DQ
THE ETHICAL CHALLENGES OF GLOBAL BUSINESS-TO-BUSINESS NEGOTIATIONS:
AN EMPIRICAL INVESTIGATION OF DEVELOPING COUNTRIES' MARKETING
MANAGERS
Jamal Al-Khatib University of St. Thomas
Mohammed Y. A. Rawwas University of Northern Iowa
Ziad Swaidan University of Houston - Victoria
Richard J. Rexeisen University of St. Thomas
The present study examines the impact of idealism, relativism and Machiavellianism on the perceived appropriateness of five opportunistic negotiation tactics (i.e., traditional competitive bargaining, attacking opponent's network, making false promises, misrepresentation of infonnation, and inappropriate infonnation gathering) using a sample from the United Arab Emirates (U AE). Results indicate that idealism and Machiavellianism are strong predictors of managers' perceptions of the ethical appropriateness of negotiating tactics. Implications of these results for global firms and marketing executives are discussed and directions for future research are provided.
46 Journal of Marketing THEORY AND PRACTICE
INTRODUCTION
Today, multinational firms consider the task of understanding the ethical mindset of their global partners a major priority and a must for successfully operating in the global market (Bagozzi 1995). Oil and recent geopolitical events have placed the Arab world at the center of attention on the global stage and have presented many potentially profitable opportunities in the region for interested western firms. Universities have also responded to such interest by offering executive seminars devoted to understanding the mindset of business executives in the region. For example, the University of Memphis CIBER designed the GlobalEd Seminars in Business, Culture and Leadership to broaden cultural and leadership understanding among executives of international corporations to prepare them for conducting business in the Arab region (Wang Center for International Education Business Education and Research 2005). Despite this heightened interest, very limited effort has been made by social and behavioral scientists to study that part of the world and its people. Most of the current research is journalistic in nature and tends to lack any scientific support. Western executives continue to rely on simplistic formulas such as "do as the Romans do" when dealing witii their Arab counterparts (Little 2004).
As international trade and business opportunities grow in the Arab region, western executives are constantly negotiating with Arab executives. The negotiation process is plagued with ethical dilemmas and opportunistic temptations. In a tactical process, as two parties try to reach agreement, each wanting to maximize their results, the temptations to use deceptive or dishonest tactics are undeniable. In fact, negotiation has been defined as "a process of potentially opportunistic interaction by which two or more parties, with some apparent conflict, seek to do better through jointly decided action than they could otherwise" (Lax and Sebenious 1986, p. 11). Despite the potential for opportunistic tendencies in the negotiation exchange, western firms' executives continue to deal with their counterparts in different Arab countries by regulating their exchange partners' behavior through governance structures (e.g., contractual agreements, ownership) that have varying capacities to respond effectively to disturbances (i.e., ex post opportunism that occurs during the relationship) (Williamson 1985). Given the considerable resources needed to monitor ex post opportunism and the opportunity costs in the form of valuable deals that will not be executed due to opportunistic behavior (Wathne and Heide 2000; Calfree and Rubin 1993), it is essential that more research focus on ex ante opportunism (i.e., opportunism that occurs in early stages of the relationship initiation and during the exchange partner selection stage) so that global firms can develop the knowledge and expertise necessary to understand how to screen, select and manage exchange partners prior (ex ante) to the establishment of the exchange relationship and any dependencies that may prove ineffective and costly.
The present study contributes to the global business-to- business negotiation literature in several ways. First, unlike prior research that conceptualizes and tests opportunistic behavior during the exchange relationship (ex post opportunism), we conceptualize opportunistic negotiation tactics as an ex ante form of opportunism (opportunistic behavior exhibited during early stage of relationship initiation) that can be detected and used as an input to the decision related to whether or not a firm may wish to be involved in an exchange relationship prior to making any costly commitment. Second, this paper focuses on the ethical determinants of ex ante opportunistic negotiation tactics. While opportunism has been investigated by marketing, management and economics scholars using various frameworks (i.e., game theory, principle agent theory, transaction cost analysis) (e.g., Williamson, 1985; Calfee and Rubin 1993; Wathne and Heide 2000), opportunism has not been studied as a moral issue by business ethicists. As Romar (2004, p. 667) suggests
Opportunism represents an important risk to contemporary business organizations, which is explored by economists and marketers and not by business ethicists. Opportunism is an important moral issue in an increasingly global world; opportunism, whether by large or small firms or entire industries, has the potential to have a significant impact well beyond the boundaries of a single firm or economy.
Third, as corporations participate in Ae global economy, one of their challenges is to understand the ethical negotiation practices of their international partners (Volkema 2004). Despite the feet that the negotiation literature is rich with numerous studies prescribing the means for managing confiicts in the negotiation process, very little attention has been devoted to the ethically challenging component of the negotiation process (Robinson, Lewicki and Donahue, 2000). Little guidance is provided to managers on how to deal effectively with the ethical component of the negotiation process. The present study fills this gap in the negotiation literature by examining the ethical mindset of the business negotiators using executives from the UAE.
The UAE market is the most progressive and open market in the Arab region as evidenced by the country's early accession to the World Trade Organization and the country's sig^iing of a Trade and Investment Framework Agreement (TIFA) with Washington. In November 2004, UAB agreed to undertake negotiations toward a Free Trade Agreement (FT A) with the U.S. These initiatives toward market openness and trade liberalization make the UAE market an attractive destination for direct foreign investments by international firms from around the globe and make it imperative for those interested firms to understand how to negotiate effectively and efficiently in this important market.
