international business negotiators of the indonesian archipelago

331 Pages·2012·2.13 MB·English

by  Nathan Gray

INTERNATIONAL
 BUSINESS
 NEGOTIATORS
 OF
 THE
 INDONESIAN

ARCHIPELAGO:
 IDENTIFICATION
 OF
 NEGOTIATION
 STYLES,

STRATEGIES
 AND
 BEHAVIOURS

NATHAN
 HOWARD
 GRAY

B.
 INT.
 ST
 (GLOBALISATION)
 B.
 COM
 (INT.
 BUS),
 B.COM
 (HONS)

SCHOOL
 OF
 COMMERCE,
 DIVISION
 OF
 BUSINESS

UNIVERSITY
 OF
 SOUTH
 AUSTRALIA

NOVEMBER
 2012

A
 THESIS
 SUBMITTED
 IN
 FULFILMENT
 OF
 THE
 REQUIREMENTS
 FOR
 THE

DEGREE
 OF
 DOCTOR
 OF
 PHILOSOPHY
ABSTRACT

This
 study
 explores
 the
 styles,
 strategies
 and
 behaviours
 of
 Indonesian
 managers
 during

international
  business
  negotiations.
  Indonesia
  is
  an
  emerging
  economic
  and
  political

power
 in
 the
 South
 East
 Asian
 region
 and
 there
 are
 increasing
 international
 business

negotiations
 occurring
 in
 this
 unique
 Asian
 cultural
 environment.
 Consequently,
 this
 study

has
  sought
  to
  investigate
  Indonesian
  management
  and
  negotiation
  behaviour
  in
  the

Indonesian
 environmental
 context
 to
 determine
 whether
 there
 is
 a
 distinct
 Indonesian

style
 of
 behaviour
 during
 these
 negotiations,
 and
 if
 so,
 the
 implications
 for
 the
 key
 actors

involved
 in
 these
 negotiations.
 This
 study
 has
 employed
 a
 grounded
 theory
 approach
 to

exploring
 Indonesian
 negotiation
 behaviour,
 through
 field
 based
 research
 comprising
 in-­‐
depth
  interviews
  with
  Indonesian
  and
  international
  managers,
  and
  participant

observation
 of
 international
 business
 negotiation
 events
 in
 an
 Indonesian
 environmental

context.

Through
  an
  inductive
  analysis
  of
  interviews
  with
  55
  Indonesian
  and
  non-­‐Indonesian

managers,
 and
 of
 49
 participant
 observation
 events,
 this
 study
 has
 detailed
 and
 unpacked

culturally
 embedded
 negotiation
 behaviours.
 Significant
 findings
 emerge,
 including
 the

influence
 of
 the
 Javanese
 Way,
 Perantara,
 and
 the
 fundamental
 relationship
 orientation

of
 Indonesian
 managers.
 Findings
 also
 identify
 the
 pragmatic
 influence
 and
 effect
 of

corruption
 upon
 Indonesian
 business,
 and
 how
 corruption
 is
 engaged
 as
 a
 risk
 mitigation

tool.
  Furthermore,
  findings
  demonstrate
  a
  unique
  communication
  and
  negotiation

protocol
 that
 informs
 bargaining
 strategies
 and
 decision-­‐making.
 The
 grounded
 theory

approach
 to
 collection
 and
 analysis
 of
 the
 research
 data
 leads
 to
 a
 cohesive
 analysis
 of

the
  findings
  in
  order
  to
  illustrate
  a
  holistic
  interpretation
  of
  Indonesian
  negotiation

behaviours,
  styles
  and
  strategies,
  and
  how
  the
  key
  factors
  that
  comprise
  these

behaviours,
 styles
 and
 strategies
 relate
 to
 each
 other
 in
 generating
 a
 definable
 Indonesian

Negotiation
  Model.
  Analysis
  of
  the
  research
  data
  and
  subsequent
  findings
  has

demonstrated
 strong
 relationships
 between
 key
 emergent
 findings
 in
 this
 study,
 with
 the

Javanese
 Way
 providing
 an
 underpinning
 motivation
 and
 influence
 upon
 all
 aspects
 of
 the

ii
Indonesian
  negotiation
  model.
  This
  model
  illustrates
  the
  procedural
  and
  pragmatic

effects
  of
  corruption
  and
  relationship
  strength
  upon
  the
  various
  communication,

negotiation
 and
 decision
 making
 protocols
 which
 comprise
 the
 Indonesian
 negotiation

process.

