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ABSTRACT
India is one of today's most important emerging economies, and as its market becomes more significant for multinational companies, it becomes more imperative that foreign firms identify those factors that contribute to successful negotiations. This study proposes and empirically tests a framework that measures the impact of "social formalities" and "power distance" on business relationships in India. The model shows that power distance sets the stage for negations, and the respect for social formalities sets a tone of mutual reference and understanding that will facilitate the establishment of a foundation for long-term business relations.
Keywords: India, business-to-business, negotiations, power distance, social formalities.
INTRODUCTION
Foreign firms have realized that if they wish to establish business-to-business relationships with Indian partners, it is essential that they identify those factors that contribute to successful business negotiations. The ability to establish and maintain quality business relationships is increasingly being accepted as an important factor determining firm competitiveness (Fliedner & Vokurka, 1997). The significance of these relations is being reinforced by the importance placed on relationship marketing, which is established through the sum of marketing activities directed toward establishing, developing and maintaining successful relational exchanges (Hunt & Morgan, 1994). The question in this research that interests us is: what relationship-specific factors are likely to affect the development of business-to-business relationships, and in particular, what factors are likely to affect business relationships in India.
Right now, India is one of the world's most important emerging markets. It is the tenth largest economy in the world, and analysts estimate that by the middle of this century, it will have a larger population than China and a swelling middle class of more than 350 million (Kohli & Mohapatra, 2008; US_State_Department, 2009). As the Indian market becomes more important to multinational companies, its relevance also increases for researchers, who need to explore the cultural differences that mediate the way Indian firms establish log-term relationships. In this study, we propose and empirically test a framework that measures the impact of "social formalities" and "power distance" on business relationships in India.
LITERATURE REVIEW
The "Asian Elephant"
In a classification of emerging economies, Cavusgil, et al. ,(2002) place India at the top and call her the "Asian Elephant" for the following reasons: (a) it is...