Cultural Impact on Models of Negotiation using the Example of Distributive Negotiations

Table of Contents

Abstract

List of Figures

List of Tables

List of Abbreviations

1 Introduction
1.1 Preliminary Note
1.2 Aims and Objectives of the Thesis
1.3 Structure of the Thesis

2 Definition of Terms
2.1 Negotiation
2.2 Culture

3 Cultural Dimensions
3.1 Hofstede ' s Cultural Dimensions
3.1.1 Power Distance Index (PDI)
3.1.2 Individualism vs. Collectivism (IDV)
3.1.3 Masculinity vs. Femininity (MAS)
3.1.4 Uncertainty Avoidance Index (UAI)
3.1.5 Long - term vs. Short - term Orientation (LTO)
3.2 Hall's Cultural Dimensions
3.2.1 High- vs. Low-Context
3.2.2 Time

4 Negotiation Analysis
4.1 Preliminary Note on Negotiation Analysis
4.2 Development of Negotiation Theory
4.3 Decision Analysis
4.4 Behavioural Decision Analysis
4.4.1 Decision Traps
4.4.2 Uncertainty Anomalies
4.4.3 Choice under Uncertainty
4.5 Game Theory
4.6 Characterization of Negotiation Analysis

5 Taxonomy of Negotiations

6 Two-Party Distributive (Win-Lose) Negotiations
6.1 Interests
6.2 Best Alternative to Negotiated Agreement (BATNA)
6.3 Reservation Price
6.4 Buyer's and Seller's Surpluses
6.5 Zone of Possible Agreement (ZOPA)
6.6 The Dance of Concession
6.7 Buyer's and Seller's Exaggeration
6.8 Raiffa's Findings concerning Distributive Negotiations
6.9 Both Parties know the Other's Reservation Price

7 Culture and Negotiation
7.1 Preliminary Note concerning Culture and Negotiation
7.2 Prevailing Concepts
7.3 New Approach to Intercultural Negotiation
7.3.1 Pre-negotiation
7.3.2 Negotiation Process
7.3.3 Post-Negotiation

8 Hypotheses
8.1 Deriving of Hypotheses
8.2 Hypotheses

9 Interpretation of the Interviews

10 Discussion and Conclusion

11 Appendix
11.1 Appendix 1 : Hofstede's Cultural Dimensions
11.2 Appendix 2: Hall's Cultural Dimensions
11.3 Appendix 3: Asian Disease
11.4 Appendix 4: Allais Paradox
11.5 Appendix 5: The Prisoner's Dilemma
11.6 Appendix 6: Taxonomy
11.7 Appendix 8: Buyer's and Seller's Exaggeration
11.8 Appendix 9: Processual Negotiation Strategies
11.9 Appendix 10: Explanation of Hypotheses
11.10 Appendix 11 : Leitfadengestütztes Experteninterview - Fragebogen
11.11 Appendix 12: Leitfadengestütztes Experteninterview - Einführung

12 Bibliography

List of Figures

Figure 1: Mental Programming

Figure 2: Cultural Onion

Figure 3: Cognitive Biases

Figure 4: 2x2 Matrix

Figure 5: Zone of Possible Agreement

Figure 6: The Negotiation Dance

Figure 7: National & Negotiation Culture

Figure 8: New Approach to Intercultural Negotiation

Figure 9: Negative and Positive Frames

Figure 10: Prisoner's Dilemma

Figure 11: Negotiation Strategies

Figure 12: Seller's & Buyer's Exaggeration

Figure 13: ZOPA

List of Tables

Table 1: Taxonomy

Table 2: Market Analysis

Table 3: Deviation of Hypotheses

Table 4: Hofstede's Cultural Dimensions

Table 5: Hall's High- vs. Low-Context

Table 6: Allais Paradox

Table 7: Taxonomy Extended

Table 8: Allgemeine Angaben zum Unternehmen - Standardversion

Table 9: Allgemeine Angaben zum Interviewpartner - Standardversion

List of Abbreviations

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Introduction

Let US never negotiate out of fear. But let us never fear to negotiate. ^[1]

John F. Kennedy (1917-1963)

Abstract

Published in 1982, Howard Raiffa ’s book The Art and Science of Negotiation constitutes the down of a new era with its asymmetrically prescriptive descriptive orientation. It consolidated distinctive approaches, boosted research and over­came thinking barriers. In times of a globalized, highly interdependent world with multi-billion dollar cross border M&A transactions, international business nego- hâtions are an essential part of the global economy and shape a company ’s sue- cess. This thesis describes the cultural dimensions of Hofstede and Hall and addi­tionally Raiffa ’s negotiation analysis from the perspective of distributive negotia­tions. A new approach for international business negotiations is introduced which should enable negotiators to deal with differences at an international stage. In order to understand if and how culture affects negotiation hypotheses are derived from theoretical grounded work. By conducting several interviews with negotia­tors from different cultural backgrounds, tendencies are illustrated and the ques­tion whether further empirical research is needed is answered. The interviews show that negotiations between individuals fi·от countries with different power distance indexes often lead to non-agreements. Moreover, the interviewees think that negotiators with an individualist mind-set are more likely to reach an agree­ment in distributive negotiations. Lastly, the interview reveals that negotiators from a country scoring high in masculinity tend to apply rather distributive than integrative negotiation styles. Further validation of the hypotheses with case stud­ies and experiments have yet to be conducted.

