Financial incentives and negotiation tactics in procurement management

As companies increasingly realize the growing strategic importance of purchasing negotiations and that negotiations have a huge impact on their long-term value growth, it is becoming more important to find an optimal explanation for the results of negotiations – for scientific as well as practical reasons. To accomplish this, an in-depth analysis of negotiating behavior (e.g. styles and tactics) and the factors that influence it was necessary, because of the direct impact of such factors on negotiation results, and hence also on company results. With this in mind, the main objective of this dissertation was to investigate the effect of financial incentives in the form of variable pay or performance-related pay on purchasing managers’ negotiation behavior, by taking into account personal and organizational characteristics of buyers, as well as situational contexts of negotiation. A second objective was the issue of negotiation power, especially in the context of purchasing managers wanting to increase such power. This dissertation also aims to cultivate understanding about politicians’ negotiation behavior, and to check similarities or differences with that of purchasing managers. This dissertation mainly offers important insights and further understanding of the relationship between financial incentives and negotiators’ selection of negotiation styles and tactics in B2B settings, as well as considerable insight into the prevalent methods in negotiation research. Further, this dissertation offers a contribution to negotiation theory and also provides valuable recommendations to practitioners.