Relational Concerns and the Economic Value of Negotiated Agreements

Abstract

Theoretical negotiation scholarship has conceptualized economic concerns and relational concerns as independent and orthogonal. Empirical negotiation scholarship has construed economic and relational concerns as compensatory and implicitly assumed that the negotiated deal terms reflect a complete accounting of the economic value of an agreement. We challenge these assumptions and assert that the economic value of an agreement includes both the deal terms and post-negotiation behavior, which may be influenced by relational outcomes. Across four studies, we show that negotiators’ economic outcomes are inextricably linked with their relational outcomes. We introduce a new dimension to characterize negotiation contexts: the Economic Relevance of Relational Outcomes (ERRO), a continuum that reflects the extent to which the economic value of a negotiated agreement hinges on the strength of the relationship between the parties. We show that individuals are more concerned about relationships in high ERRO rather than low ERRO contexts, and that in high ERRO contexts negotiators privilege relational concerns over favorable deal terms. Our work theoretically and empirically addresses a fundamental gap in the negotiation literature by underscoring the importance of negotiation context in linking relational outcomes with economic outcomes.

Keywords: Negotiation; Dual Concern Theory; Negotiators’ Concerns; Service Negotiation

JEL Classification: D01, D03, D74, D81, D84