The Unintended Consequences of Headquarters’ Involvement in Decentralized Transfer Price Negotiations: Experimental Evidence

This study investigates how headquarters’ involvement affects the efficiency of transfer price negotiations. Although prior research explores autonomous transfer price negotiations, evidence suggests that headquarters can become involved in these negotiations, particularly after they fail. Although the likely intention of headquarters’ involvement is to overcome inefficiencies arising from decentralized managers’ inability to agree on a transfer price, we suggest that such involvement can reduce agreement frequency and the efficiency of transfer pricing in coordinating transfers between divisions. Reduced agreement may occur because involvement can reduce managers’ perceived responsibility for the negotiation outcome and because they may expect headquarters’ decision to be more favorable for them than a negotiated price. Headquarters’ involvement can also reduce the coordination efficiency of transfer pricing because of information asymmetries and headquarters’ decision biases in interpreting negotiation failure and using available information. In an experiment, we manipulate whether headquarters’ involvement is absent or present. We also manipulate whether headquarters suggests a nonbinding price (weak involvement) or whether it imposes a price on divisions (strong involvement). Consistent with our predictions, we find that headquarters’ involvement reduces the frequency of negotiation agreement and the coordination efficiency of transfer pricing. Efficiency is reduced more when involvement is strong rather than weak. We contribute to research by studying managers’ negotiation behavior in the realistic setting of potential headquarters’ involvement and by providing evidence on headquarters’ biased perceptions of negotiation impasse and the unintended consequences of its involvement. This paper was accepted by Brian Bushee, accounting.

INNOVATIVE ENTREPRENEURS AND THEIR NEGOTIATION BEHAVIOURS IN LAUNCHING NEW PRODUCTS

Purpose: This study investigates the impact of the negotiation behaviours by Vietnamese innovative-entrepreneurs on negotiation outcomes. The focus emphasises face-to-face negotiation sessions between innovative entrepreneurs and their corporate customers as they promote new services and products that either fulfill unmet market demands or achieve significant improvements in comparison to existing products or services. Methodology: This paper employed a qualitative research method to distill the entrepreneurial negotiation behaviours and their impacts on negotiation performance. A series of semi-structured interviews were conducted individually with 14 Vietnamese innovative-entrepreneurs, from five industries including technology, manufacturing, agriculture, medical, and education. To ensure the entrepreneurs' fall under the classification of innovative-entrepreneurs. The participating entrepreneurs were selected Entrepreneurship-Incubator, Vietnam-Department-of-Business-Registration-Management, and Business-Startup-Support-Centre. Main Findings: The findings showed that the negotiated-terms, the self-expression of the parties, the negotiation process, and the relationship developed were found to be significant in measuring negotiation performance. Negotiation behaviours, including concern about the personal outcome; concern about others’ outcomes; building relationships; and, emotional expression, were found as having a positive impact on negotiation performance. In contrast, risk-taking negatively affected negotiation outcomes. Applications: Based on the aforementioned findings, a proposed negotiation-framework of an innovative-entrepreneur in the product launching stage is being developed. Novelty/Originality of this study: This study brings another view on measuring negotiation performance by applying psychological negotiation outcome elements rather than relying on objective elements only. The significance of each psychological negotiation outcome element is also ordered. The unique advantages and challenges of the launching stage of an innovative entrepreneur are also explored to provide in-depth entrepreneurial knowledge.

Have Your Cake and Eat It, Too? The Practical Challenges Executives Face with the Mutual Gains Approach to Negotiations

Winning a negotiation is undeniably the most desirable outcome for most negotiators. Unfortunately, a focus on one-sided gains rarely leads to sustainable agreements. In today`s competitive business environment it is therefore essential to reach a negotiation outcome that not only bridges the interests of both parties, but also enforces the relationship between them. While the idea that negotiators should strive towards mutually acceptable solutions has already been examined in literature, few studies address the practical challenges that executives face when they apply the mutual gains approach to negotiations in modern business practice. This article introduces a systematic 6-step process, which encompasses the key elements of the mutual gains approach to negotiation and the challenges that business executives typically face with the application of each element. The study provides a straightforward and user-friendly framework that can be used to prepare for a negotiation or at any time during a negotiation to avoid the most common mistakes and boost the chances of reaching executable agreements.

Competence trust, goodwill trust and negotiation power in auditor-client relationships

Purpose The purpose of this paper is to investigate how competence trust (i.e. trust regarding the ability of the counterpart) and goodwill trust (i.e. trust regarding the benevolence and integrity of the counterpart) affect the probability that the auditor or the client stand up to the respective negotiation partner’s position in situations of disagreement in the auditing relationship. Design/methodology/approach Two experiments were conducted, one with 149 auditors and one with 116 chief financial officers (CFOs). Both auditors and CFOs had to indicate the likelihood that they stand up to the other party’s preferred position in a disagreement on the materiality of unrecorded liabilities. The data derived from these experiments were analyzed using hierarchical OLS. Findings The results indicate that both auditors and CFOs who take their respective negotiation partner in the audit for highly competent are less likely to stand up to them in situations of disagreement. Interestingly, goodwill trust appears to be irrelevant for the negotiation outcome. Practical implications The findings are highly relevant for regulators, because they inform about the crucial importance of competence trust for the auditing negotiation outcome and thus put the so-called “trust-threat” into perspective. Originality/value The study adds to the literature on the role of the context for auditor-client negotiations by exploring the role of two distinct forms of trust on the outcome of these negotiations.

Goal setting in distributive and integrative negotiations: a meta-analysis

Goal setting has been shown to be a strong predictor of attaining a negotiation outcome. However, neither the type of negotiation nor the outcome level, dyadic versus individual outcomes, has been systematically analyzed. Using multilevel meta-analysis, we investigate the effects of a) goal difficulty, b) goal specificity and c) scenario integrativeness on negotiation outcomes. We find that for individual outcomes, regardless of the negotiation setting, there is support for the effect of goal difficulty, but we do not find an effect of goal specificity in any setting. For integrative negotiations, we find an effect for the integrativeness of the scenario on joint outcomes: If the negotiation is rather integrative, more of the integrative potential is realized. Additional moderators such as goal symmetry are examined, and recommendations for more research on integrativeness and its impact in negotiations are made.