buyer–supplier negotiation aspect
of market transactions, which involves a level of interdependence
between the parties (Brett, 2007).
Buyer–supplier negotiations are fraught with the TCE elements
of information asymmetries, bounded rationality and the poten-
tial for opportunism. Firms never have complete information, nor
do they have the skills and time to attain that information. So
there is often asymmetric information between the parties to a
negotiation. Managers also have cognitive limits in terms of ana-
lyzing and processing information, which is referred to as bounded
rationality (Williamson, 1979, 1981). Asymmetric information and
bounded rationality provide the potential for opportunism, which
Williamson has described as “self-interest seeking with guile”
(1979, p.234). Managers of companies may act deceptively as
they negotiate contracts, for example, by withholding or distorting
information. They may also renege on the negotiated agreement.
This grows even more complex as supply chains now span the
globe, requiring businesses to conduct negotiations with both
domestic and foreign partners.
RV and TCE generate opposite predictions regarding the
degree to which buyer–supplier relationships are collaborative or
contentious. With regard to international buyer–supplier relation-
ships, incorporating the notion of cultural differences can reconcile
these differences. In the absence of cultural differences, firms typ-
ically adopt the Relational View and focus on the positive aspects
of a collaborative relationship. However, in the presence of cultural
differences, the involved parties are more likely to adopt an adver-
sarial relationship, as predicted by TCE. Therefore, in the context
of buyer–supplier relationships, where cultural differences may or
may not be present, both theories are needed to provide a compre-
hensive grounding.
2.2. Culture, cultural differences and joint profits in negotiations
Culture provides characteristics of identification for members
of a (social) group (Brett, 2007; Rivers and Lytle, 2007). Culture
manifests itself in shared values, beliefs, and traits, providing a set
of rules and guidelines assisting its members to interpret people,
their behavior and situations (Brett and Okumura, 1998; Hofstede,
1985). Cultural characteristics provide grounds for the interpreta-
tion of actions within a context (Rivers and Lytle, 2007). Different
countries and nationalities typically are associated with distinct
cultures, so that cultural differences may readily arise in today’s
global economy.
Hall’s (1976) dichotomous operationalization captures the
essential elements of culture associated with countries or nation-
alities. Hall distinguished between low- and high-context cultures.
Low-context cultures focus on direct/explicit (often verbal) com-
munication; i.e., messages are communicated directly. In a
negotiation context, participants often probe by asking questions to
116 D. Ribbink, C.M. Grimm / Journal of Operations Management 32 (2014) 114–126
determine the other’s goals and expectations and to understand the
social context of the involved parties (Brett, 2007). High-context
cultures, on the other hand, rely on context and communication
to provide the full meaning of the message. Context variables can
include, for example, “individual backgrounds, associations, values
and position in society” (Mintu-Wimsatt and Gassenheimer, 2000,
p.1), and “physical environment, status/power relationships, roles
of participants, and even the nonverbal aspects of communication”
(Graham et al., 1994, p.77). Although the classification is partially
based on the interpretation of language, Hall’s categorization goes
beyond the means of communication. High-context cultures place
more emphasis on tradition and history. Change is slow and less
readily accepted than in low-context cultures. Furthermore, low-
context cultures are usually more exposed to diversity, both in
terms of population groups as well as mindsets.
For the present study, Hall’s operationalization of national
culture is preferable to the Hofstede and GLOBE alternatives.
Hofstede’s (1980) cultural dimensions – individualism, mas-
culinity, power distance, uncertainty avoidance and long-term
orientation – are well represented in the academic literature (Tsui
et al., 2007). The GLOBE’s nine dimensions (House et al., 2004)
focus on the impact of national culture on global leadership abil-
ities and organizational practices (Javidan et al., 2006). However,
especially in the context of experimental negotiations, Hall’s clas-
sification is preferable (see Brett, 2007 for an overview), as it allows
the grouping of participants into two distinct groups, which can be
contrasted.
In a supply chain setting, buyers and sellers need to engage in
interactions in order to agree on the exchange of products, services
and information. Negotiations refer to the interaction between two
or more parties with the ultimate goal of achieving a mutually
beneficial outcome through cooperation and resolving the often-
contradictory elements of individual goals (Evans and Beltramini,
1987). Joint profits2 are the most common measure of negotiation
outcome, particularly in experimental research (Adler et al., 1992;
Dwyer and Walker, 1981; Gelfand and Dyer, 2000). A dyadic rela-
tionship allows researchers to measure the monetary outcome of
an integrative deal. Joint profits, in this context, provide an objec-
tive performance measure and are an equivalent to supply chain
profits within a dyad.
The primary theoretical contribution is to leverage these two
theories, TCE and RV, to develop a model with new hypotheses
regarding cultural differences and buyer–supplier relationships.
The first hypothesis discusses the impact of cultural differences
on joint profits. Next, the direct impact of negotiators’ bargaining
strategy on profits and the moderating effect of cultural differences
on this relationship are derived. Finally, trust and its relation-
ship with joint profits is discussed before providing an argument
for the moderating effect of cultural differences on this relation-
ship.
2.3. The impact of cultural differences on joint profits
When the buyer and supplier share similar cultural back-
grounds, supply chain performance is enhanced with an outcome
as predicted by the RV. Mathews et al. (1972) manipulated
participants to perceive their negotiation partner as similar or dis-
similar to themselves and found that cooperation was significantly
greater in the similar dyads. The similarities allowed for a better
understanding and assessment of the other negotiator and their
respective goals even though the similarities and differences were
2
Both the term ‘joint profits’ (i.e. Graham et al., 1994; Pruitt and Lewis, 1975) and
‘joint gains’ (i.e. Adair and Brett, 2005; Adair, 2003) have been used in the literature
to describe the same concept.
only perception based. Overall, their findings stress that similari-
ties help in forming more collaborative relationships which in turn
lead to positive externalities as proposed by the Relational View.
Correspondingly, cultural similarities are likely to result in
more collaborative relationships than cultural differences. In the
context of this study, cultural differences arise when negotiators
come from countries that differ along Hall’s distinction of low
versus high context cultures. Participants from low-context cul-
ture countries such as Germany and the United States (where
the cultural background fosters an emphasis on personal ben-
efits) focus primarily on their own gains (Brett and Okumura,
1998). In contrast, participants from high-context culture coun-
tries such as Japan and Brazil tend to stress a congruency of goals
and close relationships with the partner while taking their part-
ner’s interests into account (Gelfand and Christakopoulou, 1999,
p.263). In addition, participants from similar cultural backgrounds
are more aware of their partner’s expectations in a negotiation
context.
In the presence of cultural differences, buyers and suppli-
ers in a negotiation are likely to interact like actors in the TCE
model. Cultural differences in the buyer–supplier dyad can hence
play a critical role in the outcome of negotiations. Participants
from different cultural backgrounds pose challenges to negotia-
tors in an international context (Adair and Brett, 2005). Non-verbal
communication, expectations, and context interpretations influ-
ence intercultural relationships and, hence, negotiations (Triandis,
2000). Gelfand and Christakopoulou (1999) find that different
cultural backgrounds result in different judgment errors in negotia-
tions; students from a collectivistic culture are better able to assess
their partner’s priorities during a two-week online negotiation. In
the same study, US negotiators claim more value for themselves,
at least initially – reflecting a greater understanding of self versus
the negotiating dyad (Brett and Okumura, 1998). Therefore, differ-
ences in cultural backgrounds are expected to increase the potential
for pitfalls (Brett and Okumura, 1998). Participants are required
to find mutually beneficial outcomes during the negotiation while
avoiding misunderstandings. Cross-national buyer–supplier dyads
place less emphasis on close collaboration as emphasized in the
Relational View.
Opportunistic behavior is likely to be a more important issue
when cultural differences are present. Transaction Cost Economics
states that opportunistic behavior occurs when participants in a
relationship maximize their own utility at the expense of someone
