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Determinants and Consequences of Salary Negotiations by Male and Female MBA Graduates

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Although it has been suggested that women negotiate over salaries less frequently than men, there is little empirical evidence on this point. Moreover, outside of laboratory settings, there are no investigations of whether, or to what extent, such negotiations actually pay off in higher salary outcomes for either men or women. The salary negotiating behaviors and starting salary outcomes of 205 graduating MBA students were investigated within a power and dependence theoretical framework. Results did not support the notion that women negotiate less than men. However, women did obtain lower monetary returns from negotiation (4.3% starting salary increment for men versus 2.7% for women). Over the course of a career, the accumulation of such differences may be substantial. Implications and suggestions for future research are discussed. (PsycINFO Database Record (c) 2012 APA, all rights reserved)
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Cornell University ILR School
DigitalCommons@ILR
CAHRS Working Paper Series
Center for Advanced Human Resource Studies
(CAHRS)
12-1-1989
Determinants and Consequences of Salary
Negotiations by Graduating Male and Female
MBAs
Barry A. Gerhart
Cornell University
Sara L. Rynes
Cornell University
is Article is brought to you for free and open access by the Center for Advanced Human Resource Studies (CAHRS) at DigitalCommons@ILR. It
has been accepted for inclusion in CAHRS Working Paper Series by an authorized administrator of DigitalCommons@ILR. For more information,
please contact jdd10@cornell.edu.
Determinants and Consequences of Salary Negotiations by Graduating
Male and Female MBAs
Abstract
Although it has been suggested that women negotiate over salaries less frequently than men, there is lile
empirical evidence on this point. Moreover, outside of laboratory seings, there are no investigations of
whether, or to what extent, such negotiations actually payo in higher salary outcomes for either men or
women. Using a power and dependence theoretical framework, the present research investigated the salary
negotiating behaviors and starting salary outcomes of 205 graduating MBA students. Results did not support
the notion that women negotiate less than men. However, women did obtain lower monetary returns to
negotiation (4.3% starting salary increment for men versus 2.7% for women). Over the course of a career, the
accumulation of such dierences may be substantial. Implications and suggestions for future research are
discussed.
Keywords
CAHRS, ILR, center, human resource, job, worker, advanced, labor market, satisfaction, employee, work,
salaries, women, men, male, female, salary, MBA, student
Comments
Suggested Citation
Gerhart, B., & Rynes, S. (1989). Determinants and consequences of salary negotiations by graduating male and
female MBAs (CAHRS Working Paper #89-16). Ithaca, NY: Cornell University, School of Industrial and
Labor Relations, Center for Advanced Human Resource Studies.
hp://digitalcommons.ilr.cornell.edu/cahrswp/413
is article is available at DigitalCommons@ILR: hp://digitalcommons.ilr.cornell.edu/cahrswp/413
Determinants and Consequences of Salary
Negotiations by Graduating Male and
Female MBAs
Barry Gerhart
Cornell University
Sara Rynes
Cornell University
Working Paper #89-16
(Revised May 1990)
Center for Advanced Human Resource Studies
New York State School of Industrial & Labor Relations
Cornell University
Ithaca, N.Y. 14851-0952
(607) 255-3279
This paper has not undergone formal review or approval of the faculty of the ILR School.
It is intended to make the results of Center research, conferences, and projects available to
others interested in human resource management in preliminary form to encourage
discussion and suggestions.
Salary Negotiations
2
Abstract
Although it has been suggested that women negotiate over salaries less
frequently than men, there is little empirical evidence on this point. Moreover,
outside of laboratory settings, there are no investigations of whether, or to what
extent, such negotiations actually payoff in higher salary outcomes for either men
or women. Using a power and dependence theoretical framework, the present
research investigated the salary negotiating behaviors and starting salary outcomes of
205 graduating MBA students. Results did not support the notion that women
negotiate less than men. However, women did obtain lower monetary returns to
negotiation (4.3% starting salary increment for men versus 2.7% for women). Over
the course of a career, the accumulation of such differences may be substantial.
