Business leaders often assume that they must maintain a competitive mindset, especially when they are negotiating a big deal. But seeing business interactions as cooperative rather than confrontational can often produce better outcomes, says Stanford GSB professor Nir Halevy.
Halevy and L. Taylor Phillips, a Stanford GSB student who co-authored the research, found that an individual’s view of a business interaction, such as a negotiation, can predict economic performance across a large number of interactions.
“MBA students who endorsed a cooperative view of negotiations ended up accumulating more profits in our strategy tournament,” Halevy says.
The research, published in the January 2015 issue of Social Psychological and Personality Science, extends a body of work that applies game theory to studying negotiators’ views of their interactions. That research shows that negotiators see situations in different ways, which correspond to various classic games in game theory. Negotiators who see their interactions through a competitive lens are more likely to exploit and dominate their counterparts, while those who perceive the same interactions through a cooperative lens are more likely to increase collective profits, to everyone’s benefit.
Competition Is Not a Win-All Strategy
In their study, Halevy and Phillips assessed how 103 MBA students at Stanford GSB view their negotiations. Participants then submitted strategies for an online tournament that pitted their strategies against one another in a total of over 12 million rounds. Participants who saw negotiations as highly cooperative performed best in the tournament, accumulating significantly more profit than those who viewed negotiations more competitively.
In other words, taking advantage of the perceived weaknesses of the other person is not always the best strategy. “These results demonstrate that, given a sufficiently large number of interactions, it’s more important to maximize joint gains when possible through cooperative interactions with other cooperative people than to try exploit the cooperativeness of others to try to make a killing in the short term,” says Halevy. “If you’re able to think about how everyone can jointly gain, that might help you do well.”
Still, not all business interactions are alike. There are certain types, such as deal-making negotiations, that people are more likely to view as competitive.
In a second study, using a six-week diary study, the researchers asked 101 Stanford students and staff to report their views of various scenarios, including:
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This piece originally appeared in Stanford Business Insights from Stanford Graduate School of Business. To receive business ideas and insights from Stanford GSB click here: (To sign up : https://www.gsb.stanford.edu/insights/about/emails ) ]