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New Research Directions The research described in this article by Volkema, Fleck and Hofmeister-Toth builds upon the theme of a recent issue of International Negotiation, “Ethical Issues in Conflict Resolution” (Vol. 7, no. 2, 2002). The authors test the implications of using deceptive tactics in negotiation. Their research relates to the larger theme of this present issue by its use of an innovative means of negotiation, e-mail, as the channel for the experimental exercise.

Ethicality in Negotiation: An Analysis of Attitudes, Intentions, and Outcomes

ROGER J. VOLKEMA* Kogod School of Business, American University, 4400 Massachusetts Ave., NW, Washington, DC 20016 USA (E-mail: [email protected])

DENISE FLECK** COPPEAD Graduate School of Business, Federal University of Rio de Janeiro – UFRJ, Rio de Janeiro, Brazil (E-mail: [email protected])

AGNES HOFMEISTER-TOTH*** Marketing Department, Budapest University of Economic Sciences, Budapest, Hungary (E-mail: [email protected])

Abstract. The study reported in this article examines the prediction and use of invalid infor- mation (e.g., exaggerated offers, false promises, misrepresented facts) in a two-party, property leasing negotiation in which participants from different countries negotiated seven issues via

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* Roger Volkema is Associate Professor of Management at the Kogod School of Business, American University, Washington, DC. His research focuses on negotiation, conflict manage- ment, group/meeting processes, and problem formulation. He received his Ph.D. from the University of Wisconsin, and was a Fulbright Fellow at Catholic University in Rio de Janeiro, Brazil in 1988.

** Denise L. Fleck is an Associate Professor of Strategy at Coppead Graduate School of Business, UFRJ, Brazil. Her research interests include corporate growth, organizational self- perpetuation, change and institutionalization processes, and innovation roles in growth processes. She received a Ph.D. in Management from McGill University.

*** Agnes Hofmeister-Toth is Professor of Marketing at the Budapest University of Economic Sciences and Public Administration. She teaches Consumer Behavior and Negotiation and Conflict Management. Her research interests include cultural differences, international negotiation, transition of consumer behavior, changing consumer values and lifestyles, and symbolic consumption. She received her Ph.D. in Marketing from BUESPA.

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electronic mail. Prior to negotiating, attitudes and intentions towards questionable or unethical tactics were measured, and perceived behavior was measured through a post-negotiation ques- tionnaire and compared with actual behavior and negotiated outcomes (differential and joint). The results suggest that the pre-negotiation questionnaire was a modest predictor of actual behavior, with general attitudes effective in predicting general behavior. Ethical behavior of the negotiator, ethical behavior of the other party, and perceived honesty of the other party were the best predictors of performance (perceived and actual), while likely use of unethical tactics and perceived honesty of the other party predicted whether or not an agreement was reached.

Keywords: negotiation, ethics, information exchange, e-mail.

Information is often cited as one of the central elements in understanding and managing the negotiation process (McMillan 1992; Pruitt and Carnevale 1993; Rubin and Brown 1975; Shell 1999; Thompson 1998). In theory, infor- mation exchange can help build trust between parties, which in turn can lead to a fuller, richer exchange of information and, ultimately, better joint/inte- grative outcomes. On the other hand, information is a source of power, so the more information one party has about a counterpart’s strengths and weak- nesses (preferences, priorities, alternatives), the stronger his/her bargaining position (Brodt 1994; French and Raven 1959; Lewicki, Saunders and Minton 1999; Schelling 1960; Walton and McKersie 1965). Consequently, negotiators are faced with the challenge of determining how much and what types of infor- mation to reveal while assessing their negotiating counterpart’s honesty and forthrightness.

The types of information that individuals might employ in a negotiation can range from valid and relevant information (e.g., a statement of fact critical to the outcome of the negotiation) to erroneous or invalid information (e.g., an intentional misstatement of fact). While the former has been the focus of a number of studies, generally linking valid information exchange to negotia- tor performance (Pruitt and Lewis 1975; Olekalns, Smith and Walsh 1996; Roth and Murnighan 1982; Thompson 1991), there have been far fewer stud- ies focused on the exchange of invalid information, such as through misrep- resented facts, false promises, and bluffs.

Several studies have documented the frequent use of invalid information in real and simulated negotiations (Boles, Croson and Murnighan 2000; Murnighan, Babcock, Thompson and Pillutla 1999; O’Connor and Carnevale 1997), and at least one questionnaire (the “Incidents in Negotiation Questionnaire” or SINS questionnaire, developed by Lewicki and his col- leagues) has been designed to measure individuals’ perceptions of the appro- priateness and their likely use of these tactics, although no empirical evidence exists linking the questionnaire to actual behavior. Most importantly, it seems

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likely that invalid information such as misrepresented facts, false promises, and bluffs could affect both the process (pace, openness, responsiveness) and the outcome of a negotiation (perceived and actual). These relationships, however, have received only modest attention by researchers and scholars.

In an international context, the cultural values of the principal negotiators, their familiarity with one another, and their physical proximity could moder- ate the use of invalid information. While there exist both anecdotal and empir- ical evidence regarding the differing values and behaviors to expect in cross-cultural negotiations (cf. Puffer and McCarthy 1995; Schuster and Copeland 1996; Volkema 2004), the inherent uncertainty in these negotiations often leads the parties to engage one another with caution if not suspicion (Hopmann 1996; Iklé 1964). This is further exacerbated by the increasing reliance on media of lower information richness (e.g., electronic mail) in international negotiations (Shell 2001; Ulijn, Lincke and Kavakaya 2001), media that offer apparent efficiencies but which may be associated with greater use of questionable or unethical tactics (Daft and Lengel 1986; Daniels 1967; Tinsley et al. 2002; Valley, Moag and Bazerman 1998).