else’s, often through deceptive means. However, it is only likely
to occur in situations where opportunism is not easily detected
(Waldman and Jensen, 2007). Situations of information asymme-
try and high uncertainty increase the likelihood of opportunism
(Williamson, 1993). In intercultural negotiations, participants are
faced not only with the situation of negotiating a deal but also
with traits, beliefs and behaviors that differ from their own (Brett,
2007). Hence, when dealing with partners from different cultural
backgrounds, negotiations are often more complex and uncertain
(Mintu-Wimsatt and Gassenheimer, 2000). Studies have posited
that negotiating parties in intercultural negotiations are more likely
to not fully understand how a partner will behave in certain situa-
tions since norms differ across countries (Bagozzi et al., 2003; Brett,
2007). Brett and Okumura (1998) find that differences in norm
development and conflict frames have affected the degree of coop-
eration between participants, resulting in lower joint profits. This
creates an opportunity for opportunistic behavior, as one partici-
pant can use uncertainty to disguise and manipulate a situation to
her advantage. Expanding their line of argument to the frame of TCE
and the looming threat of greater opportunistic behavior in cultur-
ally diverse dyads, this study proposes that negotiations between
partners from similar cultural backgrounds result in better joint
financial performance.
 D. Ribbink, C.M. Grimm / Journal of Operations Management 32 (2014) 114–126
Hypothesis 1. Supply chain partners realize lower joint profits if
in a bargaining dyad with differences in cultural contexts.
2.4. The impact of bargaining strategies on joint profits
Dyer and Singh’s (1998) Relational View posits that a firm’s com-
petitive advantage is derived from collaborative interfirm linkages.
Using Williamson’s (1985) Transaction Cost framework of mar-
ket, hierarchy or alliance, the authors propose that in relationships
with some idiosyncratic investments by the parties (alliances), the
relationship between two or more firms can result in a compet-
itive advantage as companies leverage their individual strengths
to complement each other. Relationships and interfirm linkages
of partners, depending upon each other, can create business rela-
tionships that leverage these strengths. However, the ever-present
threat of opportunism necessitates the need to develop trust and
arrive at an agreement through bargaining and negotiation.
During the negotiation, the often personal interactions of
involved parties allow both buyer and supplier to develop a
relationship and gauge the other party’s commitment and trans-
parency. Lee and Cavusgil (2006) find that relational-based
governance mechanisms are more effective when compared to
formal contracts, supporting Dyer and Singh’s (1998) Relational
View. Further, RV argues that the focus on relationships as a form
of governance engages partners to a greater extent in value cre-
ation. In order to have a successful relationship and, hence, create
value, cooperation is key, which is operationalized in relationship
commitment and trust (Morgan and Hunt, 1994). Buyer–supplier
engagement has a positive impact on relationship performance
(Kannan and Tan, 2006). In fact, Hoyt and Huq (2000) propose that
low levels of trust and cooperation within supply chain partner-
ships will result in a discontinuity of the relationships as they are
less profitable.
The RV is also important in contextualizing the discussion
about negotiations. While negotiation studies generally empha-
size the rational agent by focusing on an individual’s autonomy –
often operationalized in experiments through the use of previously
unknown partners – Barley (1991) questions the representative-
ness of a business interaction. Consequently, Gelfand et al. (2006,
p.443) provide a detailed discussion on the impacts of “interde-
pendence, cooperation and relationality” on negotiations. Their
compelling argumentation demonstrates the need to contextualize
the negotiation by investigating the cooperation within the supply
chain as a critical element. Business negotiations and bargaining
are the essence of the buyer–supplier relationship. While differ-
ent strategies are often used to describe bargaining patterns (Pruitt
and Carnevale, 1993), a bargaining strategy is ultimately aimed at
helping each party pursue its goals. These goals may (or may not)
be shared between the parties involved (Ness and Haugland, 2005).
The counterview is based in an adversarial relationship due
to the TCE elements of information asymmetry and opportunism
present in negotiations. During the negotiation, the level of trust,
the level of information asymmetry in the relationship and the
threat of opportunistic behavior all impact the choice of bargaining
strategy. According to Transaction Cost Theory, often in negotia-
tions, participants are more concerned about their own outcomes
than the mutual results. As a consequence, the negotiation and
interaction between the involved parties can be hostile and insin-
cere. In this scenario, participants are on edge and more likely to
renege on contracts. Investments are less likely to be made and if
so, to a lesser extent. Overall, an adversarial relationship between
buyers and suppliers negatively impacts the financial outcome
(Williamson, 2008), resulting in lower joint profits.
Bargaining strategies aimed at generating a collaborative
environment can enhance financial outcomes, consistent with
the tenets of the RV. These strategies, which can range from
117
cooperative to aggressive, differ between negotiators (Forgas,
1998) and negotiating dyads (Gelfand et al., 2006). Bargaining
strategies oriented toward “co-operation, integration, and informa-
tion exchange” (Graham et al., 1994, p.72) can facilitate negotiation
of mutually beneficial deals. They are characterized by probing
questions to ascertain the partner’s viewpoint and perspective. A
positive relationship between cooperative bargaining strategies
and joint profits has been established in the field of negotiation
and strategic management (i.e., Adler et al., 1992; Graham et al.,
1994; Olekalns and Smith, 2003; Rubin and Brown, 1975).
Hypothesis 2. The more cooperative the bargaining strategy, the
higher the resulting joint profits.
Dyer and Singh (1998) observe that a US car manufacturer
established a different type of relationship with its suppliers
than a Japanese manufacturer, the former being less cooperative
with limited information sharing between partners. In the RV, a
“country-specific institutional environment that fosters goodwill
trust and cooperation” (Dyer and Singh, 1998, p.673) is cited as a
reason for greater success in generating positive outcomes. Hence,
the understanding and acceptance of norms and conditions, by
partners from the same cultural background, can translate into
greater profits (Adair et al., 2001; Heide and John, 1992).
Aligned with the underlying arguments of TCE, cultural dif-
ferences may undermine the relationship between bargaining
strategies and joint profits. Since a country-specific environment
provides a framework for negotiating partners, negotiation across
national borders produces less clear boundaries. As such, greater
levels of uncertainty are introduced and the threat of oppor-
tunism increases (Williamson, 1979). The negotiation environment
is therefore more complex and the buyer and supplier act cau-
tiously, focusing on avoiding opportunistic behaviors, which likely
would increase the transaction cost. Cross-national negotiators are
also often less accommodating.
Several studies compare negotiations with participants from
one country to those of another to investigate the effect of
national culture on negotiations (Brett, 2000, 2007; Gelfand and
Christakopoulou, 1999; Graham et al., 1994). They generally
find significant differences between participants from more low-
context regions like the United States and Northern Europe than
high-context ones like Asia and South America. These findings
highlight that participants’ national backgrounds influence their
approaches and expectations. In international negotiations, these
differences are only accentuated. As Forgas (1998) points out, coop-
eration is more likely to occur when participants have similar
backgrounds, since differences are perceived as threats. Misun-
derstandings, based on cultural differences, can hinder mutually
beneficial outcomes.
For example, a negotiator from a high-context culture might
offer a non-verbal signal to indicate a willingness to be cooperative
and anticipate a reciprocal cooperative signal. If the negotiating
partner were from a low-context culture, that non-verbal signal
could well be missed and therefore elicit no response. The origina-
tor of the signal could interpret the lack of reciprocity as a rejection
of the cooperative overture, and the negotiation could turn more
combative. On the other hand, in the absence of cultural differences,
the same signal, properly interpreted, could be the catalyst for a
highly cooperative relationship. Hence, this research proposes that
cultural differences moderate the relationship between bargaining
strategy and joint profits.
Hypothesis 3. Differences in cultural contexts within a bargain-
ing dyad negatively moderate the relationship between bargaining
strategies and joint profits; in other words, the positive effect of
more cooperative bargaining strategies on joint profits is lessened
when cultural differences are present.
118 D. Ribbink, C.M. Grimm / Journal of Operations Management 32 (2014) 114–126

