Equity Sensitivity and Negotiation Behaviors: A Look at Mexican Exporters

The negotiation encounter is perhaps one of the most common forms of social exchange (Bazerman et al. 2000). Negotiations entail that individuals come together to reconcile differences in initial party offerings. Through the process of negotiation, bargainers attempt to establish reasonable terms of agreement and hope to secure mutually beneficial outcomes (Perdue and Summers 1991). As result, it can be expected that during the negotiation process, bargainer's sensitivity to a fair exchange will change as each individual tries to gauge the intent of the other and strives to strike a bargain that he/she perceives to be fair.

Adam's (1963) "norm of equity" suggests that negotiators will behave consistently when faced with perceptions of inequity. He suggests that when perceived inequity exists, individuals will work to restore equity. While the aforementioned rationale sounds logical, empirical evidence has been presented (cf., Greenberg 1978; Leventhal 1976) that suggests that there are several notable exceptions to Adam's norm of equity. These exceptions are based on individual differences variables that cause negotiators not to prefer for their outcome/input ratios to be equal (Patrick and Jackson 1991). For example, Huseman, Hatfield and Miles (1987) identified a spectrum of individuals who have different equity preferences. Major and Deaux (1982) found that allocation of outcomes varied depending on who is on the receiving end. Likewise, Vecchio (1981) provides empirical evidence that moral maturity affected reactions to inequity.

In business negotiations, it may be unreasonable to expect strict adherence to Adam's (1963) norm of equity. While most negotiators strive for win-win outcomes (Bazerman et al. 2000; Barry and Friedman 1998; Perdue and Summers 1991), bargainers' perceptions of what is deemed "fair" may be arbitrary. Therefore, it is important to explore how equity preferences affect negotiation behaviors. After all, equity sensitivity underscores the influence of relationship development critical to any social exchange, including negotiations.

While it is intuitively appealing to expect a relationship between perceptions of equity and negotiations, it would also be interesting to explore which negotiators are more predisposed towards equity. In particular, are there groups of negotiators who are more likely to behave in an equitable manner? Recently, Mintu-Wimsatt and Graham (forthcoming 2004) reported that equity sensitivity led to greater cooperative behaviors among Mexican exporters compared to Canadian Anglophones. They suggest that differing views of what constitutes fairness across cultures suggests a reason for the discrepant results.

The purpose of this study is three-fold. First, the level of cooperation among individuals with different equity preferences is examined. That is, the cooperative behaviors of benevolents and entitleds are compared. Second, the relationship between equity sensitivity and cooperative behaviors in a negotiation setting is explored. This study investigates whether sensitivity to equity is associated with negotiators' assessment of their cooperative behavior as well as those of their counterparts. Third, the equity and negotiation relationship is explored at a cross-cultural level. To accomplish this, the relationship of equity and negotiation was investigated among Mexican negotiators.

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THEORETICAL FOUNDATION

In this section, the level of cooperation of two equity classes of negotiators is compared. The relationship between cooperative negotiation behaviors and equity sensitivity is also presented. In particular, negotiators' evaluation of their behaviors as well as those of their counterparts will be emphasized. This section concludes with some discussion on the potential role of culture on the equity sensitivity.

Cooperation in Negotiations

There is an abundance of studies that have looked into the two approaches to buyer-seller encounters that dominate the literature (cf., Bazerman et al. 2000; Barry and Friedman 1998). One strategy suggests a more cooperative and/or problem-solving approach, while the other type is more distributive and/or competitive. The cooperative approach, otherwise known as problem-solving or integrative approach, involves conflict resolution, integration, and information exchange among buyers and sellers (cf., Bazerman et al. 2000; Barry and Friedman 1998; Pruitt 1981). The competitive or distributive strategy, in contrast, employs threats and excessive demands and seeks to win concessions at the counterpart's expense (Barry and Friedman 1998; Perdue and Summers 1991).