This article reports on a study of predicted and actual use of invalid infor- mation in a two-party, commercial-property leasing negotiation, which was conducted via electronic mail. Invalid information was measured in three ways: first, through a questionnaire (the “Incidents in Negotiation Question- naire”) to assess attitudes and intentions towards questionable or unethical tac- tics; second, through participants’ self-reporting of their behavior in this property leasing negotiation; and third, through third-party measures of actual behavior. The purpose of the study was to determine the frequency of use of questionable or unethical tactics in an e-mail-based, international negotiation, to assess the questionnaire’s utility in predicting actual use of these tactics, and to assess the impact of the tactics on differential and joint outcomes (perceived and actual). By understanding the impact of these tactics on negotiation out- comes, we can begin to understand the rationales of negotiators faced with dif- fering challenges (high stakes, time constraints, media limitations, competitive or unethical opponents/counterparts) in an international context.

Background and Hypotheses

Information exchange is generally considered one of the keys to understand- ing and managing the negotiation process (Pruitt and Carnevale 1993; Pruitt and Rubin 1986; Shell 1999; Thompson 1998; Walton and McKersie 1965). Information can take a number of forms, based on its relevancy and validity. Relevant information, for example, might include a negotiator’s

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needs, alternatives, resources, utilities, and style (Chatterjee and Ulvila 1982; Fisher, Ury and Patton 1991; Harsanyi 1962; Pinkley, Griffith and Northcraft 1995). In addition, negotiators frequently share valid information that is not directly relevant to the issues of a negotiation (e.g., discussions of traffic, weather, current events, hobbies), which can assist the parties in getting com- fortable, building rapport, and reaching agreement (Lewicki et al. 1999; Thompson, Peterson and Kray 1995).

The exchange of valid, relevant information has been found to predict both differential and joint outcomes. Roth and Murnighan (1982), Brodt (1994), and Olekalns, Smith and Walsh (1996) all found that parties with an informational advantage performed better than their peers or negotiating counterparts with respect to substantive outcomes. Likewise, several researchers have found that information exchange can be positively associated with higher joint out- comes, most notably when that information is about the parties’ interests or pri- orities (Olekalns et al. 1996; Pruitt and Lewis 1975; Thompson 1991).

Negotiators also communicate invalid or misleading information in the form of exaggerated offers, misrepresented facts, and false promises of future business opportunities (Anton 1990; Scouller 1972). These communications, in fact, have been found in several studies to occur with some degree of fre- quency. O’Connor and Carnevale (1997), for example, discovered that par- ticipants misrepresented information in 28% of their negotiations in a laboratory study. Murnighan et al. (1999) compared experienced and naive bargainers, and found that 34% of the former both lied (i.e., made an invalid statement) and were deceptive (i.e., failed to correct a counterpart’s faulty assumptions). Boles et al. (2000) found that participants in a laboratory nego- tiation were deceptive about 13% of the time, with more deception occurring in the early rounds of negotiation. In addition, they noted that the individuals making propositions were far more likely to outright lie than were the indi- viduals responding to propositions.

There are a number of reasons why individuals may choose to use invalid information in a negotiation. These include the financial stakes (Boles et al. 2000; Kelley, Beckman and Fischer 1967; Tenbrunsel 1998), perceived time pressure (Yukl, Malone, Hayslip and Pamin 1976), environmental competi- tiveness (Hegarty and Sims 1978), and their own personal characteristics/val- ues (Hegarty and Sims 1978; Trevino and Youngblood 1990). The last of these factors – personal characteristics/values – will likely be influenced by the indi- vidual’s cultural frame-of-reference (Banas and McLean Parks 2002; Faure 2002, Volkema 2004).

Invalid information can take several different forms, from generally accepted behaviors like exaggerating an offer or demand to less accepted behaviors such as making false promises. Lewicki (1983), building on the

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work of Bok (1978) and others, developed a questionnaire (“Incidents in Negotiation Questionnaire”) and typology of lying and deception in negotia- tion that consists of five categories: traditional competitive bargaining (e.g., exaggerating an initial offer or demand), misrepresentation of information (i.e., lying about an informational item), bluffing (i.e., leading your counterpart to believe that you are in control of consequences which you are not, such as through promises you may not be able to fulfill), inappropriate information collection (e.g., various forms of bribery, such as paying others for informa- tion), and influencing a counterpart’s professional network (e.g., encouraging others to defect). Subsequently, Lewicki and Robinson (1998) and Volkema (1999a, 2004) have employed this questionnaire to examine differences in perceptions due to demographic factors.

While the “Incidents in Negotiation Questionnaire” appears to be a useful tool in assessing attitudinal differences, there have been few studies to confirm the predictive validity of the instrument (Banas and McLean Parks 2002). The questionnaire measures individuals’ perceptions of the appropriateness of questionable negotiating tactics and their likelihood of using those tactics, not actual behavior. Robinson, Lewicki, and Donahue (2000) associate percep- tions of appropriateness with attitudes, while likelihood of use corresponds to behavioral intentions.

There is, however, a long history of research that links attitudes, intentions, and behavior (for a review see Ajzen 1988). Attitudes have been found to pre- dict behavior, with behavioral intentions acting as a mediating variable. Further, specific attitudes appear better at predicting specific behaviors, while general attitudes are better at predicting general behaviors.

In a meta-analysis of over one hundred studies, Kim and Hunter (1993) found significant support for these linkages between attitudes, intentions, and behavior, particularly where an individual’s actions fall within his/her control. Given that this is the case for most of the negotiating tactics identified by Lewicki and his colleagues, we propose the following:

Hypothesis 1: Attitudes and intentions towards questionable or unethical negotiating tactics (high perceived appropriateness and likely use, as mea- sured by the “Incidents in Negotiation Questionnaire”) will be positively associated with self-reported and actual use of those tactics.