Fall 2005 47
Fourth, the present research helps firms interested in the Middle Eastern market to test the external validity of their code of ethics and the extent to which individual ethical values facilitate or impede the universal application of a firm's ethical code. This study assists in this endeavor by examining the impact of Arab executives' preferred ethical ideology and Machiavellianism on their perception of unethical negotiation tactics. Through the present study's exploration of patterns of Arab executives' negotiation-related ethical beliefs and orientations, we hope to reveal interesting and significant differences in the ethical mindset of the Arab executive. By investigating the impact of these variables on their perceptions of unethical negotiation practices, global firms' executives can better understand the ethical mindset of their Arab counterparts. With this understanding it is then possible to utilize this knowledge to efficiently and effectively manage the negotiation process with their counterparts in this important maricet. Public policymakers and researchers can also benefit from this study by understanding the external validity and the degree of ethnocentrism of not only their own code of ethics but also the validity of a imiversal code of ethics.
Fifth, despite the recent surge in the business ethics research, the Middle East in general and the Arab-Gulf region in particular, have been under investigated. A review of major refereed journal articles in business and negotiation ethics published between 1995 and 2005 revealed that less than 1% of the studies published have utilized Arab executives. This massive neglect of the region by research poses a serious question about the degree of ethnocentrism of concepts and dieories developed on the West and their global applicability. As Curmingham and Green (1984, p. 9-10) correctly observed:
There is also a need for more fundamental research in international marketing in order to adapt established marketing concepts to the realities of the international marketplace ... This is essentially a question of external validity, and research should be encouraged to determine which marketing principles can be universally applied and which are basically ethnocentric (applicable only in the United States Jind similar countries).
Finally, given the Arab culture's emphasis on trust as the central theme in all exchange relations (Hofstede 1984), we propose that relational exchange is a more suitable form of governance structure in the Arab region than the more formalized forms. The present study surveys managers from the UAE on the impact of their preferred ethical ideology (idealism vs. relativism) and degree of Machiavellianism on their perceptions of various opportunistic negotiation tactics. This study has not been conducted, and therefore the study findings should contribute to the literatures of business ethics. The remaining sections of the paper review the literature related to negotiation ethics and its relation to ethical ideology and Machiavellianism; present research hypodieses, describe the research methodology, present the results and discussion, and discuss the managerial implications.
LITERATURE REVIEW AND HYPOTHESES
Opportunistic Negotiation Tactics:
Negotiation is a process by which the negotiating parties interact with one another to reach mutual agreements to provide terms, conditions, and guidelines for future behavior (Ghauri and Fang 2001). Negotiation brings two or more parties together to try to accomplish mutually beneficial outcomes, while meeting individual goals that may be at odds with the other parties' goals.
"Negotiations involve serial communication between parties to exchange information and attempt to influence or persuade one's counterpart," (Banas and Parks 2002, p. 237). The negotiation process is plagued with ethical dilemmas. In a tactical process, as two parties try to reach agreement, each wanting to maximize his or her results, they may be tempted to use deceptive or dishonest tactics. Negotiation behaviors range from the ethical to the unethical. Ethical/appropriate bargaining in distributive negotiations include exaggerated demands, hiding one's bottom line, and not being forthcoming about one's negotiation timeline. More questionable tactics include false promises/bluffing where die negotiator shows an intention to perform some act without actually having the intention to follow through; misrepresenting position, which takes place when the negotiator distorts his or her acceptable settlement point in order to convince the opponent to provide more concessions; attacking the opponent network, when the negotiator attempts to bring members of the opponent team to join his or her team; and inappropriate infonnation gathering tactic, where the negotiator uses bribes or payment to collect information about the opponent (Lewicki and Robinson 1998).
Several studies have examined the relationship between negotiation tactics and ethics (Lewicki and Robinson 1998; Robinson, Lewicki and Donahue 2000; Banas and Parks 2002; Volkema and Fleury 2002; Elahee and Brooks 2004). Lewicki and Robinson (1998) suggest that there are a wide range of negotiation behaviors that vary with respect to perceived ethicality and appropriateness. At the basic level there is traditional competitive bargaining, consisting of tactics which are generally acceptable, such as exaggerating demands and appearing to be in no hurry to come to an agreement. In addition, there are more questionable tactics, such as attacking your opponent's network, making false promises, misrepresenting information, and gathering inappropriate information.
In studying business executives' perceptions of unethical negotiation tactics, Lewicki and Robinson (1998) and Robinson, Lewicki and Donahue (2000) found that respondents are generally more accepting of traditional competitive bargaining tactics and less accepting of the other more serious and potentially illegal tactics. In contrasting U.S and Mexican samples, Volkema (1998) reported similar results. Elahee and Brooks (2004), in examining the role of
48 Journal of Marketing THEORY AND PRACTICE
trust on Mexican managers' perception of six negotiation tactics, empirically demonstrated diat there is a negative relationship between the trust and the likelihood of using inappropriate negotiation tactics. Ford et al. (1997) compared the cognitive moral development and the percent of time allocated to various negotiation tactics of Chinese and U.S. businesspeople. They concluded that U.S. businesspeople negotiating with Chinese executives must be aware of a more collectivist approach to ethics.
Several studies found that demographic factors impact the perception of the ethicality of negotiation behaviors. It has been shown that age, gender, and occupation lead to different perceptions of deception in negotiation (Anton 1990). Women have been found to be less accepting of unethical deception tactics than men (Lewicki and Robinson 1998; Robinson, Lewicki, and Donahue 2000). In addition, nationality has been shown to cause differences in perception of ethicalness of negotiation tactics, with subjects from Western Europe and to a lesser degree the Asian Pacific rim more likely to endorse ethically marginal tactics than other groups (Robinson, Lewicki, and Donahue 2000).