1 Introduction

1.1 Preliminary Note

Negotiation still is a conundrum for many people despite its significance in every­day life. Accordingly, Bazerman and Neale state that “Everyone negotiates” (Ba- zerman & Neale 1992, p. 1) and raise the question if there is anything more inher­ent to business than negotiation. Similarly, Eliashberg et al. note that “Negotiation is the most prevalent basis for exchange in the global business-to-business mar­ketplace” (Eliashberg et al. 1994, p. 2). At the same time, courses on negotiation at American business schools are highly appreciated by students and research on this topic is labelled as a “[...] perfect storm [...]” indicating the fast progression and its strength (Thompson & Leonardelli 2004, p. 1). This confirms the vital im­portance of negotiation in personal and professional life.

A field of research, which offers an even greater extent of literature, deals with the term culture. Hofstede refers to culture as the “[...] collective programming of the mind [...]” (Hofstede 1994a, p. 1) and adds that it is essential to understand the cultural background to comprehend individuals’ behaviour. In 1993, Samuel Hun­tington (1993) delineates conflicts, which will take place as a consequence of cui- turai differences among societies. Even though no fundamental clash of civiliza­tion has occurred yet, culture is a variable that can shape the outcome of many business transactions. Its influence can be observed in various M&A transactions for instance the “Merger of equals” (The Economist 2014) between Chrysler and Daimler. It showed the difficulties that may arise as a result of a missing cultural fit^[2] (Engerí et al. 2010). Schneider (2001) points out that one of the main reasons for the unsuccessful merger between two multinational corporations are cultural conflicts. McKinsey estimates the total costs incurred for Daimler to have reached 74 billion^[3] Euros which means that it is one of the worst mergers in history^[4] but Weber and Camerer argue that it is by far not the only example for an M&A transaction that eliminated value. Cross border M&A offers a powerful example for the significance of understanding culture since the sums discussed within the negotiation can reach billions of dollars and effect thousands of people (Weber & Camerer 2003).

In their book Negotiating Rationally, published in 1992, Bazerman & Neale iden­tify the major trends of the past twenty years. The six trends are as follows: (1.) Workforce mobility; (2.) Corporate restructuring; (3.) Diversified workforce; (4.) Servi ce-sector economy; (5.) Renegotiation; (6.) Global economy (Bazerman & Neale 1992). In analogy, Roland Berger Strategy Consultants define seven “mega­trends” that are expected to impact all areas of life. According to them, the major trends in the upcoming years are: changing demographics, scarcity of resources, the challenge of climate change, dynamic technology & innovation, global knowledge society, and sharing global responsibility (Roland Berger Strategy Consultants 2013). All these trends are linked to some kind of negotiation. Even the change in demographics is linked to negotiation for instance about the retire­ment age negotiation taking place in various countries. A second element all “megatrends“ have in common is the influence of globalization as the process is accelerating and subsequently the interactions of people, organizations, nations, and other entities with different cultural background increase and become more intertwined. Hence, every negotiator, which means everyone from a single indi­vidual to a large multinational corporation, should understand the cultural impact on negotiation.

In 1982, Raiffa closed a research gap between sociological and psychological re­search on negotiation and the predominant game theory. This connection presents a stimulus for further research (Raiffa et al. 2007). Nowadays, in the course of globalization, a similar stimulus could initiate the synthesis of the cultural and negotiation research. More than 30 years later, in his dissertation “Verhand­lungserfolg - Zyklische und phasenbedingte Einflüsse”, Hasler-Dierauer, identi­fies an academic void[5] and argues that notwithstanding negotiations are crucial for everyone, only marginal attention is paid to this topic throughout German­speaking countries which indicates that despite the extensive research already conducted, further research is still necessary (Hasler-Dierauer, 2007). An im­portant point to keep in mind is that there is no single negotiation strategy, which can be applied to all situations, but various approaches offer powerful strategies - each of them excellent in its field. Bazerman and Neale account for this fact by stating that their theory is not “[...] [an] ivory-tower theory.“ (Bazerman & Neale 1992, p. 4).