Despite the apparent frequency with which invalid information appears to be employed, there have been relatively few studies that have examined the influence of invalid information on negotiation outcome. Roth and Murnighan (1982) found that the party with the larger outcome (payoff ) and an informa- tional advantage was inclined to misrepresent his or her outcome to his/her ultimate advantage, while O’Connor and Carnevale (1997) found that subjects

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who misrepresented information achieved higher outcomes. These studies, however, focused only on individual outcomes (i.e., comparing a negotiator’s outcome with his or her peers’ performance) or differential outcome (i.e., com- paring a negotiator’s outcome with his/her negotiating counterpart’s perfor- mance), not joint or integrative outcomes (which are based on the combined performance of parties in a dyadic negotiation), and only on misrepresentation of information. Other tactics in the typology identified by Lewicki and his col- leagues (e.g., bluffing) were not examined.

It would seem reasonable that individual outcomes as well as differential outcomes would increase with the use of unethical tactics, as one’s counter- part is making decisions based on erroneous information. The communication of false or deceptive information might even create a sense of openness and trust on the part of the other party, causing him/her to share additional valid information. The use of such tactics would likely have the opposite effect on joint outcomes, decreasing with the use of unethical tactics and vice versa. For example, by not exaggerating an initial offer or misrepresenting information, the parties may actually negotiate a settlement that comes closer to their mutual benefit rather than benefiting one party (the party exaggerating an offer or misrepresenting information) at the expense of the party.

Given these arguments, the following hypothesis is offered:

Hypothesis 2: The more questionable or unethical tactics an individual employs, the higher will be his/her actual outcome, the higher his/her differ- ential outcome, and the lower the joint outcome.

In addition, it would be valuable to know what effect questionable or uneth- ical tactics have on perceived outcomes. Negotiators seldom know the actual payoff (differential or joint outcome) in real-world negotiations, since they sel- dom know the utilities and winnings of the other party (Putnam and Jones 1982). Instead, they make their decisions regarding whether or not to engage in future negotiations based on perceived outcomes. Brodt (1994) did one of the few studies that examined the effects of information on perceived outcome, and found that informed parties were significantly more positive about their performance than were their uninformed peers. However, the inside informa- tion that was shared with these parties came from a third party, so the validity of the information might not have been questioned.

We might assume that the individual using questionable tactics believes he/she has an advantage over the other party, since this individual knows that the other party is making decisions based on erroneous information. Therefore, the negotiator would expect that his/her outcome would exceed the other party’s performance, and that as a consequence their joint outcome might suf- fer as well (assuming there is no opportunity to increase a fixed-pie outcome for both parties). Thus,

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Hypothesis 3: The more questionable or unethical tactics an individual employs, the higher will be his/her perceived outcome, the higher his/her per- ceived differential outcome, and the lower the perceived joint outcome.

Finally, many of the studies conducted to date assume that an agreement will be reached by the negotiating parties. In reality, this is not always the case. In fact, many authors advise negotiators to develop alternatives to a negotiated agreement as a way of protecting themselves against a bad deal; sometimes the best alternative is to walk away (Fisher, Ury and Patton 1991; Thompson 1998; Volkema 1999b).

There are a number of factors that might lead one or both negotiators to back away from an agreement, including the terms of the agreement (which may not allow a negotiator to reach his/her breakeven point) or the perceived ethical- ity of either party. As Tenbrunsel (1998) noted, the use of unethical tactics can actually create a cycle of distrust when individuals project their own circumstances and unethical behavior onto others. If either party perceives the other party as being untrustworthy (for example, as a result of grossly exaggerated offers or demands, the introduction of questionable facts, or con- tradictory statements), the deal may seem too risky to consummate. The more a negotiator employs such tactics, the greater the likelihood of suspicion being raised.

Given this reasoning, the following is hypothesized:

Hypothesis 4: The more questionable or unethical tactics an individual employs, the greater the likelihood of not reaching an agreement.

Method

Participants

The participants in this study were sixty-six graduate business students taking courses in negotiation, thirty-three of whom were taking a course offered in Rio de Janeiro, Brazil. This group included individuals from Brazil and France, ranging in age from 22 to 37 years old (mean = 26.3). Sixty-one percent of the subjects were male. Each of these students was paired with a student taking a comparable course at another university in Budapest, Hungary. The students taking the course in Budapest came from a number of different countries, including Hungary, Germany, the Netherlands, Greece, Russia, Mexico, and the United States. All participants were fluent in English, which was the primary language of their courses.

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Procedure

The subjects participated in a two-party, property leasing negotiation, as described in Volkema (1999b). The thirty-three graduate students in Brazil rep- resented a company called Logan Telecommunications, which was interested in expanding its operations in a new geographic area. As such, they were inter- ested in leasing 300 square meters of commercial space. The other party (graduate students in Hungary) represented RJW Properties, Inc., a real estate firm with properties in the desired area.

In addition to background information about their company, each repre- sentative was given a scoring table with seven critical issues to be negotiated. The seven issues included cost per square meter, duration of lease, renovations, cost of utilities, parking space, furnishings, and advanced payment. Depending upon the outcome negotiated for an issue, the individual earned a certain num- ber of points (Table 1). Because some of the issues were worth more points to the representative of Logan Telecommunications than to the representative of RJW Properties, and vice versa, negotiators had an opportunity to maximize their joint score as well as their individual and differential scores. Multi-issue simulations of this type have been used effectively in a number of prior stud- ies (cf. Olekalns et al. 1996; Thompson 1991).

The negotiation took place via electronic mail, which allowed for collection of all dialogue. All communications were in English, and participants had four- teen days to complete the negotiation. This time frame was deemed more than sufficient, based on prior testing of the simulation, both in person and via the internet. All negotiating dyads remained the same throughout the study.