Eliashberg, Lilien and Kim (1995) report that of the different approaches in negotiations, cooperative problem-solving is perhaps most successful in resolving conflicts. In their review of the extant marketing negotiation literature, Eliashberg et al. (1995) suggest that cooperative behaviors in negotiations enhance business relationships by securing mutually beneficial outcomes. In international business negotiations, Graham, Mintu and Rodgers (1994) have found extensive support for this approach, albeit at different levels. Since this study focuses on better understanding face=+Italic; mutuallyface=-Italic; successful or face=+Italic; win-winface=-Italic; sales encounters, this investigation emphasizes cooperative or problem-solving oriented behaviors.

Equity Sensitivity

Huseman, Hatfield and Miles (1987) proposed that equity sensitivity is an individual difference variable that influences how individuals react to inequity. Equity sensitivity is related to a "person's perception of what is and what is not equity and then uses that information to make predictions about reactions to inequity" (King, Miles and Day 1993, p.302).

Equity sensitivity is best understood conceptually by identifying characteristics of individuals along points of a continuum. On one end of the continuum are the benevolents, otherwise known as "givers," who express high satisfaction relative to others when their output/input ratios are less than the comparison other. Benevolents have higher tolerance for under-reward. At mid- range are the equity sensitives. These individuals most closely adhere to the traditional norm of equity - with the balance of inputs to outcomes (Allen and White 2002). On the other end of the continuum are the entitled individuals or "takers," who are most satisfied when they receive more outcomes than inputs (King, Miles and Day 1993). Entitleds are most sensitive to perceived under reward inequity (Sauley and Bedeian 2000).

Equity Sensitivity and Cooperative Negotiation Behaviors

As defined by King, Miles and Day (1993), benevolent negotiators have the inherent trait of being "givers." They do not seem to mind providing more inputs [than receiving outputs] to their counterparts (King, Miles and Day 1993). In the negotiation context, these inputs come in the form of sharing information, making concessions changes, and/or discussing preferences among bargaining parties. These are all critical elements of the cooperative problem-solving strategy.

Conversely, entitleds are considered "takers." They focus on themselves and the outcomes. They are more likely to take action to rectify any imbalance in the input/output ratio when compared to their counterparts (Allen and White 2002; Miles, Hatfield and Huseman 1989). Consequently, in a negotiation setting, entitleds may be less like to cooperate than their counterparts. Therefore, it can be expected that:

H1: Benevolent negotiators will demonstrate more cooperative behaviors than entitled negotiators.

Because benevolent negotiators are genuinely concerned with the outcomes of the bargaining activity, they are more likely to behave in a cooperative manner. This is consistent to King, Miles and Day's (1993) study that found benevolents placing higher importance to intrinsic outcomes such as cooperation. As a result, it is proposed that:

H2: A positive relationship exists between equity sensitivity and negotiators' perceptions of their cooperative behaviors.

Goering (1997) noted that: "Bargaining interaction tends to be characterized by face=+Italic; reciprocal exchangesface=-Italic; ... integrative messages tend to be matched with integrative responses; while distributive communication tends to elicit distributive responses" (p.385). As a result, negotiators have the natural tendency to match or "return" the bargaining strategies of those of their partners (Pruitt 1981). This is consistent with King and Hinson's (1994) observation that equity sensitivity affected how negotiators evaluated their interaction with their opponents. Perhaps, negotiators are more willing to "give" (i.e., benevolent tendencies) information if they perceive that their counterpart is behaving in a cooperative manner. Therefore, it can be deduced that bargainers' equity will be related to their perceptions of cooperation of their counterparts.

H3: A positive relationship exists between equity sensitivity and negotiators' perceptions of their counterparts' cooperative behaviors.

Potential Role of Cultural Context on Equity

Since equity sensitivity has not been examined across various cultures, the question posed earlier (i.e., Are there groups of negotiators who are more likely to behave in an equitable manner?) is quite intriguing. So far, Mintu-Wimsatt and Graham (forthcoming 2004) have examined among Mexicans and Canadian Anglophones. However, they do not distinguish between benevolents and entitleds. In this study, this author follows Mintu-Wimsatt and Graham's (forthcoming 2004) framework and further explores the equity sensitivity traits of Mexican exporters. The focus is limited among Mexicans because of the inherent cultural differences between the Hispanic and American cultures. The latter has been thoroughly examined in the [mostly Western-based] equity sensitivity literature.