Implications and suggestions for future research are discussed.
Salary Negotiations
3
Determinants and Consequences of Salary
Negotiations by Graduating Male and Female MBAs
Starting salaries can have a lasting impact on career earnings. For example,
salary increases are commonly awarded as percentages of base pay (e.g., Milkovich
& Newman, 1987). In turn, base pay generally becomes the basis for other forms
of compensation (e.g., pensions, profit-sharing, stock options). Additionally, the
impact of starting salary in one company can be carried over to others through the
common practice of setting salaries for experienced workers in relation to their
previous salaries (e.g., Kouba and EEOC v. Allstate Insurance Company, 1982).
The fact that initial differences in starting salaries may be perpetuated, or
even exacerbated, over an entire career has implications for the well-documented
male-female earnings gap (e.g. Cain, 1986). For example, Gerhan and Milkovich's
(1989) examination of a large corporation's exempt employee data base showed that
despite women's larger annual increases after hire, women's salaries continued to
lag behind those of men. Further, these losses, which continued to accumulate
throughout the women's careers, were largely attributable to a one-time staning
salary disadvantage (Gerhan, 1990). Lower starting salaries for women, controlling
for productivity-related characteristics, have been reponed by other researchers as
well (e.g., Devanna, 1984; Reder, 1978; Strober, 1982), although not universally
(Gordon & Strober, 1978).
Given the potential long-term consequences of differences in staning salaries,
it is important to determine their origins. Most empirical investigations of gender-
based earnings differentials have focused primarily on the role of human capital
characteristics such as education or experience. A second and smaller group has
Salary Negotiations
4
focused on potential gender differences in preferences for various job attributes (e.g.,
pay versus pleasant working conditions; Daymont & Andrisiani, 1984; Filer, 1986).
Despite such attempts, a substantial portion of the earnings gap remains unexplained
(Treiman & Hartmann, 1981; Cain, 1986). Thus, efforts continue to find additional
explanations.
One potential explanation may lie in a differential tendency of men and
women to negotiate over salaries. Although this difference has been widely
hypothesized (e.g., Bird, 1981; Brenner & Bertsch, 1983; Major, Vanderslice &
McFarlin, 1984; Subich, Barrett, Doverspike & Alexander, 1989), there is a
surprising lack of empirical evidence on this point. In fact, the more general
question of when people choose to negotiate has been largely overlooked by
empirical researchers (Neale & Northcraft, undated). Rather, most negotiations
literature has focused on differences in negotiating tactics once a decision has been
made (or more commonly, a laboratory instruction been given) to negotiate (e.g.,
Rubin & Brown, 1975; Lewicki & Utterer, 1985; Kolb & Coolidge, 1988).
Despite the lack of empirical evidence on gender differences in negotiating
propensity, there is a fairly well-developed theory of when negotiations are likely to
occur in general. At their most basic level, most models of negotiating propensity
focus on two sets of explanatory variables: structural and individual (e.g., Rubin &
Brown, 1975).
Structural explanations of bargaining propensity focus on factors that
influence a potential negotiator's power and dependence vis g vis the other party
(Bacharach & Lawler, 1981; Chamberlain, 1955; Thibaut & Kelley, 1959). For
example, one basic proposition of such models is that the presence of alternatives
Salary Negotiations
5
(in the present case, alternative job offers) reduces one's dependence on the other
party and, as a result, increases one's bargaining power (e.g., Mannix, Thompson &
Bazerman, 1989). Thus, a job seeker with multiple alternatives should be more
likely to bargain because of his reduced dependence on any single alternative for a
source of income (Sondak & Bazerman, forthcoming).
A second structural proposition is that the propensity to negotiate for an
improvement in terms is inversely related to the attractiveness of the offer (e.g.,
Bacharach & Lawler, 1981; Chamberlain, 1955). Attractiveness may be assessed
relative to one's alternatives (Thibault & Kelley, 1959). Therefore, the implication
is that people are more likely to negotiate to the extent that the relative
attractiveness of an offer is low. In the present context, this suggests that the
propensity to bargain will be greater for those with a less attractive (e.g., lower-
paying) job offer.