Three weeks prior to commencing the negotiation, the thirty-three individ- uals representing Logan Telecommunications were asked to complete the “Incidents in Negotiation Questionnaire.” (Note: There have been several ver- sions of this questionnaire.) This questionnaire, developed by Lewicki and his colleagues (Lewicki and Robinson 1998; Robinson et al. 2000), asks respon- dents to rate the appropriateness and likelihood of using eighteen tactics or behaviors, rating each behavior on a 7-point Likert scale (for appropriateness: 1 = not at all appropriate, 7 = very appropriate; for likelihood of use: 1 = not at all likely, 7 = very likely). The tactics consist of a range of behaviors with respect to ethicality, from generally accepted competitive tactics (e.g., exag- gerating an offer or demand, hiding one’s bottom line) to tactics involving the other party’s professional network (e.g., seeking to discredit one’s oppo- nent with his or her supervisor). The questionnaire indicates that there are no “right answers” regarding the right or wrong thing to do, so respondents are encouraged to be candid in their answers. All respondents were assured confidentiality.

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On the final day of the negotiation (following collection of e-mail transcripts), participants completed a second questionnaire in which they were asked to indicate how well they thought they had performed in the negotiation and how well they thought the other party had done (both on 7-point Likert scales, where 1 = not well and 7 = very well), which tactics they had used (i.e., mis- representation of factual information, making promises that could not be kept, exaggerating an opening demand or offer, pretending not to be in a hurry), and

Table 1. Issues, negotiated outcomes, and point values

Issue Negotiated outcome Point value

Logan Telecom. RJW Properties

Cost per square meter $500 900 300 $600 750 450 $700 600 600 $800 450 750 $900 300 900

Renovation of space No rooms renovated 150 250 One room 400 200 Two rooms 500 150 Three rooms 600 100

Utilities included None 100 300 Water/sewer 150 200 Water/sewer/electricity 200 100

Length of lease One year 500 200 Two years 450 500 Three years 300 700 Four years 200 900

Parking available No cars 100 300 One car 300 250 Two cars 500 200 Three cars 600 150 Four cars 650 100

Furnishings None 100 100 Refrigerator/stove 350 150

Advanced payment One month 500 200 Six months 350 600 One year 150 900

Maximum 3700 3700

Minimum 1100 1100

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overall how honest they had been and how honest they thought the other party had been in the negotiation (on 7-point Likert scales, where 1 = not very hon- est/ethical and 7 = very honest/ethical). The method of asking participants to report in a post-experiment questionnaire on tactics and information exchanged has been employed successfully in other studies of bargaining and negotiation (cf. Boles et al. 2000; Murnighan et al. 1999). All post-negotiation questionnaires were confidential.

Independent and Dependent Measures

To gain insight into the predictive validity of the “Incidents in Negotiation Questionnaire,” the 7-point Likert ratings of appropriateness and likely use were taken for all eighteen tactics, including four focal tactics – pretending not to be in a hurry (when you were), exaggerating an offer or demand, misrepre- senting information, and making promises that could not or would not be kept. These four focal tactics each had the potential of being employed dur- ing the actual negotiation. Other tactics, such as talking directly to the people to whom an opponent reports in order to undermine the negotiation or inten- tionally misrepresenting the progress of negotiations to the press, are tech- niques could not be affected by participants in this negotiation. Still other approaches, such as hiding one’s bottom line, could not be easily measured by third parties reviewing transcripts of the negotiation. Overall measures were calculated as the sums of the ratings for the four focal tactics as well as for all eighteen tactics for appropriateness and likely use, respectively (Robinson et al. 2000). Self-reported use of the four focal tactics was taken from the post-negotiation questionnaire. In addition, participants also were asked to indicate on this questionnaire their overall honesty in the negotiation (as pre- viously detailed).

Actual behavior for each negotiator (Logan Telecommunications and RJW Properties) was determined by three individuals independently reviewing printed transcripts of the e-mail negotiations. These individuals, who did not know the value of the negotiated outcomes at the time of their review, identified incidents of the four focal tactics. Using the Estimate-Discuss- Estimate approach (Nutt 1992), their independent assessments were compared and any differences were resolved through discussion. An overall measure of ethicality for each participant was determined by adding the occurrences of these questionable or unethical behaviors across categories. For exaggerating an offer or demand, only those offers/demands that were outside the specified range shown in Table 1 were counted as exaggerated offers.

To determine the influence of ethics on performance, several measures of outcome were taken. Perceived outcomes were based on self-assessments

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recorded on the post-negotiation questionnaire, where subjects were asked to indicate how well they thought they had done in the negotiation and how well they thought the other party had done (as previously detailed). Perceived dif- ferential outcome was the difference in these point values (self minus other), while perceived joint outcome was calculated as the sum of these values. Actual outcome was measured by totaling the point values for each of the seven issues negotiated (Table 1). Given that the simulation allowed for both differential and joint outcomes, the difference in scores between an individual and his/her counterpart (differential outcome) was calculated, as well as the sum of their scores ( joint outcome).

Analyses

Hypotheses 1–3 were tested using regression analyses, while Hypothesis 4 was tested using discriminant analysis. Since perceived and actual ethical behav- ior of the other party in the negotiation might influence the outcomes predicted by Hypotheses 2 and 3, these variables were included as independent variables in these analyses. Due to dependency concerns with data from negotiating dyads (e.g., highly correlated outcome measures within dyads), only out- come data from Logan Telecommunications representatives were analyzed in testing hypotheses (Kenny 1995).