Perhaps, the potential effects of culture on equity sensitivity can be best explained using Hofstede's (1991) individualism-collectivism dimension. Individualism refers to the tendency to address self-serving concerns. This is consistent with the behaviors expected of entitleds. Like entitleds, individualists have elaborate self-knowledge instead of knowledge about others (Gelfand and Christakopoulou 1999). They emphasize autonomy and self-determination (Cai, Wilson and Drake 2000). As a result, individualists often demonstrate direct modes of expression (Morris, Davis and Allen 1998).

On the other hand, collectivism refers to the tendency to be more willing to sacrifice personal interests for the good of the group (Hofstede 1991). Collectivists promote interdependence with others (Gelfand and Christakopoulou 1999). Based on this definition, collectivists are more apt to become givers or benevolents. Collectivist cultures, such as the Mexican culture, focus on relational harmony and protection of group interests (Cai. Wilson and Drake 2000). They are more associated with indirect communication (Morris, Davis and Allen 1998).

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METHODOLOGY

Allen and White (2002) investigated equity sensitivity in a negotiation experiment with business students as participants. While the participation of student samples has been popular in other equity sensitivity studies, utilizing an face=+Italic; actualface=-Italic; business setting with face=+Italic; actualface=-Italic; business people will provide more applied insights between the relationship of equity sensitivity and negotiating behaviors. This is particularly salient given the complexities and dynamics of an actual business negotiation especially at an international level (Mintu-Wimsatt 2003).

Sample

A convenience sample of 50 Mexican industrial exporters in the Monterrey area participated in the study. These industrial exporters were identified based on their sales levels. Only those with at least $1.0 million in export sales were considered. This criterion is important to insure that respondents are actually involved in some "major" sale.

On average, the Mexican respondents were 39 years of age. They had been with their respective organizations for an average of 7 years. The respondents reported an average of 10 years experience in conducting international business negotiations.

Data Collection Procedure

Personal interviews were utilized to collect data among Mexican industrial exporters. The exporters were asked to refer to a "recently concluded negotiation activity with an American counterpart" as the context of the survey. Two qualified interviewers administered the Spanish version of the survey instrument. Personal interviews were deemed as the appropriate means of data collection mainly because of the general reluctance of Mexican business people to respond to mail questionnaires.

Translation

The Spanish version of the survey instrument was derived using a two-step process. First, two translators translated the English version into Spanish. Two other translators then back translated the resulting [Spanish] version into English. The two versions were compared and discrepancies were resolved. Copies of both the English and Spanish versions of the variables of interests are presented in Appendix A and Appendix B, respectively.

Measurement Assessment

Following the work of Huseman, Hatfield and Miles (1987), King and Miles (1994) reported on a series of studies focused on the validation of the Equity Sensitivity Instrument (ESI). Until recently, the ESI has been face=+Italic; theface=-Italic; primary measure of equity sensitivity (cf., Sauley and Bedeian 2000).

ESI attempts to measure how individuals differ in their allocation of outcomes. The ESI is a five-item, forced-distribution measure on which the respondent allocates 10 points between a benevolent response and an entitled response for each of the five items. A total ESI score is reached by adding the points allocated to each of the five benevolent statements. Equity sensitivity scores have a possible range of 0 to 50. The calculated mean of the ESI of the Mexican exporters was 27.64 with a standard deviation of 6.13. The Cronbach's alpha generated was .86. This is consistent with King and Miles' (1994) report on the psychometric properties and validity of ESI.

In order to generate the 3 classes or sub-groups representing benevolents, equity sensitives and entitleds, the conventional rule set by previous researchers was utilized (cf., King, Miles and Day 1993; Allen and White 2002). The decision rule of plus/minus one-half of the standard deviation from the ESI mean was used to define the breakpoints for each sub-group. King, Miles and Day (1993) suggest that "sample-specific breakpoints are necessary because of the unique characteristics on any particular sample that can influence response to the ESI" (p.305). Using the aforementioned decision rule, exporters with an ESI score of 24 or less were classified as entitleds (n=16; mean=22.25; SD=2.62). Those with a score between 25 and 29 were considered equity sensitives (n=21; mean=26.81; SD=1.40). Benevolent exporters had an ESI score of 30 or greater (n=13; mean=35.62; SD=5.75).