2.5. The impact of trust on joint profits

The Relational View also informs the direct effect of trust on

joint profits. Trust, defined as the willingness to have confidence in
a partner (Moorman et al., 1992), is an important element of busi-
ness dealings in general and in negotiations specifically (Schurr and
Ozanne, 1985). According to RV, trust is essential in relationships
within networks of firms. Dyer and Singh (1998) propose that trust
can improve relational rents. Trust is essential for a constructive
dialog between involved parties (Pruitt, 1981) and is particularly
important in situations of uncertainty (Kaufmann and Carter, 2006).
Similarly, Transaction Cost Economics argues that trust coun-
ters the negative effects of information asymmetry and reduces
the threat of opportunism within a buyer–supplier relationship.
Although mutually cooperative behavior in buyer–supplier rela-
tionships is often desirable, the threat of the negative externalities
of relying on the partner can often only be mitigated through the
element of trust (Parkhe, 1993). Trust, often combined with for-
mal or informal contacts, provides the basis that fosters partners to
invest in relationship specific assets. As trust builds, it is assumed
that one’s partner is acting in good faith (in a manner that does not
hurt the trusting party), will fulfill promises and obligations, and
will generally behave as agreed upon (Cannon and Perreault, 1999;
Corsten and Felde, 2005). Negotiators rely on trust to reach coop-
erative goals faster (Ueltschy et al., 2007). In addition, higher levels
of trust are found to result in longer relationships (Kaufmann and
Carter, 2006) and are a prerequisite for negotiators to move from
purely distributive to mutually beneficial integrative deals (Pruitt
and Lewis, 1975). Thus, trust positively influences financial out-
comes, such as joint profits, resulting from negotiations (Langerak,
2001).
Hypothesis 4. The greater the level of trust within the bargaining
dyad, the higher the level of joint profits.
Within the context of TCE, trust can mitigate the concern
for opportunistic behavior (Morgan and Hunt, 1994). Williamson
(1979, p.241) emphasizes that personal trust “survive[s] greater
stress and display[s] greater adaptability.” According to Arrow
(1973, p.24), “there is an element of trust in every transaction.”
Especially in the context of marketplace interactions, trust needs
to be established quickly for efficient buyer–seller interactions.
According to the RV, trust often serves as a governing mechanism
in relationships, reducing transaction costs (Dyer and Singh, 1998).
Chiles and McMackin (1996) directly integrate trust into the TCE
framework, arguing that as trust increases, the “vulnerability to the
risk of opportunistic behavior” (p.85) decreases. Similarly, Doney
and Cannon (1997) posit that trust is only possible in the con-
text of uncertainty and will decrease in the expected presence of
opportunism. Concern about opportunistic behavior from the dyad
partner can negatively affect the efficacy of the negotiation. At the
beginning of a relationship, it is difficult to foresee whether the
partners are likely to behave opportunistically or not (Tangpong
and Ro, 2009). Trust has been found to allay concerns regarding
opportunism and lessens costs related to controls against oppor-
tunistic behaviors (Ghoshal and Moran, 1996), resulting in higher
levels of performance in buyer–supplier relationships (Corsten and
Felde, 2005).
It is well-established in the literature that culture and cultural
differences have an impact on the development of trust. Chiles
and McMackin (1996) propose that a similar cultural background
translates into shared views and expectations and optimizes trust.
Morgan and Hunt (1994) emphasize that shared values promote the
development of trust. Therefore, in an international buyer–supplier
negotiation, it can be harder to establish trust. Interestingly,
Ueltschy et al. (2007) find differences in the perception of
the importance of trust by supply chain partners representing
Fig. 1. Dimensions and outcome of intercultural negotiations.
high-context cultures and low-context cultures. Negotiators from
high-context cultures place greater emphasis on trust, while their
low-context counterparts prefer a more direct form of control to
counter the threat of opportunism. Chen et al. (2002) differentiate
between in-group (within a culture) and out-group (with another
culture) interactions and propose that collectivistic individuals are
more likely to behave opportunistically toward out-groups; this is
partially supported by Takahashi et al. (2008). Curall and Inkpen
(2002) stress a need for a better comprehension of culture in
the context of trust. A good understanding of the cultural con-
text allows negotiators to better assess the risks (Brouthers and
Brouthers, 2000), including the threat of opportunism. In the con-
text of opportunism, trust is argued to decrease (Morgan and Hunt,
1994). Therefore, this research posits that cultural differences mod-
erate the effect the perceived level of trust has on joint profits.
Hypothesis 5. Differences in cultural contexts within a bargaining
dyad negatively moderate the relationship between trust and joint
profits. In other words, the positive impact of trust on joint profits
is lessened when cultural differences are present.
The complete model is presented in Fig. 1.
3. Research design and methodology
Experiments allow researchers to study the human behav-
ior aspect (Bendoly et al., 2006) in a dynamic business setting.
Croson and Donohue (2002) argue that experiments allow for the
investigation of causal relationships and to test economic and
operations management theories in a controlled environment. In
addition, they offer an opportunity to study the interdependence
of interpersonal interaction (Bendoly et al., 2010), providing a
direct observation of dyadic behavior in buyer–supplier relation-
ships. Finally, behavioral experiments are ideal to test theory as
they allow researchers to establish causality (Thomas, 2011; Tokar,
2010).
The context of buyer–supplier relationships lends itself
well to the use of experiments (Eckerd and Bendoly, 2011;
Rungtusanatham et al., 2011; Stevens, 2011). In the psychology lit-
erature, Pruitt and Lewis (1975) use the sale of three commodities
to study different negotiation approaches. In operations manage-
ment literature, experimental buyer–supplier relationship studies
 D. Ribbink, C.M. Grimm / Journal of Operations Management 32 (2014) 114–126
are limited. Carter and Stevens (2007) use an experimental design
to study supplier behavior in electronic reverse auctions, employ-
ing an automated buyer response instead of dyadic units of analysis
[between buyer and supplier(s)] as in the present study.
The current study used an experimental approach to investigate
the impact of cultural differences on dyadic buyer–supplier rela-
tionships, contributing to the existing literature on supply chain
management and international operations management with its
previous focus on other methodologies. Loch and Wu (2008) look at
buyer–supplier relationships using an experimental study. Dyadic