Based on environmental or structural components, then, bargaining theories
suggest that gender differences in negotiation will occur to the extent that (a) men
and women face different alternative opportunity sets (e.g., have different numbers
and salary levels of job offers), or (b) generate offers of differing attractiveness
(e.g., with different statting salaries).
In addition to structural factors, bargaining theories also propose that
negotiating behaviors differ as a function of personal characteristics. If so, gender
differences in negotiations might occur as a result of differences in factors such as
expectations, personality characteristics, or behaviors.
Although empirical evidence is lacking, the literature suggests a number of
personal characteristics that might be associated with gender differences in
Salary Negotiations
6
negotiating propensity. For example, Major and her colleagues have suggested that
women may have lower pay expectations than men, even controlling for occupation
(e.g., Major, McFarlin & Gagnon, 1984a). Differential expectations might result
from the use of different social comparison standards (i.e., women's expectations
may be based on "typical female" salaries; men's on male salaries; Adams, 1963;
Major, 1987) or less accurate market information (e.g., Major & Konar, 1984;
Subich, et al., 1989).
In addition to gender differences in pay expectations, a number of personality
characteristics have also been highlighted as potential sources of differential
bargaining propensities between men and women. These include possible sex
differences in self-confidence (Ragins & Sundstrom, 1989), interpersonal orientation
(Rubin & Brown, 1975), preference for harmony (Kolb & Coolidge, 1988), and self-
perceptions of assertiveness (Watson & Kasten, undated).
Finally, in addition to differences in expectations and personality, women
may also exhibit different bargaining-related behaviors than men. For example,
Watson and Kasten (undated) observed that women behaved less assertively than
men in a negotiating task, even though they perceived themselves to be equally
assertive. In general, however, no clear-cut pattern of gender differences in
bargaining tactics has emerged (Rubin & Brown, 1975; Lewicki & Utterer, 1985;
Kolb & Coolidge, 1988).
In summary, it has been proposed that one potential contributor to the
earnings gap may be differences in negotiating propensity between men and women.
To the extent that such differences exist, bargaining theories suggest that the causes
Salary Negotiations
7
are likely to arise from either structural factors (e.g., number or characteristics of
alternatives) or personal characteristics (expectations, personality, behaviors).
However, whether or not men and women differ in their propensity to
bargain, a gap in earnings will result if the sexes receive different payoffs to
negotiation. Thus, an additional question is whether women receive the same
returns to salary negotiation as men. Several types of evidence suggest that they
may not.
For example, Nieva and Gutek (1980) have suggested sex bias is increasingly
likely to the extent that employers have little individual productivity-related
information available to them. This hypothesis, which has received meta-analytic
support (Tosi and Einbender, 1985), may be particularly relevant to the case of
starting salaries, given that only general qualifications information is typically
available for external job applicants. For example, a meta-analysis by Olian,
Schwab, and Haberfeld (1988) found that male applicants were preferred over
females, controlling for general qualifications.
Extending this finding from staffing to compensation decisions, starting salary
offers to women may be correspondingly lower as well. Although field evidence is
lacking, a laboratory study by Major, et al. (1984b) found suggestive evidence that
hypothetical male job applicants were assigned higher starting salaries than
hypothetical females with the same pay expectations.
Additionally, a survey of general managers, compensation administrators, and
union members revealed that a substantial percentage of each group (48%, 28%, and
45%, respectively) viewed women's willingness to work for less money as either an
"extremely" or a "very important" cause of lower pay for women (Rynes, Rosen &
Salary Negotiations
8
Mahoney, 1984). To the extent that such beliefs influence managerial decisions,
employers may feel less urgency to respond to negotiation attempts by female
applicants.
