Ethical reasoning in business‐to‐business negotiations: evidence from relationships in the chemical industry in Germany

• Author: Dirk C. Moosmayer,Thomas Niemand,Florian U. Siems
• Date: 01 April 2016
• Published date: 01 April 2016
• DOI: http://doi.org/10.1111/beer.12111

Ethical reasoning in

business-to-business

negotiations: evidence from

relationships in the chemical

industry in Germany

Dirk C. Moosmayer

1

, Thomas Niemand

2

and

Florian U. Siems

2

1. Nottingham University Business School China, Ningbo,China

2. TU Dresden, Dresden,Ger many

This article explores managers’ ethical reasoning for behaviors in price negotiations using evidence from 15

in-depth interviews conducted with sales and purchasing representatives in the chemical industry in Germany.

Applying transaction cost economics, we find that negotiators in commoditized market-like exchanges either

refer to deontological norms such as not to lie, or they neglect a role for ethics, arguing that distributive

negotiation is per se opportunistic. In contrast, exchanges of products with higher asset specificity lead to

stronger informational integration which is supported with teleological justifications. Some negotiators use

teleological justification to build business on trust rather than on economic safeguards as their firm norms

would require. For negotiators, our results suggest considering institutional context and adjusting ethical

reasoning to the negotiation situation. Firms need to recognize and find ways to address the potential conflicts

of their internal norms with their frontline managers’ attempts to act in the firms’ best economic and ethical

interests.

Introduction

In linking supply and demand and determining a

price for exchanged goods, price negotiations are the

most fundamental element of economic activity. Bet-

ter understanding of business negotiations is thus

linked directly to business performance. A great deal

of negotiation literature has investigated various

strategies and tactics that allow negotiators to

achieve better results in negotiations (Carter et al.

2007; Lewicki et al. 2014). However, many strategies

aim at increasing one’s share at the expense of the

negotiation partner (Galinsky & Mussweiler 2001;

Moosmayer et al. 2012) and have thus raised ethical

questions (Provis 2000). In particular, the legitimacy

(or illegitimacy) of specific negotiation behaviors has

been considered (Lewicki & Robinson 1998; Stefani-

dis & Banai 2014).

While much research on negotiation ethics has

focused on legitimate tactics in transactional nego-

tiations (e.g. Galinsky & Mussweiler 2001), most

business, particularly in an industrial context, is

actually taking place in the context of relationships.

However, research on negotiation processes in

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doi: 10.1111/beer.12111

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Business Ethics: A European Review

Volume 25 Number 2 April 2016

continuous business relationships has been scarce to

date (Herbst et al. 2011). This is particularly true for

the consideration of ethical issues (Piercy & Lane

2007). A shortcoming of previous research is the

neglect of relationship-related context variables,

which results from the focus of such work on trans-

actional negotiations.

We aim to address this gap by exploring sellers’

and buyers’ ethical reasoning in an industrial rela-

tionship context in the chemical industry. In particu-

lar, we ask (1) what ethical reasoning negotiators use

when considering the ethicality of their negotiations,

and we further aim to explore (2) how the relation-

ship context of negotiations influences ethical

reasoning.

In doing so, we will connect ethical reasoning to a

transaction cost economics (TCE) perspective. We

thereby make a conceptual contribution by identify-

ing connections between TCE and the occurrence of

deontological and teleological reasoning. These con-

nections may help future researchers in further

exploring the utility of TCE for understanding

actors’ ethical choices and decisions. Better under-

standing how relationship context influences ethical

reasoning in business negotiations, for example,

more deontological or more teleological, could have

implications for negotiators and firms. It allows

negotiators to develop more suitable response strat-

egies, for example, arguing regarding the ethicality

of an act itself or of its outcome. Firms could use the

results to better guide their employees’ decision mak-

ing toward ethically and economically more desira-

ble outcomes. This context is depicted in Figure 1

and leads us to the following further steps.

Starting from the research questions (see ‘A’ in

Figure 1), we depict the concepts of distributive and

integrative negotiations and connect these to TCE

before we introduce deontological and teleological

approaches to ethical reasoning (see ‘B’ in Figure 1).

We then introduce our method and data, a set of 15

in-depth interviews with purchase and sales manag-

ers in the chemical industry in Germany (see ‘C’).

Findings from these interviews allow us to get a bet-

ter understanding of managers’ ethical reasoning

(see ‘D’). Finally, we provide practical implications

for negotiators, for managers, and for firms (see ‘E’)

before we conclude our article.

Conceptual background

Negotiations in business relationships

The distributive view

A constituting characteristic of negotiations is that

parties with some opposing interests make a joint

business decision, regularly directed to the purchase

of a certain amount of a specifiable product or serv-

ice at a specifiable price. In this context, negotiations

have been described as ‘a process of potentially

opportunistic interaction by which two or more par-

ties, with some apparent conflict, seek to do better

through jointly decided action than they could other-

wise’ (Lax & Sebenius 1986: 11). This is in line with

Desmond & Crane’s (2004) suggestion that eco-

nomic self-interest of the company has always been

the moral basis of marketing practice. In other

words, negotiation and decision making are based

primarily on the economic advantage for the

Figure 1: Overview of our approach to exploring ethical reasoning in negotiations

Business Ethics: A European Review

Volume 25 Number 2 April 2016

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