research provides unique insights that go beyond the individual
level, as teams form their own dynamics (Klein and Kozlowski,
2000). These studies find that individual perspectives on culture,
trust and bargaining strategy do not necessarily allow inferences
about group- (dyadic) level behavior. Furthermore, the use of an
experiment allows us to study the impact of cultural differences in
a controlled environment while still mimicking a business-like set-
ting. The use of an experiment is, hence, aligned with Handfield’s
(in Meredith, 2002) request that the methodology derives from the
research question and context. Finally, Wacker (1998) emphasizes
the need to substantiate operations management theory using var-
ious methodological techniques, to which the use of experimental
designs is responsive.
3.1. Sample
The sample consisted of 78 MBA students from a large US
business school. The majority of laboratory experiment studies in
operations management have used undergraduate student partic-
ipants (i.e., Bolton et al., 2004; Kremer et al., 2010; Loch and Wu,
2008). The literature provides strong support for the use of students
as subjects. Heisler and Gemmill (1978) compare how executives
and students perceive various managerial promotion issues and
find that they behave similarly. Montmarquette et al. (2004, p.1388)
find that “the similarity of students’ and managers’ average net
payoffs is striking.” This suggests that, in terms of outcome, the dif-
ference between the two groups is negligible. Bendoly et al. (2006)
stress that well-designed experiments “test whether representa-
tive humans react in a predictable manner to controlled stimuli”
(p.739), hence, allowing the findings from student subjects to be
generalizable to a broader field.
Furthermore, Stevens (2011) argues that the use of students is
dependent on the context of the research study. The main treatment
variable in the current study is cultural differences in negotiating
dyads and their direct and indirect impact on negotiating behavior.
Given that national culture and the characteristics associated with
them are present in both student and managers, the results are
generalizable from a student to a broader audience.
A key characteristic of the sample was diversity with respect
to nationality or country of citizenship at birth: 60.3% were born
in the United States with 61.5% in the buyer and 59.0% in the seller
group. For those born abroad, the majority of students (20 out of 29)
were from Asia [seven were from East Asia (China, Taiwan, Japan,
Thailand) and 13 were from South Asia (India, Pakistan)]. Three
were born in South America. Individual students also represented
the Arabic Peninsula, Africa, Canada, the Caribbean and Europe.
59.0% of all dyads were between partners of different cultural back-
grounds, meaning that one partner was from a high-context culture
like Asia or South America while the other was from a low-context
culture like the United States or Northern Europe. 47 (60.3%) par-
ticipants were male and 31 (39.7%) were female.3 Table 1 displays
3
It could be argued that students that would have left their country to become
educated in the U.S. might be stronger in academic performance than their domestic
U.S. counterparts and may also be from a higher socio-economic status. To assess
119
Table 1
Description of the sample.
Culture Total
Same Mixed
Buyer Male 8 10.3% 12 15.4% 20 25.6%
Female 8 10.3% 11 14.1% 19 24.4%
Seller Male 12 15.4% 15 19.2% 27 34.6%
Female 4 5.1% 8 10.3% 12 15.4%
Total (individual) 32 41.0% 46 59.0% 78 100.00
Total (dyad) 16 25 39
the split between male and female participants for both buyer and
seller by context-culture groups. It also shows that the current
study has two treatment groups: same context culture dyads and
mixed context culture dyads with 16 and 23 pairings, respectively.
Hair et al. (1998) recommend an ideal sample size of 20 obser-
vations per group, but attest that as few as five observations are
sufficient although the results may be more unstable with fewer
observations. Studies using similar methodology have used sam-
ples sizes of 13 (Thomas et al., 2013), 19 (Kalkanci et al., 2011), and
15 (Benzion et al., 2008) participants per treatment cell respec-
tively. Hence, the current sample size is well within the acceptable
range for behavioral experimental studies.
3.2. Experimental protocol
The data were collected using a negotiation simulation of
buyer–supplier dyads. This research adopted Pruitt and Lewis’
(1975) design with Carter and Stevens’ (2007) framing and wording
of the experiment when appropriate. Analogous to Pruitt and Lewis’
(1975), one buyer and one supplier were asked to negotiate the
prices of three different products (alpha, beta, and gamma). Buyer
and supplier received different price tables and the payoffs were
asymmetrically distributed, allowing participants to gain higher
profits if they arrived at an integrative deal.4
As shown in Table 2, prices were listed as letters ranging from A
to N and were for the specified number of units. As an addition to the
original simulation, two levels of product quality were introduced
(high and low). Buyer and supplier negotiated product quality along
with the price. In the post-negotiation survey, the supplier was
asked about the quality of products she actually planed to deliver.
Profits to both involved parties were determined by the delivered
quality as opposed to the negotiated quality.
Two pre-tests were conducted. Initially, 22 students from an
undergraduate class were asked to participate in the experiment.
During this testing phase, the instructions were rewritten and clar-
ified based on comments from students. Next, a trial was run in
an undergraduate class: 23 undergraduates and one PhD student
participated. This session resulted in the adjustment of the time for
the academic performance issue the overall GPA average was gathered for all sec-
ond year MBA students at the university from which the sample was drawn. On
average, the GPA of international students was 0.02 points lower than their domes-
tic counterparts (3.49/4 versus 3.51/4); The difference between the two groups,
international and domestic students, was not statistically significant. To assess the
socio-economic issue, data was gathered on program cost for the MBA, $80,366 for
resident students and $94,896 for non-resident. Thus, for both domestic and inter-
national students, the direct cost of the program is quite substantial. It follows that
both domestic and international students would generally come from a relatively
high socio-economic status.
4
‘Distributive’ and ‘integrative’ deals are discussed in detail in Brett (2007). Dis-
tributive deals imply that there is a fixed pie of profits that are distributed across
negotiating partners. Any win by one partner results in a respective loss of the other.
In integrative deals, through negotiation, participants can result in increases in the
overall pie, resulting in win-win solutions. This concept is also referred to in the
literature as ‘value claiming’ versus ‘value creating’ (Olekalns and Smith, 2003).
120 D. Ribbink, C.M. Grimm / Journal of Operations Management 32 (2014) 114–126