Finally, Dreher, Dougheny, and Whitely (1989) found that women who
reported using an "exchange" (i.e., quid pro quo) type of influence tactic had lower
current salaries than other women, whereas men who used this tactic had higher
salaries than other men. The authors speculated that women may be penalized for
bargaining because such tactics violate managers' expectations about" appropriate"
female behavior.
In summary, despite suggestions that women (a) negotiate over salaries less
frequently than men and (b) receive lower returns to those negotiations, empirical
evidence on these points is lacking, particularly in field settings. Indeed, the more
general question of when people will choose to negotiate has received little prior
empirical attention. This is a curious omission, given the potential implications for
both employer pay-setting and employee pay (as well as pay differentials).
The present study uses field data on MBA job seekers to investigate
structural and individual determinants of both the probability, and payoffs, to salary
negotiations among men and women. As pointed out by Kolb & Coolidge (1988)
and Subich et al. (1989), field data are likely to be particularly critical for
examining potential sex differences in negotiating behavior. To the extent that men
and women differ on such characteristics as interpersonal orientation (Rubin &
Brown, 1975) or preference for harmony (Kolb & Coolidge, 1988), sex differences
are more likely to emerge in the context of negotiating over real, long-term
relationships than in brief hypothetical laboratory simulations.
Salary Negotiations
9
Hypotheses
Hypotheses fall into two categories: those concerning propensity to bargain
and those concerning payoffs to bargaining. Turning first to bargaining propensity,
two hypothesized structural determinants are examined. First, in keeping with the
hypothesis that negotiation is more likely for less attractive offers (Chamberlain,
1955; Bacharach & Lawler, 1981), we predict that salary negotiations will be more
prevalent for jobs with relatively low salary offers (HI), Second, in line with the
notion that negotiation is a function of one's other alternatives, we predict that the
probability of negotiation will increase to the extent that an applicant has (a)
alternative job offers with (b) relatively high salaries (Hz).
According to our model, negotiation propensity is also a function of personal
characteristics. In the present situation, the inclusion of structural factors (see HI
and Hz), the ability to control for applicant qualifications (business experience, grade
point average, major), and the focus on a relatively well-defined labor market
(newly graduated MBAs from a single program; see Reder, 1978 and Stigler, 1962)
suggests that any observed differences in negotiating propensity between and women
should not be due to the negotiation environment. However, to the extent that men
and women differ on such personal characteristics as pay expectations, preferences
for money, asseniveness, and the like, we would expect men to be more likely to
negotiate over starting salaries than women (H3).
In addition to possible differences in negotiating propensity, we are also
interested in potential differences in payoffs to negotiation. In line with previous
arguments that employers may respond differently to negotiation by males and
females (e.g., Dreher, et aI., 1989; Major, et aI., 1984b; Rynes, et aI., 1985), we
Salary Negotiations
10
predict that women will receive lower salary payoffs to negotiation (H4), controlling
for all previously mentioned factors (e.g., human capital characteristics, initial salary
offer, number and characteristics of alternative job offers).
Method
Sample
Data on bargaining behavior and job offers were provided by a survey of
MBA students graduating from a nationally ranked (top five to top twenty,
depending on the poll) Ivy League business school during the 1987-88 and 1988-89
recruiting seasons. A total of 205 students (153 men, 52 women) participated in
this research. Although 431 students graduated in these two years, it is difficult to
calculate a precise response rate. For example, some students did not actively
search for work (and hence did not complete the questionnaire) because they were
employed upon entering graduate school and returned to the same employer after
graduation. Others did not respond because they had not generated an offer prior to
graduation. Finally, data from foreign students were excluded because of legal
restrictions governing their employability. Consequently, the apparent response rate
of 48% is something of an underestimate.
Information about negotiation was collected as a small part of a larger survey
on job search strategies and outcomes conducted for the school's placement office.
The general purpose of the survey was to obtain evidence on which job search
strategies resulted in the best job-finding success. The placement director hoped to
use such information as a basis for advising future job seekers and for validating
admissions criteria against job-hiring criteria. Of relevance to the present study was
Salary Negotiations
11
a small subset of questions that asked about alternative salary offers from other
firms, negotiations over starting salary, and actual accepted salary.