Finally, situational factors have also been shown to have an effect on the perception of appropriate behavior (Volkema and Fleury 2002). Examples of situational factors include having a counterpart who comes with a reputation as an unethical negotiator, being under a time deadline, and dealing with the likelihood of future business relations with an opponent.
Ethical Ideology and Opportunistic Negotiations Tactics:
Marketing ethics theories suggest that when individuals are faced with morally questionable situations, they tend to apply rules that are based on different moral philosophies or orientations to guide their judgments (Ferrell and Gresham 1985; Hunt and Vitell 1986; Ferrell, Gresham, and Fraedrich 1989; Hunt and Vitell 1992). For example, Ferrell, Gresham, and Fraedrich (1989) stated that, "moral philosophies provide standards to judge the act, the actor's intentions, and the consequences of the act," (p. 56). Similarly, in Hunt and Vitell's (1986) general theory of marketing ethics, normative moral philosophy was at the core of their model. These moral philosophies could be deontological or teleologicai in nature (e.g. Murphy and Laczniak 1981). While the deontological moral philosophy focuses on the specific actions or behavior of the individual, the teleologicai philosophy stresses the consequences of the action or behavior (Hunt and Vitell 1986). When faced with an ethically challenging situation, individuals who subscribe to the deontological philosophy tend to evaluate the inherent rightness or wrongness of a set of possible alternatives that he/she considers as possible courses of actions against predetermined deontological norms or rules that reflect the individual personal value or behavior. As for those individuals who subscribe to the teleologicai philosophy, their evaluations of actions are based on their perception of the consequences of these actions on various stakeholder groups
and relative to the likelihood for the consequences to occur, their desirability, and the importance of the impacted group (Hunt and Vitell 1986; Hunt and Vitell 1992).
Forsyth (1980; 1992) conceptualized two evaluative dimensions that have long been used to classify an individual's ethical and moral judgments: idealism and relativism. Forsyth's (1992) use of idealism and relativism "assumes individuals can range from high to low in their emphasis on principles and in their emphasis on consequences (p. 462)." Idealism refers to the degree to which an individual believes that the "right" decision can be made in an ethically tenuous situation. This is essentially the deontological perspective that embodies concern for others' welfare when evaluating alternatives. Idealistic individuals believe that there is a morally correct alternative that will not harm others. Less idealistic individuals may make decisions irrespective of the impjict on others.
Relativism, on the other hand, refers to the rejection of universal rules in making ethical judgments. People who espouse relativism make decisions on a situation-specific basis. That is, high relativists evaluate the current situation and use the evaluation as the basis for making a judgment. Low relativists, on the other hand, believe that standard rules can be applied regardless of the issue at hand. Forsyth (1992) suggested that an individual's ethical ideology should have an impact on how she/he would handle ethically challenging situations.
Scholars examining ethical issues in the marketing and management fields have found that ethical judgments among business executives and individuals are mediated by their ethical ideology (Vitell, Nwachukwu, and Barnes 1993; Tansey, B r o w n , a n d H y m a n 1994; Bamett, Bass, and Brown 1994, 1996; Sin^apakdi et al., 1995; Rao and Sin^apakdi 1997; Wong 1998; Singhapakdi et al., 1999; Swaidan, Vitell and Rawwas 2003; Swaidan, Rawwas and Al- Khatib 2004; Al-Khatib, Stanton and Rawwas 2005). Examining these constructs, Vitell Nwachukwu, and Barnes (1993), found that more idealistic and less relativistic members showed higher levels of honesty and integrity than their less idealistic and more relativistic counterparts. In addition, those who exhibited high levels of idealism and low relativism tended to perceive ethics and social responsibilities as more important than their less idealistic and more relativistic counterparts (Singhapakdi et al., 1995).
Examining ethical ideology and judgments regarding inappropriate negotiation tactics, Banas and Parks (2002) found that ethical ideology and acceptability of the Self- Reported Inappropriate Negotiation Strategies Scale (SINS) were correlated. The authors hypothesize that, individuals' ethical judgments as to the appropriateness of negotiation tactics are mediated by their ethical orientations.
Fall 2005 49
Machiavellianbm and Opportunistic Negotiations Tactics: H2c:
Machiavellianism, a personality trait measured along a continuum, is often examined in relation to ethical decision- making. A high Machiavellian individual believes it is appropriate to use any means to accomplish personal and organizational goals, including manipulation, persuasion, and deceit (Hunt and Chonko 1984). Hundreds of studies have investigated Machiavellianism (Gunnthorsdottir, McCabe, and Smith 2002). Researchers have also applied this concept to the business arena with many looking at die level of current and future business executives (Chonko 1982; Hunt and Chonko 1984; Corzine, Buntzman and Busch 1999). The research indicates that individuals scoring high on the Mach scale are likely to behave unethically. For example, Christie and Geis (1970) found that Machiavellian individuals lie more plausibly, manipulate others more, are persuaded by others less, and pay bribes more than non-Machiavellian individuals. Shapiro, Lewicki, and Devine (199S) found that Machiavellian individuals tend to engage in deceptive tactics to achieve personal objectives more often dian non-Machiavellian individuals. Beu, Buckley and Harvey (2003) reported significant correlation between Machiavellianism and the intent to behave unethically. Examining the impact of personality factors, cognitive moral development, and demographic factors on unethical intent was die strongest predictor of unethical intent. It has been found that high Machs are more likely than low Machs to behave unethically (Beu, Buckley and Harvey 2003). Machiavellian individuals do not mind bending the rules to achieve their desired gains. High Mach managers would not hesitate to take advantage of personal connections. In summary, current research predicts a direct relationship between relativism, Machiavellianism, and an inverse relationship between idealism and the five questionable negotiation tactics. Based on the above theory, flndings and discussions, we hypothesize that: HI a: Marketing managers' idealistic orientation will have
a positive impact on their perception of the opportunistic negotiation tactic of traditional competitive bargaining.