1.2 Aims and Objectives of the Thesis

The aim of this thesis is to identify effects on negotiation which are attributable to cultural differences among negotiators. Hypotheses are derived from a literature review and examined on the basis of various interviews with experts from pur­chasing departments of multinational organisations. As a consequence, this thesis attempts to describe possible interfaces between negotiation and culture which are worth further empirical research. The aim is not the closure of the existing аса- demie void, but rather to depict a new possible research direction. Furthermore, hypotheses that can represent a starting point for in-depth research shall be out­lined.

1.3 Structure of the Thesis

This thesis is divided into ten chapters, an Appendix and the Bibliography. The introductory, first chapter is followed by the Definition of Terms (see Chapter 2)^[5] which specifies the terms “negotiation” and “culture”. The third chapter deals with cultural dimensions conceptualized by Hofstede and Hall. The cultural di­mensions are used to explain differences in negotiation style which are attributes of an individual’s origin. The next chapter (see Chapter 4) outlines the evolution of negotiation analysis as it is a synthesis of previously distinctive fields of re­search. This chapter is aimed at identifying reasons why there is still no idealized model which could lead to the best outcome and highlights some sociological and psychological biases that are considered to influence negotiation. A taxonomy of negotiation in the fifth chapter presents common characteristics of negotiation and enables a better categorization. As mentioned above, negotiation analysis is being looked at from a new perspective, the sixth chapter describes a specific type of negotiation, the distributive negotiation. It covers inter alia: a process of how peo- pie reach an agreement and pictures one common negotiation situation. The final chapter of the literature review (see Chapter 7) is the transition from culture and negotiation as independent and поп-related concepts to an interpersonal and - organizational context that exhibits reciprocal effects. After some prevailing con­cepts are presented a new approach will be outlined. In chapter eight, the derived hypotheses are presented and explained. Findings of the interviews are interpreted in chapter nine. Ultimately, in chapter ten a conclusion and discussion compie- ment the thesis. The Appendix together with the Bibliography provides additional background information.

2 Definition of Terms

In order to improve the comprehensibility of this thesis and to prevent mi sinter­pretation the terms culture and negotiation are defined. The definition does not strive for absolute completeness but should enable the reader to understand what is meant by these terms.

2.1 Negotiation

Being aware of the importance of negotiation, the first research on negotiation was conducted in North America. Consequently, the Anglo-American literature predominates in the field of negotiation and coined the expressions “bargaining“ and “negotiation“. “Bargaining” is frequently associated with competitive nego- dations meaning a negotiation in which each party wants to claim as much of the figurative “negotiation pie” as possible and does not insist on interests but on its position. In contrast, “negotiation“ is related to principled negotiation^[6], a negoda- don framework developed by Roger Fisher and Wiliam Ury which tries to identify mutually beneficial behaviours during the negotiation process and thus create more efficient agreements (Fisher & Ury 1992).

The theorists and developers of the recognized four stage model of negotiation^[7], Walton and McKersi have the following understanding of negotiation: “[...] the deliberate interaction of two or more complex social units which are adempting to define or redefine the terms of their interdependence“ (Walton & McKersie 1965, p. 3). Gulliver defines the above-mentioned “terms of their interdependence“ more clearly and denotes negotiation as “[...] the presentation and exchange of more or less specific proposals for the terms of an agreement“ (Gulliver 1979, p. 71).

Voeth and Herbst (2009) attempt to define negotiation as a process that shares following attributes: (1.) Involvement of multiple parties; (2.) Goal congruence; (3.) Conflicting parties; (4.) Zone of Possible Agreement (ZOPA); (5.) Interactive process. By (1.) involvement of multiple parties the authors mean that two or more people participate in the negotiation process. One essential part of principled negotiation is the identification of shared interests. Similarly, Voeth and Herbst (2009) identify (2.) goal congruence, which indicates the existence of mutual in­terests, to be inherent in every negotiation. The third attribute of negotiation, (3.) conflicting preferences, refers to the inherent, different preferences of negotiators which should be overcome in order to settle an agreement. Besides the negotia­tors’ differences in every negotiation, there is a (4.) zone of possible agreement (ZOPA). Though, this does not imply that every negotiation leads to an agree- ment. Finally, every negotiation is an (5.) interactive process between several par­ties during which they try to assert their own interests (Voeth & Herbst 2009).

As this Bachelor’s thesis often refers to the book Negotiation Analysis - The Art and Science of Negotiation the terms “art“ and “science“ should be defined. The authors David c. Bangert and Kahkashan Pirzada (1992) define art as the negotia­tion process, which consists mainly of the communication between the opponents. The art of negotiation varies in each negotiation because of a different setting in­eluding cultural differences and other variables. Mathematical approaches and especially the game theory fall in the category of science of negotiation (Bangert & Pirzada 1992).