Measures and Analyses
Bargaining propensity. The dependent variable in the first analysis was
whether or not the student negotiated for a salary higher than that initially offered
by the organization with which s/he eventually accepted a job offer. The
independent variables and their corresponding hypotheses were: initial salary offer
for the accepted job (HI); number of alternative offers received from other
organizations (Hz); highest alternative salary offer minus the initial salary offer!
(Hz);
gender (H3), and gender interactions with the first three independent variables
(H3).
Because the assumptions of ordinary least squares (OLS) are typically
violated when the dependent variable is dichotomous, probit analysis (Hanushek &
Jackson, 1977) was used to model the probability of engaging in negotiating
behavior. In addition, its functional form (which assumes diminishing returns at
extreme values of the independent variables), is often more appropriate for
probability models. Predicted values from the probit model represent values of a
standard normal variable. Thus, the probability is obtained by looking up the
predicted value in a z-table.
Bargaining payoff. In this analysis, the dependent variable was accepted
starting salary (base pay only). All analyses were performed using OLS regressions.
The independent variables were initial salary offer, number of alternative offers,
highest salary offer, whether or not the person negotiated, gender, and a gender x
Salary Negotiations
12
negotiation tenn. This last tenn, if significant, would indicate a higher payoff to
negotiation for one of the sexes.
Both analyses (propensity and payoff) also included a year dummy variable
(1988 versus 1989) to control for inflation and differences in labor market
conditions. Finally, to the assess the robustness of the results, both analyses were
also conducted with the following individual control variables: grade point average,
major (e.g. finance, marketing), industry (17 dummy variables), previous business
experience, and whether a negotiation course had been taken during the MBA
program.
Table 1 repons summary statistics.
Results
Table 2 repons probit estimates for the probability of negotiating for a higher
staning salary. Equation la indicates that, as predicted by HI, students were more
likely to engage in salary negotiations to the extent they had a low initial salary
offer. In addition, H2 was also supported by the fact that negotiations were more
likely where both the number, and salary levels, of alternative job offers were high.
In contrast, (H3) was not supported. Gender did not have a main effect on
negotiating probabilities. Likewise, comparison of equations la and 2a revealed no
suppon for any interactions with gender (chi-square = .95, d.f. = 3). Adding
additional controls (see equations 1band 2b) similarly did not change the role of
gender.
In summary, as hypothesized by our model, structural conditions did predict
bargaining propensity for both male and female graduates. However, given the
same structural conditions, there were no sex differences in negotiation propensity.
Salary Negotiations
13
(Insert Tables 1, 2 and 3 about here)
Even though negotiation attempts did not differ by gender, men and women
might nevertheless have received different returns to their negotiations. Table 3
reports findings concerning the monetary payoffs to negotiation. The significant
coefficient for the bargaining variable in equations 1a and 1b suggests that, on
average, bargaining led to higher final salaries (4.1 %) for both men and women.
Nevertheless, the significant gender x negotiation term indicates that the payoffs
were larger to men than to women ($906 in the model including personal control
variables versus $742 without controls). Thus, Hypothesis 4 was supported.
Discussion
Consistent with most bargaining models, our findings suggest that the
propensity to negotiate is a function of structural factors that influence a potential
negotiator's relative bargaining power. Specifically, in the present context, the
propensity to negotiate starting salaries was found to be a function of the
attractiveness of the initial offer, as well as the existence and attractiveness of
alternative offers.
In contrast, we found no support for any gender differences in bargaining,
suggesting that when men and women face the same opportunity sets their
propensity to negotiate does not differ. Thus, our findings suggest that it may be
structural factors that determine salary negotiation behavior, not gender. These
results are consistent with previous literature reviews suggesting that structural or
environmental factors may be significantly more important than personal factors in
determining negotiation outcomes (Lewicki & Utterer, 1985; Hamner, 1980).