iii
DECLARATION

I
 Nathan
 Howard
 Gray
 declare
 that:

• this
 thesis
 presents
 work
 carried
 out
 by
 myself
 and
 does
 not
 incorporate
 without

acknowledgment
 any
 material
 previously
 submitted
 for
 a
 degree
 or
 diploma
 in
 any

university;

• to
 the
 best
 of
 my
 knowledge
 it
 does
 not
 contain
 any
 materials
 previously
 published

or
 written
 by
 another
 person
 except
 where
 due
 reference
 is
 made
 in
 the
 text;
 and

all
 substantive
 contributions
 by
 others
 to
 the
 work
 presented,
 including
 jointly

authored
 publications,
 is
 clearly
 acknowledged.

....................................................

Nathan
 Howard
 Gray

iv
ACKNOWLEDGEMENTS

This
 PhD
 research
 has
 required
 the
 assistance
 of
 a
 number
 of
 people
 and
 organisations,

which
 without
 their
 help
 and
 support,
 this
 final
 product
 would
 not
 have
 been
 possible.
 In

the
 first
 instance
 I
 would
 like
 to
 acknowledge
 the
 fantastic
 research
 advice
 and
 support

that
 I
 have
 received
 from
 my
 PhD
 supervisory
 team
 of
 Professor
 Lee
 Parker,
 and
 Dr

Hussain
 Rammal.
 Their
 availability,
 mentoring
 and
 advice,
 has
 allowed
 this
 project
 to
 be

designed
 effectively,
 conducted
 with
 minimal
 obstruction
 and
 overcome
 any
 hurdle
 that

has
 emerged
 during
 the
 course
 of
 the
 PhD
 research
 process.
 I
 am
 certain
 that
 without

their
 support
 and
 supervision
 the
 quality
 of
 this
 PhD
 research
 thesis
 would
 not
 be
 as

good.

I
 would
 also
 like
 to
 thank
 the
 support
 of
 the
 Australia
 Indonesia
 Business
 Council
 and
 the

Indonesia
 Australia
 Business
 Council,
 who
 assisted
 the
 researcher
 in
 the
 recruitment
 and

participation
 in
 this
 research
 project.
 Their
 assistance
 has
 enabled
 me
 to
 become

immersed
 in
 the
 Indonesian
 business
 community,
 and
 meet
 with
 the
 key
 decision
 makers

and
 active
 participants
 of
 Indonesian
 business.
 The
 support
 of
 these
 organisations
 has

ensured
 that
 this
 study
 has
 been
 able
 to
 reach
 the
 most
 important
 participants,
 and
 gain

access
 to
 the
 best
 available
 data.

I
 would
 also
 like
 to
 thank
 my
 family
 who
 have
 provided
 me
 with
 the
 support
 to
 continue

this
 research
 process
 over
 the
 past
 three
 years.
 Specifically
 I
 would
 like
 to
 thank
 my

mother
 in
 law,
 Sue
 Tait,
 who
 has
 spent
 endless
 hours
 helping
 with
 the
 copy
 editing
 of
 this

thesis,
 and
 provided
 much
 advice
 on
 appropriate
 use
 of
 the
 English
 language
 throughout

this
 thesis.
 I
 would
 also
 like
 to
 thank
 my
 wife,
 who
 has
 endured
 three
 years
 of
 PhD

discussion,
 and
 assisted
 me
 throughout
 the
 drafting,
 writing,
 analysing
 and
 finalising
 the

thesis.
 Assisting
 with
 first
 level
 editing,
 at
 each
 stage
 of
 the
 chapter
 drafts
 has
 ensured

that
 the
 thesis
 has
 been
 written
 in
 a
 logical
 and
 professional
 manner,
 which
 has
 required

minimal
 adjustments
 in
 the
 final
 stages.
 I
 thank
 you
 for
 that,
 and
 look
 forward
 to
 having
 a

future
 where
 we
 don't
 discuss
 the
 PhD.

v
Finally,
 I
 would
 like
 to
 thank
 all
 the
 other
 people
 at
 UniSA,
 the
 School
 of
 Commerce
 and

the
 Centre
 of
 Accounting
 Governance
 and
 Sustainability
 and
 in
 other
 organisations
 who

have
 become
 involved
 at
 various
 stages
 of
 this
 PhD
 Process.
 The
 financial
 and
 research

support
 provided
 by
 the
 School,
 CAGS,
 and
 the
 emotional
 support
 provided
 by
 my
 fellow