Results

From the “Incidents in Negotiation Questionnaire,” respondents indicated that pretending to be in no hurry was the most appropriate of the four focal tactics (mean = 5.94, SD = 1.39), followed closely by exaggerating an offer or demand (mean = 5.52, SD = 1.44), misrepresenting information (mean = 3.85, SD = 2.15), and making promises that could not or would not be kept (mean = 2.15, SD = 1.37) (Table 2). Of these four tactics, participants indicated that they would be most likely to pretend to be in no hurry (mean = 5.21, SD = 1.75), followed by exaggerate an offer or demand (mean = 5.15, SD = 1.52), misrepresent information (mean = 3.88, SD = 1.98), and make false promises (mean = 1.79, SD = 1.02). As these numbers suggest, participants generally felt that it was more appropriate to use each tactic than they indicated they were likely to do (supported by t-tests at the .05 level for pretending to be in no hurry, and at the .10 level for exaggerating an offer or demand and for making false promises.)

Consistent with findings reported elsewhere (cf. Volkema 1997), the corre- lations between attitudes (appropriateness) and intentions (likely use) were all

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ETHICALITY IN NEGOTIATION 327

significant. Specifically, the correlation for pretending to be in no hurry was .43 (p < .05), the correlation for exaggerating an offer was .71 (p < .001), the correlation for misrepresenting information was .85 (p < .001), and the corre- lation for making a promise that could not or would not be kept was .65 (p < .001). The correlation between attitudes and intentions for all eighteen tac- tics in the questionnaire was .70 (p < .001).

Eight of the thirty-three focal participants (24.2%) indicated on the post- negotiation questionnaire that they had pretended not to be in a hurry (mean = .24, SD = .44), while twenty-four participants (72.7%) felt that they had exaggerated an offer or demand during the negotiation (mean = .73, SD = .45). Fifteen individuals (45.5%) indicated that they had misrepresented informa- tion, from one to three times (mean = .73, SD = .91). One person indicated that he/she had made a promise that could not or would not be kept (mean = .03, SD = .17). On a scale from one to seven, where seven means very honest/eth- ical, participants indicated a mean honesty in their negotiations of 6.12 (SD = 1.02). Their mean perceived honesty of the other party was 4.81 (SD = 1.94). Thus, overall the thirty-three representatives of Logan Telecommunications felt that they had been more honest than their negotiating counterparts at RJW Properties (t = 3.29, p < .01).

In terms of actual behavior (as determined from transcripts), two individu- als (6.1%) pretended to be in no hurry (when they actually were in a hurry), while ten individuals (30.3%) were found to have exaggerated an offer or demand. Twenty-four (72.7%) misrepresented information, from one to ten times (mean = 2.67, SD = 2.57). No one was found to have made a promise that could not be kept. Overall, twenty-seven (81.8%) of the thirty-three participants representing Logan Telecommunications used at least one of the four focal tactics. These overall numbers were comparable for those individ- uals representing RJW Properties – twenty-five (75.8%) used at least one of the tactics.

There were sizeable correlations between several of the self-reported behav- iors and actual behaviors. The correlation between participants’ perception of pretending to be in no hurry and their actual use of this tactic was .45 (p < .01), while the correlation between perceived misrepresentation of information and actual misrepresentation was .53 (p < .001). The correlation between per- ceived exaggeration and actual exaggeration, while positive (.11), was not significant. (The fact that more individuals reported exaggerating offers than were actually counted is likely due to the fact that only offers or demands that were outside the specified ranges shown in Table 1 were counted as exagger- ated offers, while some individuals may have exaggerated within a specified range for a given issue.) Overall, participants’ perceptions of their honesty were highly correlated with actual use of these tactics (r = –.52, p < .01). That

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328 ROGER J. VOLKEMA, DENISE FLECK AND AGNES HOFMEISTER-TOTH

is, the more honest a participant judged himself/herself to be in this negotia- tion, the less he or she actually used these questionable or unethical tactics in the negotiation.

The correlations between participants’ specific attitudes and their actual behavior and between intentions and actual behavior were all positive, but at best marginally significant (Hypothesis 1). The only significant findings were for exaggerating an offer (attitude: r = .32, p < .10) and misrepresenting information (attitude: r = .31, p < .10; intentions: r = .33, p < .10). However, participant’s ratings for all attitudes and all intentions were significantly cor- related with actual behavior for all tactics (attitude: r = .48, p < .01; intentions: r = .35, p < .05).

In terms of performance, twenty-two of the thirty-three pairs of negotiators completed their negotiations. For those reaching an agreement, the scores for the negotiators representing Logan Telecommunications ranged from 2550 to 3000, with a mean of 2777.27 (SD = 119.25), while the scores for their coun- terparts (representing RJW Properties) ranged from 2400 to 3050 (mean = 2675.00, SD = 183.71). The differential outcome for the focal participants ranged from 400 to 600 (mean = 102.27, SD = 284.30). The joint outcome ranged from 5300 to 5700 (mean = 5452.27, SD = 122.94).

Regression analyses revealed that the “Incidents in Negotiation Question- naire” did predict both self-reported and actual behavior (Table 3). With appropriateness and likelihood of use of the four focal tactics as the indepen- dent variables, participants’ appropriateness ratings for the sum of the four tac- tics were positively associated with actual unethical behavior (b = .32, p < .10) as well as with perceived unethical behavior (b = .42, p < .05). Participants’ ratings for general appropriateness of tactics (all eighteen tactics) were posi- tively associated with actual unethical behavior (b = .48, p < .01) and posi- tively associated with perceived unethical behavior (b = .34, p < .05). Therefore, the higher the perceived appropriateness of questionable or uneth- ical tactics, the more questionable or unethical tactics the individual thought he or she employed in the negotiation and the more tactics he or she actually did employ, consistent with Hypothesis 1. In addition, participants’ ratings of general appropriateness were negatively associated with perceived honesty in the negotiation (b = –.30, p < .10). That is, the higher the perceived appropri- ateness of the tactics from the questionnaire, the less honest the participant per- ceived himself/herself to be in the negotiation.