Perception of cooperation was measured using Graham's (1986) problem-solving approach measure. This construct has been studied extensively in cross-cultural negotiations (Graham, Mintu and Rodgers 1994). Perceptions of one's own cooperative behavior as well as those of the counterpart's were measured using four semantic differential scales with opposing adjectives as anchors. The mean values of 3.28 (SD=.79) and 3.44 (SD=.86) were generated for one's perception of his/her own cooperative behavior and perception of his/her counterpart's cooperative behavior, respectively. The calculated Cronbach's alphas were .79 for one's perception of his/her own cooperative behavior and .86 for perception of his/her counterpart's cooperative behavior.

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RESULTS

An ANOVA was conducted to test H1 - pertaining to the differences in the cooperative behaviors of benevolents versus entitleds. The results showed that benevolents have significantly higher levels of cooperative behaviors (mean=3.63) compared to entitleds (mean=2.92) at the .05 level (t=-2.160). Therefore, H1 was supported.

The intercorrelation matrix of the variables of interest is presented in Table 1. As reported, equity sensitivity is positively correlated to perceptions of one's own cooperative behavior at the .05 level. Therefore H2 is supported. No support for H3 was found. That is, no significant relationship was found between equity sensitivity and perceptions of counterpart's cooperative behavior

Some Post Hoc Analysis

Because of the significant intercorrelations between equity sensitivity, perceptions of counterpart's behavior and negotiator's cooperative behavior, a regression analysis was conducted to further examine this interrelationship. A regression model using negotiator's cooperative behavior as the dependent variable was calculated; with equity sensitivity and perceptions of counterpart's cooperative behavior as independent variables. The model generated was significant at the p<.01 level (F=9.446) with an Rface=+Superscript; 2face=-Superscript; of .305. The regression analysis suggest that perceptions of counterpart's behavior (t=3.626, p=.001) and equity sensitivity (t=2.130, p=.039) are strong predictors for a negotiator's cooperative behavior.

TABLE 1 Correlation Matrix

* Correlation is significant at .05 level

** Correlation is significant at .01 level

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DISCUSSION

Without any doubt, conducting international business negotiations can be very challenging. This is because the dynamics involved in the activity are more complex - particularly when cultural differences and perceptions of the counterpart affect negotiation behaviors (Bazerman et al. 2000). The findings in this study provide some meaningful insights that could potentially help cross-cultural negotiators as well as their employers.

The purpose of this study was to investigate the relevance of equity sensitivity in cross-cultural negotiations. The differences in the cooperative behaviors of benevolents and entitleds were examined. Moreover, the positive association between equity sensitivity and perceptions of cooperative behaviors was emphasized. Additional analysis showed the predictive power of equity sensitivity and perceptions of counterpart's cooperative on the negotiator's cooperative behavior. Finally, the potential effects of cultural dimensions (i.e., Hofstede's individualism-collectivism dimension) discussed earlier can provide future researchers with a strong impetus for investigating equity sensitivity across cultural groups.

Managerial Implications

The findings presented here underscore several important conclusions for managers to recognize. First, the primary finding in this study relates to benevolent [Mexican] exporters' propensity to employ more cooperative behaviors in negotiations. It appears that benevolents are more likely to behave in a cooperative manner than entitled negotiators. This is not surprising considering the inherent traits of benevolents. They are more apt to "give" or "share" inputs (e.g., information) that enhance their problem-solving approach. This is critical in negotiations since bargaining is not a one-shot activity (Hogarth 1981). It involves iterations of discussions and/or meetings - requiring negotiators to share information and change concessions. Therefore, it is advisable for managers to carefully examine the equity sensitivity of corporate representatives who will be involved in international negotiations. Evidence presented here points to its potential impact on the negotiation strategy (i.e., use of cooperative problem-solving approach that lead to win-win outcomes).