HJb: Marketing managers' relattvistic orientation will have a negative impact on their perception of the opportunistic negotiation tactic of traditional competitive bargaining.
Hlc: Marketing managers 'Machiavellian orientation will have a negative impact on their perception of the opportunistic negotiation tactic of traditional competitive bargaining.
H2a: Marketing managers' idealistic orientation will have a positive impact on their perception of the opportunistic negotiation tactic of attacking the opponent's network.
H2b: Marketing managers' relativistic orientation will have a negative impact on their perception of the opportunistic negotiation tactic of attacking the opponent's network
H3a:
H3b:
H3c:
H4a:
H4b:
H4c:
Marketing managers' Machiavellian orientation will have a negative impact on their perception of the opportunistic negotiation tactic of attacking the opponent's network.
Marketing managers' idealistic orientation will have a positive impact on their perception of the opportunistic negotiation tactic of false promises. Marketing managers' relativistic orientation will have a negative impact on their perception of the opportunistic negotiation tactic ojffalse promises. Marketing managers 'Machiavellian orientation will have a negative impact on their perception of the opportunistic negotiation tactic of false promises.
Marketing managers' idealistic orientation will have a positive impact on their perception of the opportunistic negotiation tactic of misrepresentation of position. Marketing managers' relativistic orientation will have a negative impact on their perception of the opportunistic negotiation tactic of misrepresentation of position. Marketing managers 'Machiavellian orientation will have a negative impact on their perception of the opportunistic negotiation tactic of misrepresentation of position.
Marketing managers' idealistic orientation will have a positive impact on their perception of the opportunistic negotiation tactic of inappropriate information gathering. Marketing managers' relativistic orientation will have a negative impact on their perception of the opportunistic negotiation tactic of inappropriate information gathering. Marketing managers' Machiavellian orientation will have a negative impact on their perception of the opportunistic negotiation tactic of inappropriate information gathering.
METHODOLOGY
United Arab Emirates (UAE) was selected as the research setting—and provided the sampling frame—for this study. There were several reasons for this selection. First, UAE is relatively wealthy, included in the top seven Middle Eastern nations in GDP per capita while holding huge oil and natural gas (Central Intelligence Agency Publications, 2005). UAE is the commercial gate to the Gulf region. This makes the UAE an attractive destination for foreign direct investment (FDI) and an excellent setting for testing our research hypotheses. Second, the country is in the process of diversifying and privatizing its economy. As part of the process of accession to the World Trade Organization (WTO), foreign direct investment is likely to rise in the region, making UAE at the center of globalization.
H5a:
H5b:
HSc:
50 Journal of Marketing THEORY AND PRACTICE
Sampling and Data Collection:
The difficulties associated with conducting research in developing economies necessitated the use of in-country contacts to identify specific participants (Teagarden et al., 1995). A sample of 400 UAE marketing executives with budgetary and personnel responsibilify was identified. Those identified were pre-notified of the purpose of the research and given basic procedural instructions. One week later, the survey instrument was hand-delivered in the morning and picked-up at the end of the same workday using sealed boxes. This method resulted in an operational data set of 208 respondents, for a response rate of 52%. The majority of the sampled respondents were males who are employed by firms operating in various sectors of the economy (manufacturing, service and trade). On average respondents have been serving in their current positions for four years. Nearly all respondents have a college or graduate degree. Table 1 provides details on the demographic profile of the sample.
TABLE 1 DEMOGRAPHIC PROFILE OF THE SAMPLE (N=208)
GENDER:
Male: 69.7 % Female: 30.3%
Average number of years in cnrrentjob: 4 years Levet of Education:
Some College: 2 . 1 % College Degree: 85.1% Graduate Degree: 12.8%
Average work experience: S.S years
7ype of business: Retail/wholesale (Trade): 78% Manufacturing: Services: 14%
Measurement of Key Variables
A one-page (front and back) survey was administered to respondents. The instrument consisted of four major sections. Machiavellianism was measured in the first part of the survey using the MACH IV scale. Moral ideologies (i.e., idealism and relativism) were measured in the second part of the survey using the EPQ scales. The third portion of the survey measured the opportunistic negotiation tactics using the SINS scale. The last part of the survey measured the demographics of the participants. All measures used in this study were developed by researchers, validated by previous studies, used by many scholars, and published in scientific journals. Factor analysis using principle components analysis with varimax rotation was performed to confirm the underlying dimensionalify of these scales. As expected, all items loaded on the intended factors (MACH IV, Idealism, Relativism, and the five dimensions of the SINS). Table 2 provides a list of constructs used in the study, number of statements used to measure each construct, a sample statement from each construct, and the reliability measurements.
The Self-Reported Inappropriate Negotiation Strategies Scale (SINS): The SINS was developed and validated by
Lewicki and his colleagues (Lewicki 1983; Lewicki and Robinson 1998; Robinson, Lewicki, and Donahue 2000). SINS was utilized to measure marketing managers' perceptions of the appropriateness of questionable negotiating tactics and their likelihood of using those tactics. Volkema, Fleck, and Hofineister-Toth (2004) concluded that the SINS appears to be a useftil tool in assessing attitudinal differences. There were many studies that confirmed the predictive validity of the instrument (e.g., Banas and Parks 2002). Also, SINS was used successfully by many researchers (e.g., Volkema 1999; 2004; and Volkema, Fleck, and Hofineister-Toth 2004). The scale contained 16 items representing five dimensions: traditional competitive bargaiaing, attacking the opponent's network, making felse promises, misrepresenting of information, and inappropriate infonnation gathering. The five dimensions achieved acceptable levels of reliabilities as measured by Cronbach's alpha (i.e., coefficient alpha ranged from .71 to .86).