Table 2
Price-profits for buyer and seller.

Alpha Price per 1000 units Beta Price per 1000 units Gamma Price per 1000 units

Price Profits Price Profits Price Profits

High quality Low quality High quality Low quality High quality Low quality

Seller
A $2000 $3250 A $1200 $1950 A $800 $1300
B $1750 $3000 B $1050 $1800 B $700 $1200
C $1500 $2750 C $900 $1650 C $600 $1100
D $1250 $2500 D $750 $1500 D $500 $1000
E $1000 $2250 E $600 $1350 E $400 $900
F $750 $2000 F $450 $1200 F $300 $800
G $500 $1750 G $300 $1050 G $200 $700
H $250 $1500 H $150 $900 H $100 $600
I $0 $1250 I $0 $750 I $0 $500
J −$250 $1000 J −$150 $600 J −$100 $400
K −$500 $750 K −$300 $450 K −$200 $300
L −$750 $500 L −$450 $300 L −$300 $200
M −$1000 $250 M −$600 $150 M −$400 $100
N −$1250 $0 N −$750 $0 N −$500 $0

Buyer
A $0 −$500 A $0 −$750 A $0 −$1250
B $100 −$400 B $150 −$600 B $250 −$1000
C $200 −$300 C $300 −$450 C $500 −$750
D $300 −$200 D $450 −$300 D $750 −$500
E $400 −$100 E $600 −$150 E $1000 −$250
F $500 $0 F $750 $0 F $1250 $0
G $600 $100 G $900 $150 G $1500 $250
H $700 $200 H $1050 $300 H $1750 $500
I $800 $300 I $1200 $450 I $2000 $750
J $900 $400 J $1350 $600 J $2250 $1000
K $1000 $500 K $1500 $750 K $2500 $1250
L $1100 $600 L $1650 $900 L $2750 $1500
M $1200 $700 M $1800 $1050 M $3000 $1750
N $1300 $800 N $1950 $1200 N $3250 $2000