Salary Negotiations
14
Of course, the failure to find significant gender effects may be partly a
function of the relative homogeneity of this particular sample.
For example,
previous research has shown that there are fewer gender-related trait differences
among managerial than nonmanagerial samples (see Dipboye, 1987). Similarly,
extensive opportunities for information exchange in the labor market for new MBAs
may have reduced sex differences in expectations and aspirations as well. However,
applying analogous arguments, this highly centralized, relatively well-defined labor
market is also likely to have produced relative homogeneity of structural
opportunities. Yet these structural opportunity factors were shown to predict
bargaining behaviors, whereas gender (and all possible underlying factors) was not.
Although men and women did not vary in their propensity to bargain, the
payoff to such bargaining did vary by gender. Even though both men and women
received higher final starting salaries as a result of negotiations, women's payoff
was less than men's (2.7% versus 4.3%, based on equation la from Table 3 and the
mean starting salaries reported in Table 1). In addition, the larger payoff to
negotiating men (versus negotiating women) had the effect of widening the overall
male salary advantage from 2.1 % for the original offer, to 2.5% for the accepted
one. In other words, differential bargaining payoffs accounted for roughly 16%
(0.4%/2.5%) of men's final starting salary advantage.2
This observed difference in payoffs is consistent with at least two quite
different explanations. First, the employers in this sample may have been less
responsive to the negotiating behaviors of women than men. Extrapolating from
previous research, such a result might occur due to negative reactions to atypical
Salary Negotiations
15
"female" behavior (e.g., Dreher et aI., 1989), or to beliefs that when push comes to
shove, women will work for less money than men (Rynes et aI., 1985).
Alternatively, it is possible that the male job seekers in this sample used
more effective bargaining tactics, or used the same tactics more skillfully than the
women. Although previous research has sometimes found evidence that men and
women use different negotiation tactics (e.g. Kimmel, Pruitt, Magenau, Konar-
Goldband, & Carnevale, 1980), consistent evidence on the differential effectiveness
of such tactics is lacking. Although these two explanations are not mutually
exclusively, their implications are very different, indicating a clear need for
additional research in this area.
Finally, it should be noted that the practical importance of the greater payoff
to bargaining among men depends on a number of factors. For example, over a 30-
year career with men and women each averaging 7% annual increases, the initial
$742 bargaining payoff advantage (again using equation la, Table 3) would translate
into a 30-year career advantage of $75,738.3 However, in the Gerhart and
Milkovich (1989) study, among entry-level college graduates, women's salary
increases were 1.03 times as large as men's (after adjusting for experience,
education, and so on). If the women in our sample were to realize the same
advantage, they would catch up with men in their 10th year of employment. Up to
that point, their estimated losses would be $3,922. The corresponding present
values for the preceding two estimates would also be lower. For example, based on
a discount rate of 5%, the present value advantages would be $29,489 and $3,323,
respectively. As a final note, the male-female pay differential in the present study
was substantially smaller than that observed by Gerhart and Milkovich. To the
Salary Negotiations
16
extent that larger pay increases for women are a response to a pay shonfall on their
part, we should see less of a salary growth advantage for women in our study. To
the degree this is true, we would expect the present value of women's cumulative
pay shonfall to be closer to $29,489 than to $3,233.
Future Research
Our study provides the first empirical field evidence on both the propensity
to engage in actual salary negotiations and their monetary payoffs to men and
women. In designing this research, we were struck by the lack of previous research
on either the prevalence, or success, of individual salary negotiations of any type.4
Thus, in addition to helping explain gender-based pay differences, additional field
work on actual salary negotiations would make an important contribution to the
general body of knowledge about pay-setting practices and effects. Similarly, as
Neale and Nonhcraft (no date) have pointed out, the negotiation literature is
surprisingly limited on the question of when (versus how) a person chooses to
negotiate. We suggest that future researchers focus on the following issues.