There is also evidence to support the fact that [Mexican] negotiators with higher (i.e., more benevolent) equity sensitivity scores are more likely to perceive themselves as being more cooperative in the negotiation setting. Two plausible explanations could account for this finding in this study. First, perceptions of cooperation are consistent with the behavioral characteristics of "givers." That is, cooperative behaviors lead to relationship enhancement - one of the salient characteristics of benevolents. Second, it is noteworthy to mention that Mexicans are inherently cooperative. Mexico is noted as a typical high-context culture (Husted 1994; Hall 1976) that place great emphasis on relationship building. Therefore, it can be expected that cooperative behaviors in negotiations become second nature to high-context individuals (Mintu-Wimsatt & Gassenheimer 2000). This implies that those dealing with Mexican exporters should be more cognizant of this characteristic.

It is also interesting to note that no relationship was found between equity sensitivity and the negotiator's perception of the counterpart's behavior. Perhaps, in international negotiations, bargainers assess their counterpart's strategy based on other factors rather than focusing on input/output ratios. For example, cultural orientations of negotiating parties have been found to influence cooperative behaviors. This has been extensively examined by several researchers (cf., Graham, Mintu and Rodgers 1994) who have empirically shown that cooperative problem-solving is largely a function of one's cultural background rather than personal characteristics such as equity sensitivity. Moreover, since the financial gains and repercussions at stake in international negotiations are relatively high, seasoned bargainers do not let personal predispositions [such as preoccupation with equity] affect their assessment of the business encounter. In the end, what is important to negotiators is that an acceptable "deal" has been made - regardless of input/output ratios.

Finally, perhaps the most telling in the findings is the strong positive effect of equity sensitivity and perceptions of counterpart's behavior on the negotiator's cooperative strategy. This suggests that negotiators are well advised to consider these two factors when strategizing and preparing for international business encounters. That is, despite well-laid out plans to execute specific strategies, behaviors that occur during the actual bargaining or at the bargaining table may facilitate changes - depending on how each partner assesses the behavior of the other. This is when reciprocity becomes a critical element in negotiations.

Research Implications and Limitations of the Study

To the best of this author's knowledge, no other study has used the ESI in a language other than English and in the context of an actual international negotiation encounter. As a result, this author is cautious with respect to the findings presented here. Until other studies replicate the use of the Spanish version adapted in this study, issues pertaining to the validity and/or reliability of the translated instrument exist.

The analysis conducted in this study was fairly simple in nature. A limited number of variables of interest precluded more rigorous statistical analysis. Also, while other studies on ESI involved experiments that allowed for manipulation, this was not undertaken in this study. Because the research methodology utilized in this study is significantly different from previous equity sensitivity studies, its application was quite straightforward. However, it is noteworthy to mention that previous studies used business students as the convenience sample. Because of students' lack of experience, particularly in an international setting, it is reasonable to expect that their behaviors are not necessarily reflective of actual business negotiators. Herein lie the primary contribution on this study.

Another important limitation deals with the sample size - a convenience sample of 50 Mexican exporters. The sample size issue is important especially when sub-groups were created to define the 3 equity groupings. The cell sizes became relatively small. As a result, some of the statistical findings may have been biased. Once again, only a replication of this study among Mexicans exporters with a larger sample can rectify this concern.

Finally, in order to effectively answer the question - face=+Italic; Are some cultural groups of negotiators more equity sensitive than others? face=-Italic; - it imperative that future studies representing other cultures be included. This will facilitate a better comparison of findings on equity sensitivity and provide a better answer to the aforementioned question.

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CONCLUSION

The purpose of this study was to investigate the relationship between equity sensitivity and cooperative negotiation behaviors in a cross-cultural negotiation setting. Unlike many other negotiation and equity sensitivity studies, this study actually utilized Mexican business people with significant work experience. Therefore, this study serves as a foundation for further investigating equity sensitivity in other cross-cultural bargaining situations. Because equity appears to be associated with cooperative problem-solving, this warrants further studies and applications in cross-cultural negotiation settings.

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REFERENCES