Bazerman summarizes the aforementioned characteristics and determines the nu­cleus of negotiation as follows: “When two or more parties need to reach a joint decision but have different preferences, they negotiate, [...]. But as long as their preferences concerning the joint decision are not identical, they have to negotiate to reach a mutually agreeable outcome“ (Voeth & Herbst 2009, p. 4 refers to Ba- zerman 2006).

2.2 Culture

In the course of time, an innumerable number of definitions reflecting the term “culture“ were developed. In general, talking about culture involves following characteristics: (1.) culture encompasses fundamental assumptions, values, norms, attitudes and beliefs that are shared by a society (Kutschker & Schmid 2011); (2.) culture is dynamic and constantly changing (Hofstede et al. 2011); (3.) Culture is partly learned and partly inherited (Kutschker & Schmid 2011).

In order to obtain a more precise understanding of culture, two concepts are brief­ly outlined below. First, culture can be described by dividing it into the concepta and percepta layer. Secondly, Geert Hofstede illustrates culture as an onion with its various layers.

The visible layer, called percepta, is the symbolic world, which entails social forms of expression e.g. clothing, language and tradition. In addition to this, all behaviourial patterns and social structural elements such as economic, social, po- liticai, and religious institutions, in other words “society’s backbone” are part of this layer. The fundamental assumptions including values, norms, attitudes, and beliefs belong to the concepta. Unlike the percepta, the concepta layer is observa­ble and thus, it is the first layer someone is able to notice when analysing the cui- ture of a society. The second, widely-used concept of culture stems from the Dutch scientist Geert Hofstede. In his opinion, culture is “[...] the collective pro­gramming of the mind that distinguishes the member of one group or category from others.” (Hofstede et al. 2010, p. 6). By programming of the mind, he de­notes a mental program that influences the way people act, think, and feel. Even if human reactions are not completely predetermined, they are affected by learned and inherited behaviour, which can be seen as a specific software. Figure 1 illus­trates the components of this software. The human nature at the bottom of the pyramid is described as the rudimentary principles that are shared by everyone e.g. the ability to experience feelings such as joy or sadness. In contrast, the per­sonality at the peak of the pyramid reflects character traits that are partly learned and partly inherited. Culture, located in the middle of the pyramid, is the link be­tween the human nature and the personality (Hofstede et al. 2011). Hofstede’s popular metaphor of culture as an onion is illustrated in Figure 2. The outermost

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Figure 1: Mental Programming;

Source: Hofstede et al. 2010, p. 6

layer contains of symbols, which can easily be observed. Example for those is the use of language or the clothing. The second layer is named "heroes" and stands for role-models within a culture. Rituals (third layer) can be defined as social interac­tions, such as the way people greet each other. The core is composed of the values shared within a culture, for instance the answer to the question what is wrong and what is right. Heroes, symbols and rituals can be observed by people who are not part of this culture and can be summarized as practices shared within this culture. Interestingly, Geert Hofstede’s son, M. Jonker Catholijn and T. Verwaait note, that culture consists of “[...] unwritten rules of society.” (Hofstede et al. 2012, p. 80) and that culture does not refer to an individual but to a group (Hofstede et al. 2012).

Hall, whose cultural dimensions are explained in his various books^[8], pays special attention to the difficulty of understanding culture by stating: “Culture hides much more than it reveals, and strangely enough what it hides, it hides most effectively from its own participants” (Hall 1973, p. 29).

As this thesis focuses on the negotiation analysis (see Chapter 4), introduced by Howard Raiffa, it would not be wise to withhold his understanding of culture. From his point of view, culture is “[...] a set of norms and practices that are commonly held by the members of a group and perpetuated over time. The group itself might be a nation, a religion, a profession, a gender or even a family.” (Raif- fa et al. 2007, p. 284). Summed up, culture is an inconsistently defined term which can be described but not defined.

3 Cultural Dimensions

In the upcoming chapters the main cultural dimensions of Hofstede and Hall will be discussed. With this in mind, it is important to understand that the effects de- scribed below are polar extremes, which means that ideal-typical characteristics of each dimension are presented. Cultural dimensions^[9] enable the distinction of indi­viduals by means of their cultural background. It is the first step to the deviation of the hypotheses derived in Chapter 8.

3.1 Hofstede’s Cultural Dimensions

Besides the studies of Trompaars, Hall and the wide-spread GLOBE study, the cultural dimensions defined by Geert Hofstede are one of the most influential re­search projects concerning national culture^[10]. Hofstede, Jonker and Verwaait as­sess the cultural dimensions defined by Geert Hofstede as the best framework that “[...] matches society-level variables [...].” (Hofstede et al. 2012, p. 82). Fur­thermore, the authors stress that the dimensions do not relate to individual charac­teristics but to societal pattern (Hofstede et al. 2012).

Before this thesis gives an overview of the several cultural dimensions, back­ground information is provided regarding the research Geert Hofstede did, and it exhibits basic assumptions of the cultural dimensions.

