It is widely assumed that a dispute resolution reached voluntarily will be more satisfying to participants, engender stronger feelings of procedural justice and control over the process and the outcome than an imposed resolution. Consequently, the post-resolution relationship between participants is expected to be stronger and more enduring. Dr John Budd, Dr Aaron Sojourner, and Jaewoo Jung used Major League Baseball data from 1988 to 2011 to investigate whether voluntarily-negotiated agreements produced better long-term consequences than third-party imposed resolutions.
The effect of arbitration on performance and relationships
Budd, Sojourner, and Jung analysed more than 1,400 player-club salary renegotiations from Major League Baseball data to determine whether players who settled their salary disputes with their club’s management voluntarily performed better the following season than those who settled their disputes by arbitration. Interestingly, there was no significant difference in subsequent on-field performance between players who proceeded to arbitration and players who settled voluntarily. This may be driven by the fact that player performance is visible to potential future partners. However, the relationship between players and clubs that relied on arbitrated resolution were twice as likely to break up before the end of the following season compared with relationships where resolutions were reached voluntarily. Relationships that went through arbitration were less likely to remain intact in the following season, regardless of which side won the arbitration, than relationships that reached settlement voluntarily.
The intensity of the dispute and the margin of victory
The researchers also investigated the effects of dispute intensity and degrees of compromise in resolutions on both player performance and relationship durability. Higher levels of salary disagreement were associated with poorer subsequent player performance, perhaps due to overconfidence of the player about his future performance. In addition, Budd, Sojourner and Jung analysed the relationship between players’ degree of compromise and future player performance. The degree of compromise was determined by calculating the settled player’s salary as a fraction of the player’s final offer and the player’s settled salary as a fraction of the club’s final offer. Interestingly, no significant relationship was found between these variables and subsequent performance or relationship durability.
It seems that there is some support for conventional wisdom that consensual agreements are more favourable than third-party imposed agreements in professional baseball. Analysis by Budd, Sojourner and Jung suggest that the arbitration process itself, rather than the outcome, is detrimental to the club-player relationship. Making disputants’ post-arbitration behaviour observable to potential future partners creates incentives for them to maintain high performance and may limit loss of performance quality. While this data comes from professional baseball, these results are important for dispute resolution researchers and practitioners operating in a range of fields.
- Budd, J. W., Sojourner, A., & Jung, J. (2017). ‘Are Voluntary Agreements Better? Evidence from Baseball Arbitration’. ILR Review, 70 (4), 865-893.
Using data from professional baseball, Budd, Sojourner and Jung sought to test the long-standing assumption that voluntary agreements produce more favourable long-term outcomes than third party imposed resolutions. Outcomes investigated included player performance and the durability of the player-club relationship. Although the research is in the context of professional baseball, the results have important implications beyond professional baseball for both researchers and practitioners.
John W. Budd is a Professor of Work and Organizations in the University of Minnesota’s Carlson School of Management, where he holds the Industrial Relations Land Grant Chair. He is a graduate of Colgate University and earned a PhD degree in economics from Princeton University.
Aaron Sojourner is a labour economist and associate professor at the University of Minnesota’s Carlson School of Management. Sojourner completed his PhD in economics at Northwestern University in 2009. He also has an MA in public policy analysis from the University of Chicago and a BA in History from Yale University. He served as senior economist for labour at the US President’s Council of Economic Advisers during 2016-’17.
Jaewoo Jung is a PhD student at the University of Tennessee’s Haslam College of Business. He has an MA degree in Human Resources and Industrial Relations from the University of Minnesota and a bachelor’s degree from Inha University. He previously worked as a research officer for the Korea Labor Institute.
University of Minnesota
Carlson School of Management
Department of Work & Organisations
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