These results also suggest a relationship between participants’ perceived honesty and their actual unethical behavior, with the latter also potentially affected by the other party’s perceived or actual behavior. When actual uneth- ical behavior was regressed on perceived honesty of self and other as well as actual unethical behavior of other (Table 4), the perceived honesty of self was

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ETHICALITY IN NEGOTIATION 329

found to be negatively associated with actual unethical behavior of self (b = –.48, p < .01) while actual unethical behavior of the other party was found to be positively associated with actual unethical behavior of self (b = .38, p < .05). Thus, the more honest the negotiator perceived himself/herself to be in the negotiation, the fewer questionable or unethical tactics the individual employed during the negotiation. The lack of a significant correlation between perceived honesty of self and the other party (r = –.01) suggests that partici- pants did not necessarily project their own ethicality onto their negotiating counterpart. However, the positive relationship between actual unethical behavior of the two parties suggests that unethical behavior might breed sim- ilar behavior from the other party.

Table 3. Results of regression analyses of actual and perceived behavior on the Incidents in Negotiation Questionnairea

Predictor variable Actual unethical Perceived unethical Perceived honesty behavior behavior of self

Four focal tactics Appropriateness .32⊥ .42* –.09 Likely use –.05 .00 –.19

All eighteen tactics Appropriateness .48** .34* –.30⊥

Likely use .03 .01 –.13

Adjusted R2 .08 .21 .15 .09 .01 .06

F 3.59⊥ 9.49** 6.67* 4.14* 1.17 3.11⊥

a n = 33 ⊥ p < .10, * p < .05, ** p < .01, *** p < .001

Table 4. Results of regression analysis of actual behavior on the perceived honesty of self and honesty of othera

Predictor variable Actual unethical behavior

Perceived honesty of self –.48**

Perceived honesty of other .08 Actual unethical behavior of other .38*

Adjusted R2 .36

F 9.74***

a n = 33 ⊥ p < .10, * p < .05, ** p < .01, *** p < .001

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330 ROGER J. VOLKEMA, DENISE FLECK AND AGNES HOFMEISTER-TOTH

As a follow-up analysis, the first use of a questionable or unethical behav- ior was examined for each representative, Logan Telecommunications and RJW Properties (i.e., location in the sequence of e-mail messages sent by a party where the first use of a focal tactic occurred). In twenty-two (66.7%) of the negotiations, both parties used one or more tactics, in eight cases (24.2%) only one party used a focal tactic, and in three cases (9.1%) neither party used one of these tactics. In those cases where both parties employed one or more focal tactics there was a high correlation between stages of first use (r = .64, p < .001), suggesting that the first incidence of a questionable or unethical behavior on the part of one negotiator was followed quickly by reciprocal behavior on the part of the other negotiator. Furthermore, the earlier a Logan Telecommunications representative used a questionable or unethical behavior in the sequence of e-mail messages exchanged, the more unethical the RJW representative was overall (r = –.40, p < .05), and the earlier the RJW repre- sentative used a questionable or unethical behavior, the more unethical the Logan Telecommunications representative was overall (r = –.36, p < .10).

Outcomes (actual and perceived) were regressed on attitudes, intentions, perceived honesty, and actual behavior (Table 5). The more questionable or unethical tactics a party used (b = .37, p < .10) and the less honest he/she thought the other party was in the negotiation (b = –.51, p < .05), the higher the negotiator’s score (the former consistent with Hypothesis 2). The more unethical the other party, the greater the differential outcome (b = .40, p < .10) and the smaller the joint outcome (b = –.62, p < .01). These results suggest that the perceived or actual ethicality of the other party was a better predictor of actual outcomes than the ethics of the principal party (although, as previously noted, unethical behavior by one party appears to promote similar behavior by the other party).

The participant’s perception of the honesty of the other party and the actual unethical behavior of the other party were the only variables significantly asso- ciated with perceived outcomes. The more honest the other party was per- ceived to be, the better the negotiator perceived he/she did in the negotiation (b = .30, p < .10) and the better the negotiator perceived the other party did in the negotiation (b = .64, p < .001). In addition, the more honest the other party was perceived to be (b = –.58, p < .001) and the more unethical the other party actually was (b = –.29, p < .10), the smaller the perceived differential outcome (i.e., the difference between his/her perceived performance and the perceived performance of the other party). Finally, the more honest the other party was perceived to be, the larger the perceived joint outcome (b = .55, p < .001). However, there was no support for a relationship between actual unethical behavior of the Logan Telecommunications negotiators and perceived out- comes (Hypothesis 3).

As previously noted, eleven pairs of negotiators were unable to reach an

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agreement in the allotted time (a period of two weeks, which appeared sub- stantial for completing the negotiation). To determine if the ethics of the sub- jects might have played a role in predicting whether or not an agreement was reached, a discriminant analysis was performed, with agreement/no agreement as the dependent variable, and the mean score for appropriateness of tactics (attitude), mean score for likely use of tactics (intentions), perceived honesty during the negotiation, perceived honesty of the other party during the nego- tiation, and actual ethical behavior of each party during the negotiation as the predictor variables. The analysis yielded a significant function (canonical correlation = .54; Wilks’ lambda = .71; p < .01) involving two variables – likely use of tactics and perceived honesty of the other party. The more likely the use of competitive or unethical tactics, the greater the likelihood that no agreement would be reached. In addition, the less honest the other party was perceived to be, the greater the likelihood that no agreement would be reached. The function correctly classified 78.1% of all cases into their original groups, which exceeds the threshold suggested by Hair et al. (1998). In addition, Press’s Q was significant (Q = 10.1, p < .01), supporting the efficacy of the function. Strictly speaking, however, this result did not support Hypothesis 4, which predicted that the more questionable or unethical tactics an individual employed, the greater the likelihood of not reaching an agreement.