Between 1960 and 1970, Hofstede conducted an extensive survey within the IBM conglomerate to confirm findings regarding national cultural differences that were being anticipated. Today’s division of the world into distinct nation states was developed in the mid-twentieth century. Thus, cultural borders are not inevitably congruent with national borders. Hofstede was aware of this inconsistency and acknowledged that it would be more accurate to consider societies rather than nation states. Whereas nation states were formed and are continually in the pro­cess of formation, societies developed organically. However, Geert Hofstede con­siders the classification of cultural differences by means of national borders as the only applicable criterion (Hofstede et al. 2010). Even before Hofstede identified cultural dimensions, A. Inkeles and D. Levinsion were able to discern three erite- ria to differentiate cultural differences in several societies. Namely, the relation to authority, the individual’s concept of masculinity and feminity^[11] and the ways of dealing with conflicts (Hofstede et al. 2010). Later, Hofstede was able to confirm all three criteria and incorporate those in his dimensions.

Hofstede thought that an international corporation like IBM would be the appro­priate setting to conduct a survey and prove the findings, because the employees were alike in many aspects^[12], but differed in their nationalities. The first survey was conducted between 1960 and 1970, a questionnaire was issued to more to more than 116.000 IBM employees around the world. In 1980 a second question­naire was issued to only Chinese students, because Hofstede thought that the first survey was created under high western influence and thus, did not address Confu- cian values adequately. Consequently, Hofstede identified a fifth dimension^[13] ac­counting for the differences between Western and Confucian values (see Chapter 3.1.5). However, in 2010, a sixth dimension was added by Michael Minkov. This thesis will focus on Hofstede's five dimensions because no correlation between negotiation and the sixth dimension is assumed^[14].

In the following passages, the cultural dimensions will be characterized and the consequences of the idealized manifestation of the cultural differences are ex­plained in the context of negotiation.

3.1.1 Power Distance Index (PDI)

The first dimension Hofstede characterizes is the so-called Power Distance Index, which is defined as follows: “[...] the extent to which the less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally.” (Hofstede et al. 2010, p. 61). Furthermore, Hofstede notes that inequality exists in every society, but the extent varies (Hofstede 1994b; Hof­stede & Hofstede 2005).

Again, this thesis restricts its view of power distance on negotiation and thus on the relationship between power distance and negotiation-related topics. A high degree of power distance indicates that the decision-making is centralized as much as possible (Kutschker & Schmid 2011). Moreover, the organizational structure exhibits many hierarchical levels. Those hierarchies need to be followed by all members of the organization. Accordingly, employees perceive formal structures as very important and want to be guided by their superiors. A “benevolent auto­crat” or “good farther” is considered to be the ideal boss in large-power distance countries (Hofstede & Hofstede 2005; Hofstede 2011). Similarly, referring to su­periors as “good father” implies the emotional relationship between superiors and subordinates. At first sight, nations with a high power distance can be identified by the status symbols being shown. Two interesting aspects can be identified by looking at the authority-citizen relationship. High income-disparities are accepted in large-power distance countries and superiors are solely legitimated because of their power, regardless their qualifications. Regarding the negotiating situation, G.J. Hofstede, C.J. Jonker and T. Verwaait denote that: “The powerful dictate the conditions” (Hofstede et al. 2012, p. 86). In other words, hierarchically high- positioned individuals have a better negotiation setting. Brett (2000) notes that negotiators from egalitarian societies do not focus on their BATNA^[15] or other sources of power, but on information sharing striving for an integrative agree­ment. Moreover, the authors assume that negotiators from countries scoring low on the Power Distance Index are more used to negotiations, because they will ne­gotiate in any case and are used to it.

3.1.2 Individualism vs. Collectivism (IDV)

The second dimension deals with the individualism and collectivism which can be observed within a nation^[16]. The characteristics of individualist and collectivist societies can be outlined as follows: “Individualism pertains to societies in which the ties between individuals are loose [...]. Collectivism as its opposite pertains to societies in which people from birth onward are integrated in strong, cohesive in­groups, which throughout people’s lifetime continue to protect them in exchange for unquestioning loyalty.” (Hofstede et al. 2010, p. 92).