the complete experiment from 60 min to 40 min since participants
required less time than initially expected to reach agreement.
3.3. Procedure
Subjects were invited to participate in a 40-min experiment
that was entirely voluntary. After a short introduction, the partic-
ipants were paired up in teams of two (dyad). The assignments
were pre-arranged by the researchers using information from the
participant signup list. Dyads were generated based on partici-
pants’ national backgrounds, creating both mixed-context culture
(participants representing both a high- and a low-context cultural
background) and same-context culture groups (both participants
representing low-context cultures).5 Participants were randomly
assigned to the role of buyer and supplier within each dyad. Role-
appropriate instruction sheets were handed out, which included
a price list and associated profits for each product as depicted in
Table 2. The instructions also contained information about the com-
panies represented by the participants and the number of products
they had to acquire.
Next, an administrator read out the instructions, explained the
goals of the negotiation and informed participants of the survey.
She also pointed out that they could use part or all of the informa-
tion on the instruction sheets to devise their negotiation strategy.
Participants were encouraged to ask clarifying questions. In order to
encourage competitiveness, prizes for best performances (in both
5
The language of instruction and during the negotiation for all participants was
English.
the buyer and a supplier category) were offered, analogous to a
rank-order tournament (Lazear and Rosen, 1991).
Participants were unaware of their partners’ payoff scheme
and were explicitly asked not to share the information until they
finished the questionnaire and left the experiment. The subjects
spent 10 min studying the material and developing their individual
bargaining strategies. Next, the dyads conducted the negotiation
process.
After concluding the bargaining component, each participant
filled out a questionnaire. The first piece of information col-
lected from the seller was the level of quality they intended to
deliver to the buyer. This might or might not have been the
quality level agreed upon during the negotiation. In addition, infor-
mation was gathered on the level of trust and the perceived
bargaining strategy of the partner during the negotiation. The
questionnaire also requested background information about the
participants, including their nationality at birth, age, gender, length
of time they had spent abroad as well as countries they had
lived in.
3.4. Measures
Next, a discussion of the variables and their operationalization
in the model follows. First, the dependent variable is discussed,
followed by the hypothesized independent variables and then the
controls.
Joint Profit. Joint profits, the dependent variable in this exper-
imental simulation, was used as a measure of supply chain
performance. Analogous to Pruitt and Lewis (1975), it was com-
puted as the sum of both buyer and supplier profits in a dyad
across all three products. With reference to Table 2, an example
 D. Ribbink, C.M. Grimm / Journal of Operations Management 32 (2014) 114–126
can aid in understanding how joint profits are calculated. For exam-
ple: the participants agreed on high quality and price B for product
“Alpha,” on low quality and price I for “Beta,” and on high quality and
price G for “Gamma.” Assuming the supplier delivered high-quality
products per the agreement, the joint profits totaled $4750 (Alpha:
$1750 + $100; Beta: $750 + $450; Gamma: $200 + $1500).
Cultural differences. Hall’s (1976) distinction between high and
low-context culture was used to differentiate cultural groups by
nationality.6 The nationality of the negotiators at birth was used to
classify participants into high- or low-context culture groups. Next,
this classification was used to assign participants into negotiating
pairs. The study at hand tested two different pairings: mixed-
context and same (low)-context culture dyads.
Trust. The perceived level of trust was measured, in the follow-
up questionnaire, using a five-item scale by Spake and Bishop
(2009), adapted slightly to better fit the buyer–supplier negoti-
ation context. In Table 4, individual survey items are reported.
Participants were asked to rate each item on a five-point Likert
scale ranging from ‘completely agree’ (1) to ‘completely disagree’
(5). The scales were reverse-coded for the remainder of this study,
facilitating interpretation in Section 4.
Bargaining strategy. Bargaining strategy was measured in the
follow-up questionnaire using a scale developed by Graham et al.
(1994). As can be observed from the individual items in Table 4,
this measure looked at the perceived willingness to make con-
cessions during the negotiation. As the negotiation was ideally
a give-and-take, buyers and sellers could target mutually benefi-
cial agreements, or just follow their own agendas with a focus on
self-interest irrespective of their partners’ demands. A lower score
indicated more cooperative behavior, while higher scores were an
indication of perceived selfishness. Again, to make interpretations
more intuitive, the scales were reverse-coded for the data analysis.
Controls. In the post-experiment survey, additional information
for each individual participant was collected, such as their age and
gender. In addition, data were gathered about their nationality and
country at birth, their parents’ birth countries, time spent abroad
and other countries where they had resided.
4. Results
An overview of correlations between the independent variables
is provided in Table 3. Generally, the correlations are low. Some
correlation is present between the factors of trust and bargaining
strategy (0.482), but it is still below the accepted cutoff value of 0.6
(Hair et al., 1998).
The factors were tested for reliability, validity and unidimen-
sionality. To assess reliability, the average correlation between
items in a scale was used. The coefficient alpha values are reported
in Table 4. As this study used existing scales, the suggested cutoff
value is 0.70 (Hair et al., 1998); it was exceeded by both factors.
Confirmatory factor analysis (CFA) was used on all items to
assess fit with the latent variables. Items with low standardized
loadings (less than 0.35) and cross-loadings were discarded (one
item for bargaining strategy). Confirmatory factor analysis was
chosen as preexisting scales were used. CFA is a stricter mea-
sure to assess construct validity and unidimensionality (Gerbing
and Anderson, 1988). For the analysis, standardized loadings were
used, implying that the loadings of one item within the construct
were fixed to a value of 1.0. Item loadings and fit indices for the
CFA analysis are shown in Table 4. Convergent validity was tested
6
As discussed earlier, in an experiment, the use of categorical variables is prefer-
able over a discrete or continuous variable (i.e. Hofstede or GLOBE dimensions)
in order to create groups. Previous research in international negotiations provides
ample support (see Brett, 2007).
121
by checking that the “individual item’s coefficient is greater than
twice its standard error” (Chen et al., 2004, p.513). The large z-
values support that individual items form the underlying factors
and are all significant at the 1% level. The chi-square value of 23.69
is statistically insignificant indicating that the model fits the data.
Additional goodness-of-fit indices also are within acceptable lim-
its (RMSEA < 0.06; RMSR < 0.08; CFI > 0.90; TLI/NNFI > 0.95), thereby
suggesting good model fit (Sharma, 1996).
4.1. Hypothesis testing
To test for potential non-independence of observations (Kenny
et al., 2006), a nonparametric chi-square test was used, showing
the observations vary by dyad (as opposed to each observation
individually). Regression analysis – with between estimation for
cross-sectional data – was run to analyze the experimental data
(Kenny et al., 2006). The between estimator controlled for unob-
served consistent effects in heterogeneity within each buyer–seller
dyad (Rabe-Hesketh and Skrondal, 2008).
In the initial hypothesis, this study proposed that intercultural
negotiations result in lower profits. Model I in Table 5 shows that, at
the 5% level, joint profits are significantly influenced by the cultural
backgrounds of the parties involved in the negotiation, suppor-
ting hypothesis 1. Participants in mixed-context dyads generally
agree on lower joint profits than participants with similar cultural
backgrounds.
The results are mixed with regard to the effect of bargaining
strategy and trust on joint profits. Neither hypothesis 2 (the effect
of a particular bargaining strategy on joint profits) nor hypothe-
sis 4 (the effect of trust on joint profits) is supported in Model I.
However, in Model II, one observes a statistically significant effect
of a more collaborative bargaining strategy on joint profits, but in
the opposite of the hypothesized direction. Hypothesis 2 is there-
fore not supported. In Model II, increased levels of trust result in
greater joint profits in same context-culture dyads. This is aligned
with the proposed hypothesis and, hence, provides partial support
for hypothesis 4.
Turning next to the two moderating hypotheses, Model II shows
support for a positive moderating effect of cultural differences on
the relationship between bargaining strategy and joint profits (H3).
However, this effect is counter to the proposed negative moder-
ating effect of cultural differences as hypothesized in H3. Hence,
hypothesis 3 is not supported. Finally, Model II shows that cultural
differences have a moderating effect on the relationship between
trust and joint profits, consistent with H5. Therefore, hypothesis 5
is supported.
The controls of gender and age do not have a significant effect
on the results when included in the model. Similarly, an additional
model was run including a control variable measuring the percent-
age of lifetime spent outside of the United States to counter the
effect of cultural assimilation due to living in the United States
for an extended period of time. There is no statistically significant
effect.
5. Discussion
This study uses RV and TCE to develop hypotheses and tests
theory regarding the impact of cultural differences, both direct and
indirect, on supply chain performance in buyer–supplier relation-
ships. The results provide both significant and interesting findings.
5.1. Theoretical implications
Juxtaposing the contrasting theories of RV and TCE to develop
a model, empirical support is found for the hypotheses regarding
the impact of cultural differences on supply chain relationships.
122 D. Ribbink, C.M. Grimm / Journal of Operations Management 32 (2014) 114–126

Table 3
Correlation table.

