The coordination of internal transactions: the functioning of transfer pricing systems in the organizational context

Abstract

Recently I finished an in-depth study into the functioning of transfer pricing systems. This study was designed to research (a) the theoretical developments with respect to the coordination of internal transactions and (b) case research. The case research was carried out at four Dutch multinationals, where seven case studies were done. In this case research the central assumption was that the coordination of internal transactions is part of the coordination problem of decentralized firms. Much attention has therefore been paid to the mutual relations between the various rules, including the rules in the transfer pricing system, which are aimed at the realization of the required differentiation and integration. Furthermore, as an elaboration of the concepts of transactions cost theory, the significance of the characteristics of the transactions for the coordination methods has been studied. Behavioural aspects have been taken into consideration as well. This article describes the most important findings of my study.