Machiavellianism Scale: Machiavellianism was measured using the MACH IV scale developed and validated by Christie and Geis (1970). MACH IV scale was used successfully by many researchers to explore ethical judgments (e.g., Raybum and Raybum 1999; Bass, Bamett, and Brown 1999; and Razzaque and Hwee 2002), and ethical intentions (e.g., Ross and Robertson 2003). This scale contains 20 items with ten items worded in a Machiavellian direction and ten items worded in the opposite direction. Each respondent was asked to indicate the degree of either agreement or disagreement with each of the 20 items using a five-point Likert scale where a 5 indicated strong agreement. Two items of the original scale were deleted (up front) due to their irrelevance to the culture of the country under study. The 18-item scale achieved an acceptable level of reliabilify (coefficient alpha= .71).
Ethical ideology Scales: A person's predominant ethical ideology or perspective was measured using the EPQ developed and validated by Forsyth (1980, 1992). EPQ consists of two scales with each containing ten items; one is designed to measure idealism, or the acceptance of moral absolutes, and the second is designed to measure relativism, or the rejection of universal moral principles. Respondents were asked to indicate their agreement or disagreement with each item using a five-point Likert format where a 5 indicated strong agreement with a statement. All questions were worded in a positive direction. Idealism and relativism scales have been shown to be both reliable and valid in several studies (e.g., Sivadas et al. 2003; Kim 2003; Elias 2002). Many studies used the EPQ successfully to explore ethical awareness (e.g., Yetmar and Eastman 2000; Sparks and Hunt 1998), judgments (e.g., Elias 2002; Boyle 2000; Bass, Bamett, and Brown 1999), and intentions (e.g., Singhapakdi et al. 2000). The coefficient alpha reliabilities for the Idealism and Relativism scales were (.84) and (.78) respectively.
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TABLE 2 STUDY MEASURES AND RELUBILITY OF CONSTRUCTS
VARIABLE
Idealism
Relativism
Mach IV
Traditional Competitive Bargaining (TCB)
Attacking Opponent's Network (AON)
False Promises (FP)
Misrepresentation of Position (MP)
Inappropriate Information Gathering (IIG)
NUMBER
O F ITEMS
10
10
18
3
3
3
3
3
SAMPLE STATEMENT
A peison should make certain that their actions never intentionally harm another even to a small degree.
What is ethical varies from one situation and society to another.
One should take action only when sure it is morally right
Make an opening demand that is far greater than what you really hope to settle for. Threaten to make your opponent look weak or foolish in front of a boss or others to whom he/she is accountable, even if you know that you won't actually carry out the threat
Promise that good things will happen to your opponent if he/she gives you what you want, even if you know that you can't (or won't) deliver these things when the other's cooperation is obtained.
Intentionally misrepresent information to your opponent in order to strengthen your negotiating arguments or position.
Gain information about an opponent's negotiating position by trying to recruit or hire one of your opponent's teammates(on the condition that the teammate
ALPHA
COEFnCIENT
.84
.78
.71
.86
.71
.80
.85
.84
TABLE 3 REGRESSION ANALYSIS RESULTS
DEPENDENT VARIABLE: TRADITIONAL COMPETmvE BARGAINING (HI)
F Value =16.420 Significant F = .000 Adjusted R' = .661 Variable
Idealism (Hla)
Relativism (HIb)
II Standardized Beta II - . 4 8 6 II - . 0 9 9
Machiavellianism (HIc) ||-.083
DepcDdent Variable: F Value = 21.77 Significant F = .000 Adjusted R' = .305
Variable
Idealism (H2a)
Relativism (H2b)
Attacking Opponents Network (H2)
II Standardized Beta
II - . 3 0 1 II . 1 7 0
Machiavellianism (H2c) II .229
Depcadent Variable: F Value = 29.19 Significant F = .000 Adjusted R' = .321
Variable
Idealism (H3a) Relativism (H3b)
False Promises (H3)
Machiavellianism (H3c)
Dependent Variable: F Value = 9.028 Significant F = .000 Adjusted R' = .221
Variable
Idealism (H4a)
Relativism (H4b)
Standardized Beta
-.469
.118 -.142
Misrepresentation of Information (H4)
Machiavellianism (H4c)
Dependent Variable: F Value = 27.175 Significant F = .000 Adjusted R' = .364
Variable
Idealism (H5a) Relativism (H5b)
Standardized Beta
-.143 .032
.282 Inappropriate Information Gathering (HS
II Standardized Beta
II - . 3 4 4 II 1 2 5 1
MarhinvplHiini-im (HSr) II 7^0
Ii T-test 1 II - 4 . 6 8 0 1
II -1.273 1 II - . 8 1 9 1
T-test
-2.896 J 2.263
2.192
T-test
-4.762
1.653 -1.438
T-test
-1.240 .384
2.428
T-test
-3.444
.725
Significance of T-Test
.000
.205
.414
Significance of T-Test
.004
.025
.030
Significance of T-Test
.000 1.10
.153
1 Significance of T-Test
.217
1.701 1.016
Significance of T-Test
.001
.087 n i l
52 Joumal of Marketing THEORY AND PRACTICE
DATA ANALYSIS AND RESULTS
To examine the relationships between employees' preferred ethical ideology/orientation, Machiavellianism and UAE's marketing managers' perception of opportunistic negotiation tactics, five regression models were used (Table 3). Each equation used the manager's perception of: 1) traditional competitive bargaining tactics; 2) attacking an opponent's network; 3) false promises; 4) misrepresentation opposition; and 5) inappropriate information gathering as a dependent variable and the idealism, relativism and Machiavellianism as the independent variables.
