Interorganizational negotiation perspective: the role of interaction, pluralistic discord and relative strength of formal and informal institutions

Purpose This study extends the relationship, behavior and condition perspective on international business negotiation to predict cross-border merger and acquisition negotiation outcomes. Taking a two-dimensional approach to classifying institutional distance (ID), the authors identify a set of cognitive and behavioral mechanisms underlying interfirm negotiation processes. The purpose of this study is to propose that the degree, interaction, pluralistic discord of institutional dimensions and the relative importance of IDs shape cross-national negotiation workflows and tactics. Design/methodology/approach Using a cross-sectional sample of over 76,000 interfirm merger and acquisition deals, the authors find that this study’s empirical results support their overarching theory of relationship-, behavior- and condition-focused cross-border negotiation outcomes. Applying the Mahalanobis approach to multidimensional IDs, the authors conduct logistic regression analyses to run the competing models to test the hypotheses. Findings This research finds that the degree of dimensional interactions, pluralistic discord and relative impact – all three ID dynamics – at the dyadic level undermine the likelihood of deal completion. As such, interfirm negotiations require managing cognitive and behavioral costs underlying the intricacies of IDs. Originality/value The relationship, behavior and condition-centric interfirm negotiation theory proposed in this study informs our existing knowledge of both institutional and behavioral negotiations. Simulating the context of de facto deals, the research model simultaneously captures formal and informal ID dimensions as a tandem to identify some exogenous and endogenous bargaining dynamics to provide new insights. The results of this study demonstrate that the codified, authoritative, and legally enforceable attributes of distance (i.e. formal directives) undermine cross-border deals more acutely than the socio-culturally embedded norms (i.e. informal conventions).