Financial vulnerability and the reproduction of disadvantage in economic exchanges

• Main Authors: HE, Tianyu, DERFLER-ROZIN, Rellie, PITESA, Marko
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2020
• Subjects: negotiation; integrative value generation; financial vulnerability; low-income workers; Finance and Financial Management; Organizational Behavior and Theory
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/6496; https://ink.library.smu.edu.sg/context/lkcsb_research/article/7495/viewcontent/Financial_Vulnerability_Reproduction_av.pdf
• Institution: Singapore Management University

Integrative value generation through negotiated business deals is a fundamental way in which organizations and economic systems attain economic benefits. It is also an important way in which individuals can improve their financial situation. We propose that individuals most in need of improving their financial standing, those in a financially vulnerable situation, are least likely to reap the benefits of integrative value generation. We theorize that financial vulnerability induces a more zero-sum construal of success, or a view that success for one person must come at another person’s success. A more zero-sum construal of success, in turn, hampers negotiators’ ability to realize integrative potential in negotiations. In a large archival dataset (N 191,648), we found evidence that various proxies of financial vulnerability are associated with a more zero-sum construal of success. In two subsequent face-to-face negotiation studies, we found that financial vulnerability, whether measured or induced experimentally, undermined integrative value generation. The final two-part study found evidence of the hypothesized psychological process. Taken together, our studies uncover a fundamental pathway through which the disadvantage of financially vulnerable people is reproduced through economic exchanges.