Cross Border Negotiated Deals: Why Culture Matters?

Different negotiation styles in the negotiation of complex contracts observed in different cultures reflect both different allocations of responsibility within organizations as well as the degree of trust in the business relationship. Complexity of documentation associates with a low degree of trust and a desire for rent-seeking by the draftsmen. There appear to be inherent inefficiencies that prevent a simpler approach, although such an approach would result in a net benefit both in transaction costs and certainty of execution. Neither the “Harvard” approach to negotiations, nor a low context approach to communication characteristic of some very successful business cultures (e.g. USA or Germany) is universally accepted. Accordingly, however well they (demonstrably) work in a national context, the high-context approaches to negotiation (e.g. Japan or to a lesser extent England) can create risks to a transaction with parties who do not share the same context.