PhD
 scholars,
 and
 senior
 researchers
 in
 the
 school
 have
 ensured
 I
 have
 maintained

motivation
 throughout
 the
 course
 of
 this
 PhD
 study.
 Thank
 you
 to
 all
 of
 you
 that
 have

been
 involved
 in
 this
 project,
 for
 without
 your
 involvement
 and
 support
 this
 PhD
 would

not
 have
 been
 completed.

vi
TABLE
 OF
 CONTENTS

ABSTRACT
 .....................................................................................................................................
 ii

DECLARATION
 .............................................................................................................................
 iv

ACKNOWLEDGEMENTS
 ...............................................................................................................
 v

1
  Introduction
 Chapter
 ...............................................................................
 1

1.1
  Introduction
 .......................................................................................................................
 2

1.2
  Background
 and
 Context
 ....................................................................................................
 2

1.2.1
  Significance
 of
 the
 Study
 ............................................................................................
 3

1.2.2
  Indonesian
 Cultural
 Heritage
 .....................................................................................
 9

1.3
  Central
 Aim
 of
 Research
 ...................................................................................................
 10

1.3.1
  Research
 Questions
 ..................................................................................................
 11

Primary
 Research
 Question
 One:
 .........................................................................................
 12

Primary
 Research
 Question
 Two:
 .........................................................................................
 14

1.3.2
  Objectives
 of
 the
 Study
 ............................................................................................
 15

Objective
 One:
 .....................................................................................................................
 15

Objective
 Two:
 .....................................................................................................................
 16

Objective
 Three
 ....................................................................................................................
 17

1.4
  Methodology
 ....................................................................................................................
 18

1.5
  Key
 Issues
 .........................................................................................................................
 21

1.6
  Outline
 of
 Thesis
 ..............................................................................................................
 22

2
  Methodology
 Chapter
 ............................................................................
 26

2.1
  Introduction
 .....................................................................................................................
 27

2.2
  Method
 Selected
 ..............................................................................................................
 27

2.2.1
  Qualitative
 Research
 in
 International
 Business
 ........................................................
 28

2.2.2
  Field
 Based
 Research
 ................................................................................................
 30

2.3
  Grounded
 Theory
 .............................................................................................................
 31

2.3.1
  Overview
 ..................................................................................................................
 32

vii
2.3.2
  Suitability
 .................................................................................................................
 34

2.3.3
  Analytical
 Approach
 .................................................................................................
 36

2.3.4
  Advantages
 of
 the
 Method
 ......................................................................................
 38

2.3.5
  Strengthening
 the
 Method
 .......................................................................................
 41

2.4
  Data
 Collection
 .................................................................................................................
 45

2.4.1
  Method
 Steps
 ...........................................................................................................
 45

2.4.2
  The
 Participants
 .......................................................................................................
 46

2.4.3
  Interviews
 .................................................................................................................
 47

2.4.4
  Participant
 Observation
 ...........................................................................................
 51

2.4.5
  Research
 Ethics
 ........................................................................................................
 55

2.5
  Data
 Analysis
 ....................................................................................................................
 56

2.5.1
  Presenting
 Data
 and
 Analysis
 ...................................................................................
 56

2.6
  Summary
 ..........................................................................................................................
 57

3
  Literature
 ReviewChapter
 ......................................................................
 59

3.1
  Introduction
 .....................................................................................................................
 60

3.2
  Communication
 ................................................................................................................
 60

3.2.1
  Barriers
 to
 Communication
 ......................................................................................
 63

3.3
  Culture
 .............................................................................................................................
 64

3.3.1
  Organisational
 Culture
 .............................................................................................
 66

3.3.2
  Professional
 Culture
 .................................................................................................
 68

3.3.3
  National
 Culture
 .......................................................................................................
 69

3.4
  Cultural
 Value
 Dimensions
 ...............................................................................................
 71

3.4.1
  Individual
 vs.
 Collective
 ............................................................................................
 75

3.4.2
  Power
 Distance
 ........................................................................................................
 77

3.4.3
  Uncertainty
 Avoidance
 .............................................................................................
 78

3.4.4
  Masculinity
 vs.
 Femininity
 ........................................................................................
 79

3.4.5
  Future
 Orientation
 ...................................................................................................
 80

viii
3.4.6
  Performance
 and
 Humane
 Orientations
 ..................................................................
 81

3.4.7
  High
 Context
 vs.
 Low
 Context
 ..................................................................................
 82