I II III IV V

Trust (I)a 1
Coop. bargaining strategy (II)a 0.482 1
Cultural differences (III) 0.112 0.065 1
Gender (IV) −0.009 −0.090 −0.038 1
Age (V) −0.006 0.079 −0.0771 0.129 1
Time abroad as a percentage of lifetime (VI) 0.018 −0.042 −0.234 0.072 −0.024
a
Trust and cooperative bargaining strategy are reverse coded.

Table 4
Assessment of reliability and construct validity (parameter estimates, error terms and z-values).

Factors and items Estimated loadings Standardized loadings Std. error for std. ldg. z-values

Trust (coefficient alpha = 0.91)

Corporation can be trusted completely.a 0.859 1.000 0.032 26.88
Corporation can be counted on to do what is right.a 0.890 1.027 0.026 34.19
Corporation is a company that I have great confidence in.a 0.957 1.071 0.013 76.07
Corporation can be relied upon.a 0.965 1.005 0.012 83.66
I am willing to deal with a corporation again 0.694 0.622 0.061 11.46
Cooperative bargaining strategy (coefficient alpha = 0.71)
Rate a Corporation’s bargaining strategies on the following scales
Accommodating to exploitive 0.617 1.000 0.089 6.89
Honest to deceptive 0.799 1.330 0.078 10.29
Unbiased to biased 0.591 0.958 0.098 6.05
Goodness-of-fit indices
Chi-square 23.69 (p > chi2 = 0.208)
RMSEA 0.056
RMSR 0.042
CFI 0.990
TLI 0.986

All z-values are significant at p < 0.01 level.

a
Refers to either Buyer or Seller depending on participant’s role in the negotiation.

While RV states that a firm’s competitive advantage can be achieved
through leveraging interfirm relationships, TCE warns of the detri-
mental effects that might arise out of bounded rationality and the
threat of opportunistic behavior. Although both theories have been
used individually in the supply chain literature to explain the rela-
tionship between buyers and suppliers, juxtaposing both theories
contributes to new insights in the context of international business
negotiations. The results of this research provide support for both
theories, depending critically on whether or not cultural differences
are present.
Using the Transaction Cost Theory lens, it is argued that cul-
tural differences reduce the realized profits for firms. TCE clearly
outlines that greater levels of uncertainty translate into a greater
risk of opportunistic behavior. The results provide support for the
key arguments presented in support of the first hypothesis. The
presence of cultural differences facilitates misunderstandings and
errors in judgment during interactions between the participants.
Cultural differences within the dyad can result in false readings
of the partner’s behavioral signals. Negotiators in these dyads are
faced with greater complexity, which increases the level of uncer-
tainty in the relationship and, hence, increases the potential for
missing signs of opportunistic behavior. On the other hand, cultural
similarities allow negotiators to better judge the other’s behaviors
and expectations. Consequently, there is less need for elaborate
explanations, resulting in a more direct exchange of information.
The familiarity in behavior also provides support in assessing the
potential to behave opportunistically and allows partners to take
countermeasures to avoid unfavorable situations and outcomes.

Table 5
Between group estimation regression model of joint profits per dyad as DV (std. error in parenthesis).

Independent variable Joint profits

Model I Model II

Cultural differences (CD) −513.212 (250.7)

*
−553.229* (236.4) H1
Cooperative bargaining Strategy (CBS) −30.059 (474.0) −2394.104* (1044.1) H2
CBS* CD 2864.176* (1153.5) H3
Trust 29.771 (247.0) 1353.538* (605.3) H4
Trust* CD −1541.889* (653.1) H5
Gender −46.982 (306.5) −164.807 (293.1)
Age −29.619 (56.3) −34.080 (53.6)
Time in US as percentage of lifetime 0.515 (6.9) −2.110 (6.5)
Constant 5900.789** (1665.1) 6263.239** (1590.4)