The first equation examined the impact of idealism, relativism, and Machiavellianism on marketing managers' propensity to engage in traditional competitive bargaining tactics. The three independent variables explained 66.1 % of the variation on the equation {F= 16.42,/? < .05). Idealism was the only influential factor of the three variables {Beta = -.486, p < .05). The negative Beta indicates that marketing managers in UAE who possess high levels of idealism are less likely to become involved in traditional competitive bargaining tactics. This result supports the hypothesis Hla. Hypotheses H l b and Hlc were not supported.
The second equation investigated the determinants of mariceting managers' engagement in attacking opponents' network tactics. The three predictive variables explained 30.5% of the variance in the equation {F = 21.77, P < .05). Idealism was the most influential factor {Beta=-.301 ,/> < .05), followed by Machiavellianism {Beta = .229, p < .05) and relativism {Beta = .170,/? < .05). Examining the directions of the signs of the Beta coefficients indicate, as hypothesized, that marketing managers exhibiting h i ^ level of idealism, low levels of relativism, and low levels of Machiavellianism are less likely to engage in attacking their negotiating opponent's network. These results confirm hypotheses H2a, H2b and H2c.
When examining the role of the independent variables on managers' tendencies to make false promises, the thr«e independent variables explained 32.1% of the variance in the marketing managers' perceptions of the false promises behavior {F = 29.19, P < .05). Idealism was the only influential variable in this equation {Beta=-.469,p < .05). The direction of the beta sign indicates an inverse relationship between the degree of the respondent's idealistic orientation and the engagement in actions involving making false promises to a negotiating partner. That is, idealistic marketing managers are less likely to be involved in such unethical behavior. This result supports the hypothesis H3a.
When examining the determinants of marketing managers' engagements in misrepresentation of position to opponents, the three independent variables explained 22.1% of the variance in the dependent variable {F = 9.03, P < .05). Machiavellianism was positively related to the misrepresentation of information fector {Beta = .282,;? < .05)
indicating that Machiavellian managers tend to engage in such tactic. This result provides support for hypothesis H4c.
The final equation investigated marketing managers' use of inappropriate information gathering tactics. Idealism, relativism and Machiavellianism explained 36.4% of the variance in the equation {F = 27.18, />< .05). Idealism was found to be negatively related to the respondents' tendencies to engage in this tactic {Beta = -.344, p < .05) and Machiavellianism was found to be positively related to participants' tendencies to engage in the questionable tactic of inappropriate information gathering {Beta = .260, p < .05). These results provide partial support forhypotheses H5a and H5c.
DISCUSSION AND MANAGERIAL IMPLICATIONS
Several factors have been described as predictors of ethical behavior, including personality variables (Hunt and Chonko 1984), demographics (Volkema 2004), ethical orientation (Al- Khatib, Vitell, and Rawwas 1997), trust (Al-Khatib, Stanton and Rawwas 2005), cultural values (Vitell, Nwachukwu, and Bames 1993), opportunism (Al-Khatib, Stanton and Rawwas 2005) and economic Actors (Ford and Richardson 1994). Given the presumption of conflicting interests among the negotiating parties, it has been shown that many negotiators attempt to seek advantages through opportunistic behavior or other unethical means (Lewicki et al. 1994).
This study explored the relationship between three independent variables (i.e., idealism, relativism, and Machiavellianism) and five dependent variables (i.e., traditional competitive bargaining, attacking your opponent's network, making false promises, misrepresentation of information, and inappropriate informadon gathering) using a sample of managers firom the UAE. This was the first study to explore these relationships between the three independent variables and the five dependent variables using a sample of marketing managers from the UAE. The findings of current study are comparable to other ethical studies that used the three independent variables to explore ethical awareness, judgments, intentions and behavior. This study found an inverse relationship between idealism and direct relationships between relativism, Machiavellianism and the five questionable negotiations tactics. These results cotifinn the outcomes of other ethical studies that tested similar relationships. For example, Kim (2003) found that individuals with high idealism or low relativism tend to make stricter ethical judgments. Yetmar and Eastman (2000) found that relativism is negatively associated with ethical sensitivity. Raybum and Raybum (1996) found that Machiavellians are less ethically-oriented than non-Machiavellians. O'Fallon and Butterfield (2005) in their review of the empirical ethical decision making literature for the period 1996-2003 concluded that idealism, relativism, and Machiavellianism revealed fairly consistent findings over the last two decades of ethical research. They concluded that idealism was positively related
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to ethical decision making, while relativism and Machiavellianism were negatively associated with ethical judgments. Our study's results support the extemal validity of the previous studies conducted in westem cultures.
Forsyth (1992) used both idealism and relativism to classify people into four different ethical groups. First, absolutists are individuals with low relativism and high idealism. Absolutists believe that their actions are moral only if they yield positive consequences through conformity to moral absolutes. They believe that deception is always wrong since it violates fiindamental moral principles. Second, subjectivists are individtials with high relativism and low idealism. Subjectivists are those who reject moral mles and base their moral judgments on personal feelings about their actions. They believe that deception is a personal matter to be decided upon by the individual. Third, exceptionists are individuals with low relativism and low idealism. Exceptionists believe that conformity to moral mles is desirable, but that exceptions are permissible. They believe that if deception cannot be avoided, then it is allowable as long as safeguards are used. Last, situationists are individuals with high relativism and high idealism scores. Situationists are those who reject moral mles while asking if their actions yield the best possible outcome in a situation.