Table 5. Results of regression analyses of outcomes on attitudes, intentions, perceived honesty, and actual behaviora

Predictor variable ___Actual outcome____ _____Perceived outcome______ Self Differential Joint Self Other Differential Joint

Attitude/intentions (Incident in Negotiation Questionnaire, 18 tactics)

Appropriateness .25 .04 –.18 –.20 –.08 –.07 –.15 Likely use .11 .01 –.14 –.15 –.03 –.16 –.09

Perceived honesty Self .00 .02 .04 .09 .02 .05 .06 Other –.51* –.25 –.26 .30⊥ .64*** –.58*** .55***

Actual unethical behavior Self .37⊥ .15 –.03 .03 .07 .06 .06 Other .06 .40⊥ –.62** –.04 .21 –.29⊥ .11

Adjusted R2 .20 .12 .36 .06 .40 .28 .28

F 3.66* 3.80⊥ 12.64** 2.89⊥ 21.23*** 7.11** 13.25***

a For actual outcomes, n = 22; for perceived outcomes, n = 33. ⊥ p < .10, * p < .05, ** p < .01, *** p < .001

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Discussion

As reported elsewhere (Boles et al. 2000; Murnighan et al. 1999; O’Connor and Carnevale 1997; Scouller 1972), the use of questionable or unethical tac- tics in negotiating is a common phenomenon. In this study, approximately 80% of the participants were found to use one or more of the four focal tactics. The tactic that was used most frequently was misrepresenting information, which was used by over 70% of the participants. In general, these percentages are somewhat higher than the numbers reported in previous studies, which may be due to the medium employed in this study – electronic mail – and the fact that most of the dyads represented cross-cultural negotiations. At least one study has suggested that the use of unethical tactics increases when negotia- tions occur via electronic mail, due in part to the inability of the other party to read nonverbal cues which can give away intentions to deceive (Valley et al. 1998). In addition, Volkema and Fleury (2002) report that the likelihood of unethical behavior increases when an individual is negotiating with someone from another country, particularly a country known for its skilled negotiators.

The “Incidents in Negotiation Questionnaire” was found to be modestly pre- dictive of perceived (self-reported) and actual behavior. While there were some marginally significant relationships between perceived appropriateness or likely use of specific tactics and the actual use of those tactics, the measure of general appropriateness (all eighteen behaviors) was the best predictor of actual ethical behavior. Prior research on the linkages between attitudes, intentions, and behavior has reported significant correlations between spe- cific attitudes or intentions and specific behaviors, and between general attitudes or intentions and general behaviors (Ajzen 1988). The somewhat weak finding for the former (specific-to-specific linkages) might be an artifact of only four tactics from the questionnaire having applicability to this partic- ular simulation. The positive link between the measure of general appropri- ateness and actual ethical behavior is encouraging as regards the predictive utility of the questionnaire.

The likely use of questionable or unethical tactics, the actual use of those tactics, and the perceived honesty of the other party were the critical variables in predicting outcomes. The use of questionable or unethical tactics by a party was positively associated with a party’s performance, while the per- ceived honesty of the other party was negatively or inversely associated with the negotiator’s score. Thus, a negotiator did better relative to others repre- senting Logan Telecommunications when he/she used these questionable tac- tics and when he/she presumed the other party was using these tactics. In addition, the use of questionable or unethical tactics by the other party was associated with lower joint outcomes.

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There appears to be a reciprocating effect involving the use of questionable or unethical tactics, as early use by one party was associated with early use by the other party. In addition, timing appeared to influence frequency of use, as the earlier one party used one of these four tactics, the more the other party used questionable or unethical tactics. As already noted, exaggerating an offer or demand was only coded as such if the offer or demand was outside the specific ranges shown in Table 1. Since exaggeration is often one of the first tactics employed by negotiators, going beyond specified ranges may have sent a signal to the other party that future unethical behavior was likely (prompting not only reciprocation but escalating use of questionable or un- ethical tactics).

The perceived honesty of the other party was the primary variable significantly related to perceived outcomes. The more honest the other party was perceived to be, the better a negotiator perceived he/she did compared to others representing Logan Telecommunications, the poorer the individual perceived he/she did in competition with the other party (differential outcome), but the better the individual perceived he/she did in cooperation with the other party ( joint outcome). Interestingly, the more honest the other party was per- ceived to be, the better the negotiator perceived the other party did in the nego- tiation. Conceivably, the other party’s perceived honesty led to an increase in exchange of valid information, or accommodation on certain issues.

There were two variables that were most effective in differentiating between negotiations that reached agreement and negotiations that did not reach agree- ment – likely use of questionable or unethical tactics (as measured by the “Incidents in Negotiation Questionnaire”) and the perceived honesty of the other party. The more likely the use of these tactics and the less honest one’s counterpart was perceived to be, the greater the likelihood that the parties would not reach an agreement. It is important to note, however, that the rating of the other party’s honesty occurred at the conclusion of the negotiating period (when it was clear no agreement would be reached). Therefore, it is con- ceivable that the respondent was seeking to explain or justify the failed nego- tiation by placing blame elsewhere. In future research, this perception might be measured at several points throughout the negotiation, to determine if per- ceptions change when it first appears that no agreement will be reached.

The significant positive relationship found between subjects’ self-reported behavior and actual behavior is also worth noting, as such findings have not always been reported by researchers. In general, restricting the recall of an event to a short and recent reference period and providing specific recall cues can help improve recall (Gilbert, Fiske and Lindzey 1998). However, indi- viduals still may choose to misreport events when social capital is at stake. The high correlation between self-reported behavior and actual behavior found in

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this study may be due to the fact that participants knew transcripts of their exchanges would be available to others (e.g., the researchers) for verification. While this finding requires further study, it suggests one way of increasing the validity of self-report data of this type, where the issue is more one of honesty in reporting than accuracy in reporting behaviors.

