Pragmatism versus Idealism: Understanding the Negotiating Practices in China and India

China and India are now emerging as major players in the new international economic order. Their economies are growing at a rapid pace, and increasingly foreign investors are flocking to these countries to capitalize on the emerging opportunities. Although economic and social transformation is under way in these societies, this transformation is occurring within a backdrop of an institutional context that is rather different from what is present in Western societies. We draw upon an institutional theory framework to compare and contrast China and India along the dimensions of the regulatory, normative, and the cognitive dimensions. The regulatory dimension refers to the restrictions or lack thereof that might impact foreign investors and/or the manner in which they are implemented. Normative dimension refers to the dominant cultural norms and values present in a given society, while cognitive dimension pertains to the acceptance or the lack thereof of foreign investment. These dimensions are then posited to impact on the negotiating processes that are characteristic of that society. We compare and contrast the negotiating practices in China with that of India and outline strategies through which foreign investors may manage the negotiating process in these countries more effectively.