First, although the present study provided the first evidence on actual salary
negotiations, a limitation was the lack of information available on the actual
negotiating arguments, styles, and tactics used by successful (versus unsuccessful)
male and female negotiators (see also Subich, et aI., 1989). Although the laboratory
offers the opportunity for independent observation of behavior, it suffers from a lack
of appropriate context--the existence (or high potential) of an ongoing relationship.
If field research is conducted, evidence of interobserver agreement (e.g., regarding
the types of tactics and the skill with which they are used) would be helpful.
Salary NegOtiations
17
Second, it would be instructive to determine the extent to which bargaining
propensities generalize across tasks and situations other than starting salary
negotiations. In particular, it would be useful to broaden our knowledge of the
extent to which bargaining is structurally, versus individually, determined. To that
end, Neale and Northcraft (undated) have developed a scale to assess individual
differences in bargaining propensities. To the extent that bargaining behaviors have
a dispositional component, any measured advantage due to starting salary
negotiations may be compounded by additional returns to side negotiations over
such things as benefits, perquisites, or subsequent salary increases.5
Third, future research should examine bargaining behavior in a multiattribute
context. Although the present study focused on the role of starting salary in job
choice negotiations, other job attributes may also be targets (or determinants) of
negotiation. For example, the fact that many of our subjects negotiated with
employers offering lower salaries (rather than accepting the high salary offer)
suggests that job seekers often entered into salary negotiations because of desired
nonpecuniary job attributes.
Fourth, additional field research is needed to determine both the short- and
long-term impacts of conducting successful, versus unsuccessful, negotiating
attempts. For example, in the short term, it would be interesting to know whether
initial bargaining successes breed greater job search confidence and additional
bargaining, or whether failure results in reduced self-confidence, curtailed job search,
or offer tUrn-downs. The longer-term implications of successful versus failed
bargains (e.g., job satisfaction, length of service, future bargaining attempts) are also
important both to job seekers and employers.
Salary Negotiations
18
Fifth, it would be helpful to study the reactions (both process and outcomes)
of those who are the targets of negotiation.
For example, if targets are found to
respond less favorably to female than male demands for more money, it would be
imponant to determine the source of this difference (e.g., negative reactions to
female "pushiness," versus different beliefs about the consequences of underpaying
men versus women). It would also be interesting to know whether targets appear to
be conscious of their motivations, or whether male targets respond differently than
females.
Finally, it would be useful to funher examine the extent to which structural
factors influence negotiation propensity and possible gender differences. For
example, one implication of our model is that job seekers are less likely to
negotiate when they have substantially fewer, or less lucrative, alternative job offers.
At present, we do not know whether men and women respond similarly to large
advantages (or disadvantages) in opportunity. We also do not know the extent to
whether men and women differ in their tendencies to generate multiple offers
merely as a tactic for obtaining bargaining advantage. Other relevant structural
factors raised earlier may be the amount of opponunity for social comparison and
information exchange in the labor market, as well as the amount of standardization
in applicant and job attributes.
In summary, despite frequent anecdotal references to the likelihood of gender
differences in negotiating behaviors and the likely imponance of those differences
for reward outcomes, empirical research on this topic is surprisingly scarce. As we
have shown, even small differences in outcomes for just one kind of negotiation
(statting salary) can add up to large differences over an entire career. To the extent
Salary Negotiations
19
that individual propensities to bargain (and successes in doing so) generalize across
a variety of potential negotiation situations, the returns to negotiating behaviors (or,
alternatively, the penalties for failing to engage in such behaviors) may be
substantial indeed. Moreover, the existence of individual or group differences in
bargaining behaviors and outcomes could have important implications for employers
as well. As such, further research should examine these behaviors over a wider
variety of subjects, settings, and potential negotiation issues.
Salary Negotiations
20
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Footnotes
l.This definition is consistent with our hypothesis that attractiveness is judged in relative
terms. Note also that we followed the convention of setting the highest alternative salary
offer equal to the initial offer when there were no alternative offers.