These findings have some direct implications for practitioners. First, as reported in prior research, the use of questionable or unethical tactics is com- monplace among negotiators (approximately 80% in this study used at least one such tactic), although some tactics may be considered more acceptable than other tactics. Thus, it is not unreasonable to assume that the other party in a negotiation will use a questionable or unethical tactic, especially misrep- resentation of information (which was the tactic used most frequently). The use may actually increase when a medium such as electronic mail is employed (rather than face-to-face negotiations, where nonverbal cues can be read). Second, an individual’s general attitude/intentions towards the appropriateness and use of questionable or unethical tactics will likely translate into actual use of such tactics. Therefore, the extent to which another party’s general attitude or intentions towards tactics can be ascertained prior to the negotiation (e.g., through demographic information, reputation, etc.) or early in the negotiation (e.g., through background and anecdotal exchanges) could be valuable in predicting the degree of unethical behavior. Third, the use of questionable or unethical tactics will likely result in reciprocal behavior on the part of the other party, and the earlier such tactics are employed, the more unethical the other party is likely to be. Fourth, the more likely one is to use questionable or uneth- ical tactics and the less honest the other party is perceived to be, the greater the likelihood that no agreement will be reached. This could be costly if a viable agreement is lost due to inaccurate perceptions of the other party. Whether or not someone can easily project honesty while in fact acting unethically is important to this finding. An ad hoc correlation analysis of participants’ per- ceptions of the other parties’ honesty and the other parties’ actual unethical behavior was in the expected direction (r = –.26) but not statistically significant (p = .15). Fifth, perceived outcomes matter, since many times negotiators do not know how they actually performed relative to their counterpart; a decision to engage in future negotiations with the same party must therefore be based on perceptions. Furthermore, based on the findings of this study, one’s per- ceived performance (differential and joint) is likely to be tied to the perceived honesty of the other party. The more honest the other party is perceived to be, the less the negotiator’s differential advantage is perceived to be and the larger the joint outcome is perceived to be. Finally, the use of questionable or unethical tactics by a negotiator and the perceived dishonesty of the other party can positively influence the negotiator’s actual performance. Exaggerating an

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initial offer, for example, is both a generally accepted tactic and a tactic that can directly affect outcome by serving as an anchor around which a final set- tlement is reached. Cramton and Dees (Cramton and Dees 1993; Dees and Cramton 1991), in fact, argue that a negotiator has a moral right to exagger- ate an initial offer, since the other party will assume this was the case in any event and demand the negotiator compromise on a sincere initial offer.

As with all research, there are several caveats that must be offered regard- ing this study and our findings. First, it should be pointed out that this negoti- ation took place entirely via electronic mail. While this medium has its benefits in terms of data analysis and has been employed effectively elsewhere (Tinsley et al. 2002), as already noted the use of questionable or unethical tactics may vary depending on the medium and its richness (Daft and Lengel 1986; Daniels 1967; Tinsley et al. 2002). Remote media, such as telephone and elec- tronic mail, can induce greater competition between negotiators where trust and honesty appear lacking (Paese, Schreiber and Taylor 2003). In addition, as an asynchronous form of communication that is not always reliable, elec- tronic mail introduces other issues that can complicate the development of rap- port and trust between parties. Before generalizing beyond this medium, further study is clearly warranted. Although electronic mail may be used increasingly in negotiations over the coming years, the parties frequently have some face-to-face contact as well, and other media such as video con- ferencing have begun to emerge. In one study, preliminary face-to-face con- tact was found to mitigate the likelihood of deadlocks in e-mail negotiations (Shell 2001). Researchers need to recognize that other media (or combination media) might influence ethical behavior and outcome.

It should also be pointed out that the parties in this negotiation were from many different cultures (as is the case in most multinational organizations these days) and had had no prior contact or the guarantee of future contact. These factors also can affect the extent to which a party employs questionable tactics (Volkema and Fleury 2002), and how individuals perceive the actions (or inactions) of the other party. It is easy for a cycle of mistrust and hostility to emerge under such conditions, which in turn can reinforce the tendency to view oneself as good and the other party as bad or evil (Hopmann 1996). Innocuous behaviors, such as gift-giving, extended socialization, and flexible time orientation, which are often more common in the business practices of non-Western cultures, suddenly become suspect (Donohue and Hoobler 2002; Schuster and Copeland 1996). With the continued globalization of markets and the reliance on technologies such as electronic mail to negotiate agreements (particularly when challenging economic times limit travel), these factors will become increasingly important.

A growing number of studies have reported the use of questionable and

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unethical tactics in both actual and simulated negotiations. These tactics are employed in the public sector as well as the private sector, between nations as well as multinationals. To fully understand the negotiation process, the use and impact of these tactics needs to be better understood. This study represents one of the first to examine some of these issues. Beyond replication, future research needs to examine the intentions with which invalid information is employed. Invalid information may provide a means of checking another party’s knowl- edge base, uncovering the other party’s settlement range, determining a coun- terpart’s negotiating style (e.g., cooperative, assertive), building rapport and perceived trust, or countering another party’s dishonesty, among other pur- poses. At the same time, we must recognize that many tactics that are per- ceived as unethical in one culture might be seen as acceptable practice in another culture (Puffer and McCarthy 1995; Schuster and Copeland 1996). Indeed, being polite may be more important than telling the truth in some cul- tures (Faure 2002). Future research, therefore, might seek to isolate intentions in order to better understand their influence on behavior and performance.

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