Societies with a high degree of collectivism emphasize the importance of groups. As a result, collectivist societies differentiate between a “we-group” and “they- group”, which means people distinguish between members of their own group and outsiders. In collectivist countries individuals do not have ends in itself and their own interests and entrepreneurial spirit, but in the utility maximization of their group (Triandis 1995). In contrast members of individualist countries try to sepa­rate from others and achieve their own, personal objectives (Gelfand & Realo 1999). Independent thinking is far less valued in collectivist countries than in in­dividualist countries or in other words, individuals with a collectivist mind-set do not recognize the necessity to develop creative solutions^[17]. The impact of an indi­vidualistic country can be seen in the principle of universalism, which defines the maxim that everyone should be treated in the same way (Hofstede 1994a). Con- ceming the work itself, Hofstede said that in societies with a high score in collec­tivism, “[...] the personal relationship prevails over the task” (Hofstede et al. 2002, p. 123). Thus, before starting any business in a collectivist country or with people from a collectivist society, it is advisable to become part of their “in­group”. Collectivist countries tend to differ sharply between “in-group” and “out­group” members of their society. This behaviour is observable with respect to a company’s choice with whom they negotiate or which supplier they choose (Hof­stede et al. 2010). In addition to this, G.J. Hofstede, C.M. Jonker and T. Verwaart predict that a negotiation will not be successful in case no relationship to the op­ponent is formed prior to the negotiation^[18] (Hofstede et al. 2012). The above- mentioned distinction between “in-group” and “out-group” is an important factor when talking about decision-making. In collectivist countries, individuals do not only act according to their own, independent thinking but to the norms and values of the group they are representing (Schwartz 1994; Hofstede 2011). Thus, group membership has a high impact on the final decision as well as the whole decision­making process. In addition, communication style is correlated to the different manifestations of individualism and collectivism. In collectivist countries it is likely to see high-context communication rather than low-context communication. These effects of communication were observed by Hall and will be discussed more precisely in Chapter 3.2.1 Hall (1959) and Brett (2000) suppose that indi­vidualistic negotiators try to maximize their own utility regardless of the subse­quent effects for the opposing party. Thinking of the cultural effects on the man­agement styles and behaviours, another study, conducted by Christopher Earley, sheds light on the performance of employees under certain conditions^[19]. The sur­vey was carried out with 48 management trainees from both, the u.s. and China. Evidently, the American trainees performed best when working independently on tasks marked with their names, whereas the Chinese trainees did worse under this condition (Earley 2010; Hofstede et al. 2010).

3.1.3 Masculinity vs. Femininity (MAS)

Apart from the differences related to the procreation, Hofstede considers differ- enees between women and men as rather relative than absolute. Despite the mar­ginai biological differences between men and women^[20], their social position with­in countries varies heavily. According to the authors, a masculine society exists in case clear differentiation of roles takes place. Men are considered to be achieve­ment-oriented and women are awarded with good interpersonal skills. In contrast, talking about feminine societies involves no differentiation in roles regarding the sex. Moreover, equal evaluation standards are being used regardless of someone’s gender. Hofstede, Jonker and Verwaait see masculinity versus feminity “[...] as a preference for performance versus cooperation.” (Hofstede et al. 2012, p. 88).

Generally, the study reveals that “[...] women’s values differ less among societies than men’s values; [...]” (Hofstede 1994a, p. 3). In a masculine society values, performance, toughness, and ambition are predominant (Barkai 2008). On the contrary, modesty is the most important value in feminine societies. The rigorous differentiation of roles in masculine societies complicate the women’s ability to hold a senior executive position and many women carry out rather simple tasks. The high competitive pressure and the objective to be the best are characteristics of masculine societies. An important aspect regarding negotiations is that in mas­culine societies conflicts are carried out in order to find a “winner”. Feminine so­cieties prefer discussions and compensations to reach an agreement. Moreover, it is likely that the percentage of women in professional jobs is smaller in masculine societies than it is in feminine societies. The remuneration and incentives system is based on the performance merit system (Hofstede et al. 2010; Hofstede & Hof­stede 2005; Hofstede 2011).

3.1.4 Uncertainty Avoidance Index (UAI)

Hofstede describes uncertainty as a subjective experience, which is handled dif­ferently in every country. This omnipresent phenomenon exists regardless of po­liticai, cultural or economic borders. Consequently, this dimension is not aimed at identifying uncertainty in different countries but at how people handle this condi­tion. Similarly to other aspects of culture, the feeling of uncertainty is shared by a distinct social group and is acquired or learned by the members of this specific group. Defining uncertainty more accurately, Hofstede denotes it as “[...] the ex­tent to which the members of a culture feel threatened by ambiguous or unknown situations.” (Hofstede et al. 2010, p. 191). In other words it is “[...] a society’s tolerance for uncertainty and ambiguity: [...] [which] refers to man’s search for truth.” (Hofstede 1994a, p. 4). In addition to this, Hofstede emphasizes that uncer­tainty avoidance is not to be equated with risk avoidance because the term “risk” refers to the probability of the occurrence of a certain event. Moreover, uncertain- ty avoidance is not to be equated with fear but the psychological term of “anxie- ty”^[21] (Hofstede et al. 2010).

