Research Handbooks in Business and Management series
Edited by Frank Horwitz and Pawan Budhwar
A major feature of the contemporary global environment is the rise of emerging markets. A characteristic of these markets is the inherent tension that they exhibit between commitment and flexibility (Mody 2004). Policy commitment is essential to attracting foreign direct investment but may not be tenable, likewise while flexibility may be essential to deal with unexpected events it may be subject to abuse. We are now witnessing an increased interaction between companies from developed economies and companies from emerging economies (UNCTAD 2012). Consider, for example, the case of India and China, where the inflow of FDI into China exceeded US $120 billion, whereas the outflow was US $60 billion. The corresponding figures for India are around US $10 billion and US $14 billion respectively. As Western firms seek to exploit the extant opportunities in the emerging markets and as emerging market firms enter the developed markets they are confronted with the need to negotiate a mutually satisfactory contractual agreement. Negotiation is the process by which the actors seek to reconcile their interests that may be partly congruent as well as partly incongruent. The normative ideal is to try to attain an integrative or a win–win agreement which maximizes the benefits for all of the parties concerned (Rubin, Pruitt and Kim 1994; Walton and McKersie 1965). The development of a win–win agreement is not necessarily easy as the parties may be hesitant in exchanging information lest their partner take advantage of that. Cultural and institutional differences coupled with intraorganizational dynamics may only amplify this problem.
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