Negotiation is often viewed as a single interaction between two parties where exchange conditions are determined (Mintu-Wimsatt & Calantone, 1996). In contemporary supply chains, negotiations commonly determine the details of product and service exchanges between buyers and suppliers (Atkins & Rinehart, 2006; Fang, 2006). Although the practice has always been an important aspect of business, the current economic environment has placed increased emphasis on successful negotiations as performance pressures continue to increase (Herbst, Voeth & Meister, 2011). Therefore, many firms develop negotiation strategies designed to obtain desirable results. Research on negotiation strategies looks at the interaction patterns parties use to reach an acceptable agreement (Ganesan, 1993). The cumulative evidence in the literature suggests that two common types of negotiation strategy are win–win and win–lose approaches.
A win–win negotiation strategy has been labeled in the literature by a number of terms such as integrative, cooperative, problem-solving approach and collaborative (Campbell, Graham, Jolibert & Meissner, 1988; Krause et al., 2006). The goal of a win–win strategy is to reconcile divergent interests between a buyer and supplier to provide both parties with joint benefits as an outcome of the specific negotiation (Zachariassen, 2008). Win–win negotiators seek information from their counterparts to consider the needs and preferences of all parties involved in the negotiation rather than attempting to exploit differences (Mintu-Wimsatt & Graham, 2004). For long-term relationships, use of a win–win strategy has been advocated to improve overall supply chain performance, but such claims often lack empirical evidence (Graham et al., 1994; Zachariassen, 2008).
A win–lose negotiation strategy is defined as the attempt to resolve conflicts through the implicit or explicit use of threats, persuasive arguments and punishments (Ganesan, 1993). The implicit assumption and justification for this strategy is the desired outcome of winning at all costs without consideration for the other party (Calhoun & Smith, 1999). Characteristics of a win–lose negotiation strategy include behaviors that are competitive, individualistic, aggressive and persuasive (Mintu-Wimsatt & Graham, 2004). Threats and warnings may be used by a negotiator to pursue goals that conflict with their negotiation partner's goals (Mintu-Wimsatt & Gassenheimer, 2000). Win–lose negotiators often force an opposing party to make concessions to achieve more profitable outcomes.
Win–win and win–lose negotiation strategies are contrasting approaches to determining exchange conditions. The literature suggests these negotiation strategies have several common characteristics and behavioral elements. However, these aspects of negotiation are usually diametrically opposed. For instance, win–win negotiations emphasize high degrees of information exchange, but win–lose negotiations are characterized by limited information exchange (Campbell et al., 1988; Herbst et al., 2011; Ramsay, 2004). Win–win negotiators communicate clearly, but win–lose negotiators often communicate deceptively (Graham et al., 1994; Krause et al., 2006). Win–win approaches emphasize mutual gain, but win–lose approaches focus on individual goals (Ramsay, 2004; Rubin & Brown, 1975). Win–win bargaining is open to making concessions, but win–lose bargaining is not willing to concede (Mintu-Wimsatt & Graham, 2004; Neu, Graham & Gilly, 1988). Win–win tactics are cooperative and do not rely on aggressive threats, but win–lose tactics often seek to use intimidation to force concessions (Ganesan, 1993; Herbst et al., 2011; Krause et al., 2006). As these examples demonstrate, negotiation styles differ on several important dimensions.
The type of negotiation strategy impacts the outcome of a negotiation (Krause et al., 2006; Rinehart, Eckert, Handfield, Page and Atkins 2004). Negotiation research has largely utilized negotiation outcomes as dependent variables. The most common dependent variable studied in negotiations is the economic outcome of profit that is viewed as an objective result of the buyer–supplier interaction (Mintu-Wimsatt & Graham, 2004). Given the game theory origins that treat a negotiation as an individual encounter, an economic variable limited to a specific negotiation is reasonable. Profit is the most commonly measured monetary outcome in negotiation strategy and has been measured both individually and jointly (Graham et al., 1994; Neu et al., 1988). However, such measures are limited to a specific individual negotiation rather than an ongoing buyer–supplier relationship.
The second most common dependent variable in negotiation strategy research is the social-psychological outcome of satisfaction. Satisfaction represents a subjective assessment of the negotiation encounter, and it is often measured from the buyer's perspective (Graham et al., 1994). When used in negotiation strategy research, satisfaction assessments measure how a negotiator was mentally and emotionally impacted by the strategy of their bargaining counterpart. As an affective measure, satisfaction determines how managers “feel” about the outcome of a negotiation. However, similar to the economic outcome of profit, current satisfaction measures fail to capture the ongoing nature of an interdependent buyer–supplier relationship, the likelihood that the negotiators will meet again in a future encounter, or how past negotiations impact future relational exchanges and intentions in supply chains.
Negotiations take place within the context of an existing buyer–supplier relationship, and impactful research needs to encompass this expanded view instead of treating negotiation exchanges as isolated discrete events (Daugherty, 2011; Dwyer et al., 1987; Gelfand, Major, Raver, Nishii & O'Brien, 2006). Understanding the impact of negotiation strategy choice on collaborative intentions in buyer–supplier relationships is important for managers and academics alike as many critical components in supply chains are negotiated.
Dependence is an important part of understanding supply chains because, to some degree, all members of a supply chain depend on each other (Stern, El-Ansary & Coughlin, 2001). This type of mutual dependence between buyers and suppliers is described as interdependence (Pfeffer & Salancik, 1978). The concept of interdependence suggests that buyers and suppliers must take each other into account to achieve their individual goals (Gundlach & Cadotte, 1994). Although interdependence can be conceptualized with varying degrees of symmetry or asymmetry, in this study the focus is on high and low levels of mutual symmetric interdependence. Relationships with mutual symmetric interdependence have an equal amount of dependence between a buyer and supplier (Kumar, Scheer & Steenkamp, 1995). In these kinds of interdependent buyer–supplier relationships, neither party has more power over the other. Mutually interdependent buyer–supplier relationships are used in this study to control for the known effects of power in negotiations and instead permit the rigorous investigation of negotiation strategy effects in supply chain relationships. Likewise, interdependent buyer–supplier relationships allow for the development of collaborative behaviors that are dependent variables of interest in this study.
Sharing valuable knowledge and essential information is at the heart of the supply chain concept (Thomas, Esper & Stank, 2010). Information is one of the primary flows in a supply chain, and it is a critical driver of efficiency, effectiveness and overall supply chain performance (Mentzer et al., 2001; Thomas, Fugate & Koukova, 2011). To coordinate key supply chain activities and ultimately meet end-consumer expectations, buyers and suppliers must share key information (Kannan & Tan, 2002; Kwon & Suh, 2004; Terpend, Tyler, Krause & Handfield, 2008). Given the importance of this type of information flow in supply chain relationships, knowledge sharing–oriented constructs are particularly relevant to buyer–supplier relationship research.
The knowledge sharing–dependent variables used in this study are information exchange, communication quality and operational knowledge transfer. Information exchange is defined as the expectation that supply chain members will provide basic information to each other (Lusch & Brown, 1996). Communication quality is defined as the completeness, credibility, accuracy, timeliness and adequacy of communication flows between supply chain members (Mohr & Sohi, 1995). Operational knowledge transfer is defined as the transfer of knowledge or know-how between supply chain members (Fugate, Stank & Mentzer, 2009; Modi & Mabert, 2007). These three constructs were selected as dependent variables because they tap into the domain of key collaborative knowledge sharing behaviors that are essential to high-performing supply chain relationships.