How does a high degree of uncertainty avoidance manifest itself? Countries with a high score on the Uncertainty Avoidance Index tend to implement rigorous norm and control systems in private and professional life. What follows is that different forms of addressing someone are being used for different people (Hofstede & Hofstede 2005, Kutschker & Schmid 2011). In countries scoring high on the un­certainty avoidance index, people have to adhere to predetermined processes. In a working environment, experts with a high level of technical knowledge are excep­tionally appreciated. The neutral observation of facts and the following decision making are of paramount importance. Different opinions and discussions are far less valued in such countries. A high level of uncertainty avoidance precipitates in low workforce mobility indicating that people tend to work longer for one, sole company. Kutschker and Schmid (2011) add that members of a society with a high uncertainty avoidance do not try to influence the future, but to control it. Al­so, according to them, technocratic coordination occurs in companies operating in uncertainty-averse countries (Kutschker & Schmid 2011). Uncertainty avoiding negotiators are expected to show an emotional negotiation style what means that they tend to extreme reactions and that they will stick to their behaviour instead of adapting the behaviour of the opponent (Hofstede et al. 2012).

3.1.5 Long - term vs. Short - term Orientation (LTO)

Beside the four dimensions described above, Michael Bond^[22] and Geert Hofstede defined a fifth dimension after they conducted the so-called Chinese Value Survey (CVS) based on the Rockeach Value Survey (RVS)^[23]. The fifth dimension pays special attention to a society’s search for virtue. According to the Confucian phi­losophy, virtue implies a life oriented towards hard work, thriftiness, patience, and endurance. The CVS was conducted because Hofstede thought that the first sur- vey did not include questions adequate for countries influenced by Confucianism because it was constructed by western scientists. Similar to masculinity and fern- inity, Hofstede and Bond were able to identify two poles, long-term orientation and short - term orientation. Long - term orientation connotes “[...] the fostering of virtues oriented towards future rewards [...], perseverance and thrift. Whereas short-term oriented societies attribute more value to past and present including traditions and obligations.” (Hofstede et al. 2010, p. 239).

Due to the fact that people living in long-term oriented countries strive for virtue, rigorous hierarchical structures are important for them (Hofstede & Hofstede, 2005). In addition to this, Geert and Geert Jan Hofstede (2005) think that individ­uals in long-term oriented societies are very persistent in pursuing their goals and show a high level of adaptability to new settings. The tendency to preserve one’s face and a high level of sense for shame lead people to strengthen their social con­tacts. The value of thriftiness can be found in many corporate strategies of Asian companies. Those companies try to foster sustainable investments, which should pay off over a long period. In addition to this, the planning horizon is significantly longer and in general, planning is more precise than it is in short-term oriented countries. Moreover, it is assumed that negotiators from long-term oriented socie­ties apply a holistic point of view (Hofstede et al. 2012). Thinking about the ef­fects on negotiation, it is important to mention that employees and superiors tend to pursue common objectives in long-term oriented countries. Furthermore, peo- pie in long-term oriented societies tend to think rather synthetically than analyti­cally. Regarding the human resource strategy, organizations operating in long­term oriented societies try to achieve a high level of personal loyalty, which im­plies that the negotiation style may be affected as well (Hofstede et al. 2010).

3.2 Hall’s Cultural Dimensions

In his book The Silent Language, Hall makes some attempts to define culture more precisely but similar to other anthropologists, he comes to the conclusion that there is no fixed scientific term that describes culture. In order not to lead to further confusion, an in-depth definition of culture according to Hall is not men­tioned under Chapter 2.2 but it is useful to give a brief insight in his perception of culture at this point. Hall states that beside some core principles of culture, as learned behaviour patterns of a group of people, no precise definition of culture is present and it can be implied that he doubts the possibility to define it. In addition, Hall holds the opinion that culture cannot be taught like a scientific subject such as mathematics or biology. Nevertheless, there is a need to understand or at least be aware of culture (Hall 1959). Hall emphasizes the intertwined connection be­tween culture and communication by stating: “Culture is the communication and communication is culture” (Kutschker & Schmid 2011, p. 711 refers to Hall 1959). To put it in a nutshell, Hall identifies the following three main elements of culture: (1.) Culture is learned and not inherited; (2.) The elements of culture are closely connected and dependent; (3.) Culture distinguishes one society from an­other and has a large impact on society’s identity. Furthermore, Hall highlights the importance of culture when he states that it is the most important interface be­tween individuals and a basis for interpersonal relations (Hall & Hall 1984). Un­der Hall’s cultural dimensions, authors usually describe four dimensions extracted from the major publications The Hidden Dimension, The Dance of Life, Beyond Culture and The Silent Language. Consequently, the dimensions are not defined as accurately as Hofstede’s dimensions, however they represent a valuable contri­bution to cultural concepts. Hall distinguishes societies by means of following four dimensions: (1.) Context orientation; (2.) Dimension of space; (3.) Dimen­sion of time; (4.) Dimension of speed of information. This thesis focuses on the two dimensions of context and time as they are expected to have the most pro­found impact on negotiation (Hall 1959; 1969; Hall & Hall 1984).