2.Supplementary analyses further revealed that differences in final starting salaries did not
result from differential gender-based tendencies to reject the highest offer.
3.0ur results are based on the $742 estimate from equation la because the controls added
in equation 1b did not improve the fit of the model. Naturally, the projected long-term
pay shortfalls for women would be larger if the $907 estimate from equation 1b were to be
used.
4.0ne partial exception is an unpublished study by Mannix and Bazerman (1988). They
reported that 41 of the 135 (30%) surveyed MBAs did negotiate over starting salaries.
However, they did not report information about gender differences or the determinants or
consequences of negotiation.
5.Additional data from the our research suggest that bargaining over benefits and
perquisites is at least as prevalent as negotiating over salaries per se. However, it proved
difficult to attach precise monetary values to some of these items.
Table 1
Descriptive
Statistics
Women Men
Variable
Mean Standard Mean Standard
t
Deviation
Deviation
Bargained
(1
= yes,
0 = no)
.154 .364 .229 .421
-1.23
Accepted Starting Salary
$45,467
$7,734
$46,626 $7,906
-0.92
Initial
Salary Offer
$45,255 $7,895 $46,167 $8,069
-0.71
Highest Alternative Offer
(diff)
a
$ 2,311
$3,275 $ 3,478 $ 7,927
-1.49
Number of Alternative Offers
1.558 1.765 1.758 1.698
-0.73
Grade Point Average
3.386
.276 3.447 .284
-1.35
Business Experience
(months)
29.096 28.291 23.222 24.515 1.43
Major
Accounting
.077 .269 .046 .210
0.86
Finance
.269 .449 .556
.499
-3.67
Marketing
.346 .480 .105 .307
3.40
Other
.308
.462 .293 .422 0.18
Note: Number of observations = 205 (52 women, 153 men)
aDifference = Highest Alternative Salary Offer - Initial Salary Offer
Table 2
Probability of Negotiating for a Higher Salary, Probit Estimates
Variable
Initial Salary Offer
Highest Alternative Offer (diff)b
Number of Alternative Offers
(la)
-.411**&
.211 *&
.111*
Gender (Men = 1, Women = 0)
Gender x Highest Alternative Offer
.253
Gender x Initial Salary Offer
Gender x Number of Alternative Offers
Controls
No
-2 times log likelihood ratio
Degrees of Freedom
25.773
5
Equation
(2a)
- .513&
.290&
.191
(lb)
-.422**&
.177&
.141*
(2b)
-.393&
.412&
.219
.704
-.244&
-.020&
-.110
Yes
53.949
30
Note: Equations 1a and 2a control for year only.
-.090
-.086&
.140&
-.112
.289
Equations 1b and 2b control for year,
&Coefficient is multiplied by 10,000
~ifference = Highest Alternative Salary Offer - Initial Salary Offer
*
p < .05, one-tailed;
**
p < .01, one-tailed
No
26.724
Yes
53.204
27
8
industry, major, grade point average, business experience, and completion of a negotiation
course.
Equation
(la)
(lb)
4039.766
11530.670
.986**
.987**
.021*
.022*
14.083
-1.516
1231.016**
1061.738*
-26.557
-74.797
741.963*
906.918*
.984
.985
.984
.983
Table 3
Determinants of Accepted Starting Salary, Ordinary Least Squares
R2
Variable
Intercept
Initial Salary Offer
Highest Alternative Offer (diff)a
Number of Alternative Offers
Negotiated (1 = Yes, 0 = No)
Gender (Men = 1, Women =
0)
Gender x Negotiated
Adjusted
R2b
Note: Equation 1a (F
8,197= 1752.01) controls for year only.
Equation 1b (F
28,177 = 430.35) controls for year, industry, major,
grade point average, business experience, and completion of a
negotiation course. Column entries are unstandardized
coefficients.
-Difference = Highest Alternative Salary Offer - Initial Salary
Offer
~ased on formula appearing in Cohen and Cohen (1983, p. 106)
* P < .05, one-tailed;
**
p < .01, one-tailed
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