Observations 78 78
R2 (between) 0.134 0.283
R2 (overall) 0.126 0.175
Number of dyads (Grouping variable) 39 39
*
p < 0.05.
**
p < 0.01.
 D. Ribbink, C.M. Grimm / Journal of Operations Management 32 (2014) 114–126
Fig. 2. Interaction plot of cultural differences on trust and joint profits.
It may also be the case that negotiators have more difficulty
establishing supply chain collaboration, as envisioned by the Rela-
tional View, when negotiating with someone representing another
cultural background. There are three potential explanations for
this. First, the partners in buyer–seller relationships may be reluc-
tant to provide the required additional information to someone
they perceive as different. This, in turn, translates into lower pro-
fits. Second, participants in business interactions might not want
to threaten their counterpart, in the presence of cultural differ-
ences, by being a tough bargainer. The underlying assumption, in
this second setting, is that the partner representing a different cul-
tural background does not understand the full implications of the
negotiation banter as well as someone from the same cultural back-
ground. Or third, someone from the same cultural background is
likely to understand the negotiation dance with its expected intri-
cacies better than someone with a different background (Gelfand
and Christakopoulou, 1999). The uncertainties arising from nego-
tiating in mixed-context culture dyads can lead to inconsistent
approaches, translating into lost opportunities and missed profits.
In either of these cases, cultural differences between participants,
originating from different backgrounds, result in lower supply
chain performance.
An interesting finding is that trust has a positive and significant
impact on joint profits in dyads with similar cultural backgrounds
but not in dyads with cultural differences. Fig. 2 illustrates this
relationship. Contrary to previous studies, the results in Model
I (Table 5) show that the direct effect of trust on joint profits
is insignificant. However, the results hold for participants from
same-cultural context dyads. In Model II (Table 5), the interaction
effect of cultural differences and trust is statistically significant.
Trust, therefore, positively impacts joint profits in same-cultural
contexts dyads, but does not in dyads with participants from dif-
ferent cultural backgrounds. An explanation for this finding is that
when partners have a similar cultural background, trust enables
negotiators to move from distributive to integrative deals through
increasing levels of information exchange. However, in the pres-
ence of cultural differences, this relationship between trust and
joint profits no longer holds. Consistent with TCE theory, greater
levels of uncertainty, due to cultural differences, appear to elimi-
nate the positive effect of trust on joint profits. In an international
setting, negotiators may need to rely on mechanisms other than
trust to control for the potential of opportunistic behavior.
It is also interesting to observe that the absence of cultural
differences in the dyad affects the relationship between bargain-
ing strategy and joint profits. Fig. 3 illustrates this relationship.
In dyads with cultural differences, an uncooperative bargaining
123
Fig. 3. Interaction plot of cultural differences on bargaining strategy and joint pro-
fits.
strategy leads to lower joint profits as expected. Similarly, in this
context, a partner more insistent on discussing greater details of
the deal might be perceived as more self-interested or even hos-
tile toward the partner’s needs. However, when there is cultural
harmony within the dyad, a more combative bargaining strategy
may ultimately be beneficial. When partners approach a negoti-
ation with a less accommodating bargaining strategy, this may
prompt participants to discuss alternative options in more detail.
As is typical in an actual negotiation, the relationships between
prices, quality and joint profits are complex and more significant
attention to alternatives can open up the opportunity to discover
superior joint profits. Participants sharing the same culture can
better withstand the tension arising from more combative bargain-
ing strategies and achieve a better outcome. Thus, in dyads with
participants from similar cultural background, a cooperative bar-
gaining strategy can cause complacency and satisficing (Gelfand
et al., 2006) and not yield the full potential of the negotiation.
This finding may imply that perceived hostile bargaining strate-
gies are not always detrimental to a relationship, but can provide
the stimulus for mutually beneficial negotiations in the appropriate
setting.
The research contributes broadly to supply chain management
theories of international buyer–supplier interactions. Past stud-
ies establish that supplier relationship management (Krause et al.,
2007) and the level of inter-organizational communications (Carr
and Pearson, 1999; Claycomb and Franwick, 2004; Paulraj et al.,
2008; Prahinski and Benton, 2004) impact a firm’s financial per-
formance, but have not provided theory regarding the role of
cultural differences in international interactions. In this context,
Lovejoy (2010), who develops theory in supply chain negotiations,
expressly emphasizes the need for more research in experimental
bargaining to advance both theory and practice. This study used
two overarching theories – each well established individually – to
jointly leverage their opposing arguments in the context of inter-
national buyer supplier relationships. Juxtaposing both the RV and
TCE provides powerful grounding regarding the impact of cultural
differences on joint profits.
5.2. Managerial implications
Global supply chains are increasingly prevalent in today’s
economy with managers seeking out – often through face-to-face
negotiation – the most cost effective, high quality products sup-
pliers can provide. As a consequence, participants with different
nationalities and oftentimes cultural differences are commonplace
124 D. Ribbink, C.M. Grimm / Journal of Operations Management 32 (2014) 114–126
in buyer–supplier interactions. The United States and China are
important supply chain trading partners and provide a good exam-
ple of mixed-cultural context backgrounds of high (China) and low
(US) context cultures. Hence, it is important for companies dealing
in such environments to be aware of the implications of cultural
differences. In an international context, misunderstandings are
more likely to occur, and it can be harder to attain mutually
beneficial outcomes. Therefore, training should be required for
managers to prepare them for the additional challenges arising
from intercultural negotiations. Managers need to be very cul-
turally adapt in order to negotiate across national cultures. In
conclusion, managers and negotiators need to be aware of the
implications of cultural differences and may need to adjust their
negotiation tactics when moving into an international context. An
appropriate approach will improve the overall financial perfor-
mance of the involved parties and, hence, should be in alignment
with the objectives of the company.
5.3. Limitations and future research
This study makes an important contribution, but is not without
limitations. Although a behavioral experiment is the most appro-
priate methodology for this study, there are drawbacks to using
a laboratory environment to test theory. One issue is the use of
MBA students rather than professionals in the field. As documented
in the method section, there is strong justification for using stu-
dents as subjects although they are generally less experienced than
professionals at international negotiations and the context of pur-
chasing (Mantel et al., 2006). As Morris and Fu (2001) argue, some
managers in intercultural negotiations are able to better adapt to
another culture (just as some people grow up bilingual), so experi-
ence might mitigate and facilitate the relationship. A comparison of
experienced versus inexperienced negotiators (in their approach to
a global supply chain negotiation setting) would be a good exten-
sion of this study.
Another limitation of the experimental approach is that the par-
ticipants in the dyads were all part of an MBA program, and likely
had previous knowledge of their partner. In order to mitigate this
concern, the assignment of participants into dyads was random-
ized. However, in a business environment, industry peers are also
likely to have some familiarity with each other (Gelfand et al., 2006).
In addition, it can be argued that familiarity should counter the
effect of cultural differences as participants will have developed
a base level of trust by belonging to the same group. Given the
fact that this research finds strong results supporting the impact
of cultural differences on international buyer–supplier negotia-
tions, this shortcoming further strengthens this study’s arguments.
Future research could investigate the role of prior familiarity within
the dyad as a moderator of the cultural differences – joint profits
relationship.
Culture as an individual construct is another potential limita-
tion. While culture is generally thought of as societal attribute,
characteristics of a society reflect individual perceptions. While
there can clearly be individual differences within members of a
society, on average, individuals from each context are likely to
behave as predicted (Brett, 2007). Consequently, in negotiations
with people from different countries, differences are more likely to
be observed between participants than within dyads comprised of
participants from the same country. In a future study, it would be
interesting to observe individual-level scores within the context of
a societal group and assess the influence on each level. In addition,
that study could also examine how individual aspects of trust and
bargaining behavior interact with national culture.
The study is also limited by breaking new ground regarding
the impact of cultural differences in buyer–supplier negotiations
and, in so doing, could not examine all the potentially interesting
variables which could impact the outcome. As such, the study is by
no means all-encompassing. By using RV and TCE to develop theory,
this study focuses on the factors of cultural difference, bargaining
strategy and trust in a single exchange without prior business inter-
action of buyer and supplier. The findings of this study support the
theoretic argument that cultural differences significantly impact
the outcome of negotiations and that experiences and inferences
from a same-cultural context are not easily transferred to an inter-
national setting. However, additional factors such as the frequency
of exchange, relationship history and commitment could impact
the theory and empirical results. Therefore, future research could
examine the confluence of cultural differences in combination with
such factors and develop further theory in this area.
6. Conclusion
This study provided both a theoretical and empirical con-
tribution to the timely topic of how cultural differences affect
buyer–supplier negotiations. Using Transaction Costs Economics
and the Relational View as lenses, theory was developed regarding
the direct and moderating effects of cultural differences on joint
profits. The model was tested with experimental data.
This study found that cultural differences directly influenced
supply chain joint profit levels. In addition, cultural differences
served as a moderator reducing the strength of the relationship
between trust and joint profits. Finally, the results also showed that
cultural differences moderate the effect of cooperative bargaining
strategies on joint profits. Future research should extend and test
theory on this important topic.
Acknowledgments
The authors thank David Cantor and John Gray as well as the
editors and reviewers of the Journal of Operations Management for
their helpful comments on earlier versions of this paper.
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