3.2.1 High- vs. Low-Context

According to the context dimension, cultures can be divided in low- and high- context cultures. Kutscher and Schmid (2011) explain context as the amount of information needed by the recipient of a message to understand it. In high-context cultures only rudimentary information is needed whereas in low-context cultures communication involves the exchange of large amounts of information. This is a consequence of the social structure. In high-context cultures, interpersonal rela­tions are valued more and a dense network of people is created. Hall argues that in high-context cultures individuals already contain the needed information.

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^[1] This sentence IS part of John F. Kennedy’s inaugural address in 1961 (Kennedy 1961).

^[2] A cultural fit refers to the cultural compatibility. In particular, the cultural fit of two companies is assessed in a M&A transaction.

^[3] The figure is based on a newspaper article of Süddeutsche Zeitung which refers to an internal report by McKinsey (Büschemann 2013).

^[4] For instance the merger between AOL and Time Warner is supposed to be one of the worst mergers in history. Time Warner acquired AOL only shortly before the dotcom bubble bursted and an adjustment of the market occurred which decreased AOĽS value dramatically (Weber c armerer 2003).

^[5] Alexander Hasler-Dierauer identifies a research gap which consists of two elements. Firstly, he thinks that processual negotiation strategies (see Chapter 11.9) are not considered adequately. Secondly. Hasler-Dierauer holds the opinion that psychological effects and especially biases are given too little consideration (Hasler-Dierauer 2007).

^[6] Defined by R. Fisher & w. Ury (1992) principled negotiation’s key essence is it’s distinction between positions and interests. The four cornerstones of principled negotiation are: (1.) Dif­ferentiate between people and the issue; (2.) Focus on interests not positions; (3.) Develop al- temative solutions; (4.) Implement objective evaluation standards (Fisher & Ury 1992).

^[7] The four stages are: (1.) Distributive bargaining; (2.) Integrative bargaining; (3.) Intra- organizational bargaining; (4.) Attitudinal Structuring (Walton & McKersie 1965).

^[8] The most influential books are: The Hidden Dimension (1969); The Silent Language (1973); Beyond Culture (1976); The Dance of Life (1984).

^[9] Maznevski et al. (2002) assess the validity of cultural dimensions by means of five countries. They came to the conclusion that the concept of cultural dimensions is a useful that illustrates inter alia the work behaviour of individuals.

^[10] Hofstede’s methodology is not outlined because it is beyond the scope of this thesis and not relevant for the research question.

^[11] Masculinity and feminity are expressions coined by Geert Hofstede which contrast the biologi­cal terms male and female and relate to societal differences between man and women (Hof­stede et al. 2010).

^[12] The employees had similar education and job postings (Hofstede et al. 2010).

^[13] Geert Hofstede and Michael Bond issued a new questionnaire based on the Rockeach Value Survey (Hofstede et al. 2010).

^[14] This newly added dimension is called Indulgence vs. Restraint and reflects the subjective well­being, a term used to describe the level of happiness (Hofstede et al. 2010). A seventh dimen­sion was presented on Hofstede’s website but not published in a book. It distinguishes individ­uals who seek for absolute truth and people who do not strive to explain all issues in life (Hof­stede 2014).

^[15] Best Alternative to Negotiated Agreement (see Chapter 6.2).

^[16] Hofstede (2011) emphasizes that Individualism vs. Collectivism is a societal phenomenon and not attributable to individuals’ characteristics.

^[17] Developing creative solutions refers to principled negotiation and is a method to develop alter­native solutions that might lead to an integrative, mutually beneficial agreement (Fisher & Ury 1992).

^[18] They illustrate the distinction between in- and out-group with the example of a negotiation situation in which the opponent makes very small or no concession. The authors assume that if the opponent is a part of the “out-group” negotiation would be broken-off whereas “in-group” opponents would get a second chance (Hofstede et al. 2012).

^[19] The exact conditions are not relevant for the thesis but for further understanding Christopher Earley’s study setting can be found in the article Socia¡ loafing and collectivism: A comparison of the United States and the People ׳S Republic of China (Earley 1997, pp. 565).

^[20] The terms “male” and “female” phrase the biological differences between the sexes and “mas­culine” and “feminine” is related to the social, economic and cultural roles of men and women (Hofstede et al. 2010).

^[21] Unlike anxiety which is described as a “[...] state of being uneasy or worried about what may happen.” (Hofstede et al. 2010, p. 195), fear refers to a certain object (Hofstede et al. 2010).

^[22] Michael Harris Bond is a professor at the Chinese University of Hong Kong who lead the CVS with other colleagues (Hofstede et al. 2010).

^[23] Milton Rockeach developed a survey to classify values. The values can be separated in two categories: terminal and instrumental values (Hofstede et al. 2010).