To gain better understanding of the various types of ethical ideologies, we classified the sample into four groups using the median points of the idealism (3.90) and relativism (3.10) scales (Forsyth 1992). In past researeh we found two studies (i.e., Vitell et al. 1991 and Rawwas 1996), which used this scheme to classify respondents. Overall, the UAE managers were mostly "absolutists" (38.6%) who strictly conform to moral standards and norms. The second sub-group was the "subjectivists" (24.8%); individuals belonging to this subgroup not only reject moral standards, but also base their ethical judgments on their personal whims. The third group, who hold the same moral standards as the "absolutists" but who may bend them somewhat under certain extraordinary circumstances are the "exceptionists." The "exceptionists" formed 22.8% of the sample. The fourth group was the "situationists" (13.9%), who judge ethics by the consequences of the situation. Most of the individuals in the fourth group are probably utilitarian who believe that an act is right only if it produces a greater balance of positive consequences than do other available alternatives.
The mean score for the idealism scale was 3.77 and for the relativism scale was 3.03. It is clear that UAE managers are giving higher weight to idealistic rather than to relativistic moral philosophies when making their ethical decisions. It is interesting to note that idealism emerged as the most important factor in determining respondents' perceptions of inappropriate negotiation tactics that involves one's negotiating opponent directly (e.g., making false promises, traditional competitive bargaining). The Machiavellianism constmct manifested its significant impact on questionable negotiation practices that
involves a third party (e.g., inappropriate information gathering, attacking opponent network and inappropriate information gathering). These results are consistent with previous research (Volkema and Fleury 2002) and suggest that UAE negotiators may be more concemed with face saving in direct negotiation by employing negotiation tactics that are less harsh and generally accepted tactics in distributive negotiation. However, when the tactic involves an indirect third party, they may act in a more bmtal, opportunistic and unethical manner. These results can be explained in the context of the Arab culture. Previous research has shown that cultures characterized by high power distance and uncertainty avoidance, such the UAE culture, produce a lack of tmst with the imfamiliar, and outsiders are viewed with suspicion and distmst (Volkema 1998; Volkema and Fleury 2002). Second, in the UAE culture, cell loyalty is of great importance (Sommer, Welsh, and Gubman 2000). There is a great focus on tmst and building relationships and doing business with those people in the inner circle. To the Arab manager, engaging in behaviors that exploit the "stranger" is permissible; however, behaviors that exploit colleagues or an irmer circle member are frowned upon. Given the nature of the relationship among negotiating parties, the UAE negotiator's counterpart is an outsider who is not trustworthy and thus deserves exploitation.
The lack of significant relationship between relativism and the respondents' perceptions of unethical negotiation practices fails to support the hypothesized relationship; however, it is not completely inconsistent with previous researeh findings linking relativism to the acceptance of questionable ethical practices (Forsyth 1980; Bamett, Bass, and Brown 1994; and Bass, Bamett, and Brown 1998). These studies have found that idealism has a stronger impact than relativism on ethical judgments. The present study's result suggests that the individuals' concems for the consequences of actions may be less influential than their idealistic moral philosophy when judging questionable negotiation practices.
Since little research has focused on the ethical mindset of Arab negotiators, the findings from this study can be used to help multinational companies doing business in the Arab-Gulf region to become more aware of their host country's ethical environment. Intemationai managers should also find the results of this study intriguing and helpful in their dealings with associates in the UAE.
Given the important role of Machiavellianism in shaping Arab executives' perceptions of opportunistic negotiation tactics, coupled with high levels of hostility (the legal environment favoring local businesses regardless of just cause) (Cavusgil, Deligonul, and Zhang 2004), westem finms need to be cautious when drafting legal contracts. That is, if westem firms impose explicit legal contracts on their Arab counterparts, the counterparts may perceive such action as a means of controlling them. This can raise the inclination to behave more opportunistically. Westem firms negotiating in the Arab region
54 Journal of Marketing THEORY AND PRACTICE
can promote honesty, enhance trust and curb opportunism by exhibiting benevolence, moral commitment, and mutual trust to their Arab coimterparts.
Westem firms negotiating with Arab counterparts can also curb opportunistic behavior by implementing screening and selection programs of various types that result in selecting partners who are not opportunistically inclined or inherently cooperative (Orbell and Dawes 1993). These selection efforts should identify the criteria to be used in screening and selecting future exchange partners. One possible criterion is the reputation or past behavior in other relationships. Existing reputation provides disincentive for opportunistic behavior (Wathne and Heide 2000) and can be useful in judging the potential exchange partner's willingness, motivation and ability to behave ethically in the current relationship (Shapiro, Lewicki, and Devine 1995). However, for this tool to be effective, westem firms operating in the Arab region should have information on their negotiating partner's past and current behavior. Westem firms who have an established presence in the region may find this information gathering task manageable; however, for first time movers, the employment of a local and independent consultant may be a more efficient way to assess potential partners' reputations. Basic reputation assessment tools such as a credit rating bureau and better business bureau can also be useful in this assessment process; however, in case these databases are not readily available, local media coverage of legal actions taken or pending against the negotiating counterpart may be an effective altemative.
