The Effect of Negative Expectancy Violations and Relational Familiarity on Client Managers’ Negotiation Positions

Abstract

During the interactive process of issue resolution, client managers may develop expectations about the auditor’s position. We examine the effect that negative expectancy violations have on managers’ pre-negotiation positions and how relational familiarity can moderate this effect. Through a series of experiments, we find that, when the partner’s proposed adjustment is within the client’s original expectations, managers offer greater concessions to a more familiar partner than to a less familiar partner. However, depending on relational familiarity, client managers react to expectancy violations very differently. Managers react more severely when a more familiar partner violates expectations, offering lower negotiation concessions than when no violation occurs. In contrast, managers tend to ignore violations committed by a less familiar partner, offering similar negotiation concessions whether or not a violation has occurred. Furthermore, we find support for a practical intervention to repair damage from expectancy violations committed by more familiar partners.