3.4.8
  Time
 Sensitivity
 ........................................................................................................
 84

3.5
  Corruption
 ........................................................................................................................
 85

3.5.1
  Global
 Anti-­‐corruption
 Measures
 .............................................................................
 87

3.5.2
  Corruption
 in
 a
 Contemporary
 Context
 ...................................................................
 89

3.6
  Negotiation
 ......................................................................................................................
 90

3.6.1
  International
 Business
 Negotiation
 ..........................................................................
 92

3.6.2
  Barriers
 to
 Successful
 International
 Business
 Negotiations
 .....................................
 94

3.6.3
  International
 Business
 Negotiation
 Process
 Models
 ................................................
 95

International
 Business
 Negotiation
 Process
 .........................................................................
 96

Influential
 Negotiating
 Factors
 .............................................................................................
 97

3.7
  National
 Business
 Negotiation
 Styles
 .............................................................................
 101

3.8
  Identifying
 Indonesian
 Business
 Negotiation
 Styles
 .......................................................
 104

3.9
  Summary
 ........................................................................................................................
 108

4
  The
 Indonesian
 Negotiation
 Setting:
 History,
 Politics,
 Economics
 and

Culture
 ......................................................................................................
 110

4.1
  Introduction
 ...................................................................................................................
 111

4.2
  Profile
 of
 Indonesia
 ........................................................................................................
 111

4.3
  Religious
 and
 Cultural
 History
 ........................................................................................
 113

4.3.1
  Hinduism
 and
 Buddhism
 in
 Indonesia
 ....................................................................
 114

4.3.2
  Chinese
 in
 Indonesia
 ..............................................................................................
 115

4.3.3
  Islam
 in
 Indonesia
 ..................................................................................................
 117

4.3.4
  Javanese
 Empire
 .....................................................................................................
 118

4.4
  Historical
 Trade
 Perspectives
 .........................................................................................
 120

4.4.1
  Asia
 Based
 Trade
 ....................................................................................................
 120

4.4.2
  European
 Based
 Trade
 ...........................................................................................
 121

4.5
  Political
 History
 ..............................................................................................................
 124

ix
4.5.1
  Colonial
 Dutch
 East
 Indies
 ......................................................................................
 124

4.5.2
  Post
 Colonial
 Indonesia
 –
 The
 Sukarno
 Years
 .........................................................
 125

4.5.3
  The
 New
 Order
 Regime
 –
 President
 Suharto
 .........................................................
 126

4.5.4
  The
 Post
 Suharto
 Democracy
 .................................................................................
 128

4.5.5
  Wahid
 and
 Megawati
 Presidencies
 ........................................................................
 130

4.5.6
  President
 Yudhoyono
 .............................................................................................
 131

4.6
  Corruption
 in
 Indonesia
 .................................................................................................
 132

4.6.1
  Corruption
 during
 the
 Suharto
 Era
 .........................................................................
 133

4.6.2
  Corruption
 in
 the
 Post-­‐Suharto
 Era
 ........................................................................
 135

4.7
  Economic
 Development
 .................................................................................................
 137

4.7.1
  The
 1980's
 Economic
 Crisis
 ....................................................................................
 138

4.7.2
  The
 East
 Asian
 Financial
 Crisis
 ................................................................................
 139

4.7.3
  The
 Post-­‐Suharto
 Economy
 ....................................................................................
 140

4.8
  Business
 and
 Industry
 ....................................................................................................
 141

4.8.1
  Mining
 ....................................................................................................................
 142

4.8.2
  Manufacturing
 ........................................................................................................
 143

4.8.3
  Banking
 and
 Finance
 ..............................................................................................
 146

4.9
  Encouraging
 International
 Trade
 and
 Investment
 .........................................................
 147

4.10
  Summary
 ........................................................................................................................
 149

5
  The
 Javanese
 Way
 of
 Business
 .............................................................
 152

5.1
  Introduction
 ...................................................................................................................
 153

5.2
  The
 Influence
 of
 Ethnic
 Diversity
 upon
 Business
 ...........................................................
 153

5.2.1
  Javanese
 and
 the
 Governing
 Class
 .........................................................................
 157

5.2.2
  Chinese
 ...................................................................................................................
 159

5.2.3
  Ethnic
 Diversity
 in
 the
 Outer
 Islands
 ......................................................................
 162

5.3
  The
 Javanese
 Way
 ..........................................................................................................
 164

5.3.1
  Maintenance
 of
 Harmonious
 Relations
 ..................................................................
 166

x