Another means of curbing opportunistic tendencies (e.g., making false promises) is ex ante verification which involves the verification of claims or promises before making commitments that depend on these claims or promises (Cramton and Dees 1993). Given the long-term ramification of this opportunistic tactic, it is essential that westem firms negotiating in the region employ a local agent (i.e., an insider) who can assist in this verification effort. In a similar manner, a local agent can be employed to represent the westem firm in early stages of negotiation to reduce the potential use of opportunistic tactics used against a third party (i.e., inappropriate information gathering, attacking opponent netwoik and in^propriate infonnation gathering) and resulting from the Arab culture's distrust of outsiders.
The high emphasis on trust in relationship building in the Arab region heightens the need to rely on trust-based exchange as the most effective and efficient negotiation process in the region. Westem firms operating in the region can enhance mutual trust by exhibiting to their Arab partners that they are trustworthy and that they can be trusted. One way to demonstrate trustworthiness early in the negotiation process is for the westem firm to ^cilitate the other party's verification efforts by providing privileged information that is otherwise not obtainable, thus reducing information asymmetry and imcertainfy ( e.g., causes of opportunistic behavior). To
demonstrate the ability to trust, western firms need to use a personalized trust approach suitable for the Arab culture. This approach may include the creation of more opportunities for face-to-face meetings over a longer period of time and the use of preliminary meetings prior to the actual negotiation to discuss issues of mutual concems, the use of pre-negotiation social contacts and even gift exchange among the parties involved (Cramton and Dees 1993).
The strong negative relationship between idealism and the Arab executives' likelihood of using opportunistic negotiation tactics indicates that the groimds for ethical dealing is fertile and underscores the need for multinational corporations, joint venture partners to Arab firms, and intemational managers operating in the UAE to codify the desirable and undesir^le behavioral activities of the Arab negotiating partner. Given the high power distance and high uncertainty avoidance characterizing the Arab culture, these codification efforts ar« likely to prove successful. However, such efforts need to be developed with the Arab culture and past history in mind; otherwise, any effort to codify behavior is bound to fail.
Moreover, understanding the Arab negotiator's ethical mindset provides a valuable decision-making tool for firms interested in this maricet. The strong emphasis that the Arab culture places on trust as the backbone of all social, organizational and transactional relationships infiuences both firm-level perceptions of transaction costs and the preference for foreign direct investment (FDI) as an entry strategy (Hofstede 1984; Shane, Venkataraman, and MacMillan 1995). Intemational firms capable of developing trustworthy relationships with Arab strategic partners can reduce transaction costs and increase FDI in the region.
Finally, situational factors such as possibilify of future/long term business with the negotiating partners, ethicality of the negotiating counterpart, and the degree of favorabilify of the negotiation condition, can dramatically affect the negotiator's perception of the appropriateness of opportunistic negotiation tactics and the likelihood of their use (Volkema and Fleury 2002). Thus, it is possible for westem negotiators to influence their Arab counterparts' choice of appropriate negotiation tactics by discussing long term business opportunities, exhibiting high ethical standards during the negotiation process and by understanding the conditions under which their Arab partners are negotiating. Such understanding can then be integrated into training programs tailored to each specific negotiation situation and offered to westem negotiators as part of their preparation for the negotiation process.
LIMITATIONS AND FUTURE RESEARCH
The difficulfy of drawing a true random sample impairs the generalizability of the specific findings of the current study. Procurement of data from additional nations in the Middle East would also add to the appeal of the existing database. Given the sensitive nature of die topic being investigated and
Fall 2005 55
despite the effort to control for it, social desirability bias may have been an issue among respondents. Future research should include measures for controlling such bias and seek methods of data collection that provide greater levels of respondents identities confidentiality.
Future research should also investigate negotiation ethics in Middle Eastem countries with more social, economic and political problems than are evidenced in the current study. This will provide a deeper understanding of the impact of environmental factors (e.g., the civil unrest in Lebanon, the economic and political hardships in Iraq, and the strong foreign cultural infiuence on the population of the Arab nations of North Africa) on consumers' ethical beliefe and preferred ethical ideologies.
Another avenue of research suggested by this study would be to empirically investigate how other intervening variables mediate the impact of cultural values on ethical judgments and ideologies. For example, what role does national identity play in shaping the ethical mindset of individuals from different nations? This can be contrasted with other well established cultural value approaches (e.g., Hofstede's typology). It would also be interesting to examine the impact of various levels of religiosify in the Middle East on ethical conduct. This is especially important considering the speed at which modernization is taking place in the countries of the region and the subsequent possible erosion of religious values at the individual level. Finally, the roles of trust among exchange partners as well as their ethical ideologies and their impact on the individual's perceptions of negotiation practices should be an interesting and useful area for future research.
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AUTHOR BIOGRAPHY
Jamal Al-Khatib (Ph.D., University of Mississippi), Professor of Marketing, College of Business, University of St. Thomas, St. Paul, MN, jaalkhatib@stthomas.edu.
AUTHOR BIOGRAPHY
Mohammed Y.A. Rawwas (Ph.D., University of Mississippi), Professor of Marketing, College of Business Administration, University of Northern Iowa, Cedar Falls, IA, Mohammed.Rawwas@uni.edu
Fall 2005 59
AUTHOR BIOGRAPHY
Ziad Swaidan (Ph.D., University of Mississippi), Assistant Professor of Marketing, School of Business Administration, University of Houston Victoria, Victoria, TX, swaidanz@uhv.edu.
AUTHOR BIOGRAPHY
Richard Rexeisen (Ph.D., University of Minnesota), Professor of Marketing, College of Business, University of St. Thomas, St. Paul, MN, rjrexeisen@stthomas.edu
60 Journal of Marketing THEORY AND PRACTICE