Transaction-level determinants of transfer-pricing policy: evidence from the high-technology sector

This paper uses transaction cost economics (TCE) as the basis for an empirical study of transfer pricing-pricing of intra-firm transactions-in a multi-divisional firm. The study finds the evidence to support predictions that transaction-specific investment and quality requirements increase the likelihood that headquarters will centrally administer the pricing of transactions between divisions. This article concludes that, just as transaction-cost economizing plays a role in organizing transactions between firms, it also affects organization of exchange within firms.