Journal of Business Research 134 (2021) 275–287
Available online 31 May 2021
0148-2963/© 2021 Elsevier Inc. All rights reserved.
What do we know about transfer pricing? Insights from bibliometric analysis
Satish Kumar
a,b, Neeraj Pandey
c, Weng Marc Lim
b,d,*, Akash Nil Chatterjee
e, Nitesh Pandey
aaMalaviya National Institute of Technology, Department of Management Studies, 302017 Jaipur, Rajasthan, India
bSwinburne University of Technology, School of Business, Jalan Simpang Tiga, 93350 Kuching, Sarawak, Malaysia
cNational Institute of Industrial Engineering (NITIE), Mumbai, India
dSwinburne University of Technology, Swinburne Business School, John Street, 3122 Hawthorn, Victoria, Australia
eDr. Reddy’s Laboratories, Hyderabad, India
A R T I C L E I N F O Keywords:
Bibliometric analysis Bibliometric review Transfer price Transfer pricing Conglomerate Multinational International business Tax compliance Tax management Strategy
A B S T R A C T
Transfer pricing is important to many business conglomerates and multinational enterprises. In this review, we pursue a stock-take of transfer pricing research through a bibliometric analysis. Using bibliometric data of 735 research articles from the Scopus database, this review sheds light on the leading authors, countries, institutions, outlets, articles, and themes of transfer pricing research over 50 years (1968–2019). Findings of this review suggest that there is a need for transfer pricing research to go beyond compliance and tax management and toward a more meaningful exercise of using transfer pricing as a strategic tool in business. Future research di- rections for transfer pricing conclude this review.
1. Introduction
Transfer pricing (TP) refers to the practice of pricing transactions between and within enterprises under common ownership and control (e.g., business conglomerates, multinational enterprises). TP is war- ranted for numerous reasons, such as economic (e.g., efficiency in resource allocation), functional (e.g., divisionalization of the organiza- tion into profit centers responsible for both revenues and costs), orga- nizational (e.g., enhancing integration and differentiation within divisionalized organizations), and strategic (e.g., influence by and on accounting mechanisms) necessity. Nevertheless, TP can be subject to unethical and unlawful exploitation, for example, to reduce global tax, whereby revenue and costs are manipulated in ways to show maximum and minimum profits in low- and high-tax countries, respectively.
Indeed, research has revealed that TP has enabled many organizations to shift their profits from high- to low-tax countries (Davies et al., 2018;
Grubert & Mutti, 1991; Klassen, Lisowsky, & Mescall, 2017; Yao, 2013), which has led to instances of tax avoidance, most notably through over-
and under-invoicing in TP transactions (Al-Eryani et al., 1990; Davies et al., 2018; Sari et al., 2020).
With the understanding that there may be an administered or negotiated transfer price among business conglomerates and multina- tional enterprises depending on company policy (Liu, Zhang, & Tang, 2015), governments often rely on “arm’s length pricing” as a measure to ensure that firms in intraorganizational transactions within the same group companies charge a transfer price that is prevalent between un- related companies (Mehafdi, 2000; Yao, 2013). Yet, applying the arm’s length pricing principle for calculating TP may be difficult for unique goods and services, and thus, other measures such as marginal or op- portunity cost for manufacturing the product or creating the service can be considered for calculating transfer price (Holmstrom & Tirole, 1991).
Moving beyond the basics of TP, this review argues that there is a need to pursue a stock-take of TP research. Numerous scholars have attempted to do so, but several limitations are apparent. For example, Grabski’s (1985) review of TP in complex organizations was limited to only 10 years (1975–1983) prior to the new millennium, and thus, does
* Corresponding author at: Swinburne University of Technology, Swinburne Business School, John Street, 3122 Hawthorn, Victoria, Australia, and Swinburne University of Technology, School of Business, Jalan Simpang Tiga, 93350 Kuching, Sarawak, Malaysia.
E-mail addresses: [email protected] (S. Kumar), [email protected] (N. Pandey), [email protected], [email protected], [email protected] (W.M. Lim), [email protected] (N. Pandey).
Contents lists available at ScienceDirect
Journal of Business Research
journal homepage: www.elsevier.com/locate/jbusres
https://doi.org/10.1016/j.jbusres.2021.05.041
Received 14 March 2021; Received in revised form 3 May 2021; Accepted 17 May 2021
not provide up-to-date insights on TP research. McAulay and Tomkins’s (1992) review of TP was, in fact, conceptual, as they did not employ a systematic procedure to review. Instead, they focused on explaining the concept of TP so that they could “make the subject of transfer pricing accessible” to managers and researchers (McAulay & Tomkins, 1992, p.
101). More recently, Cecchini, Leitch, and Strobel’s (2013) and Rossing and Rohde’s (2014) reviews were published, but they were limited to insights from the theoretical perspectives that they employed, namely transaction cost and resource-based views in the former, and functional-, economic-, and strategic-informed perspectives in the latter.
Moreover, to the best of our knowledge, no review on TP was pub- lished within the last five years. This contention is also validated through a Scopus search of “transfer pricing” and “review” between 2015 and 2020. More importantly, no review on TP, to date, has adopted a bibliometric analysis for review, which is a useful method to reveal key bibliometric attributes and research themes (Donthu, Kumar, Mukher- jee, Pandey, & Lim, 2021; Donthu, Kumar, Pandey, & Lim, 2021; Don- thu, Kumar, Pattnaik, & Lim, 2021; Kumar, Lim, Pandey, & Westland, 2021; Kumar, Sureka, Lim, Mangla, & Goyal, 2021). Such information is arguably important and useful to help scholars, practitioners, and poli- cymakers identify the leading authors, countries, institutions, outlets, articles, and topics of TP, and thus, gaining a more informed under- standing about the knowledge structure of TP and where TP expertise can be found.
To this end, this review is positioned as a pioneering effort to map the domain of TP through a bibliometric perspective, wherein current in- sights and future research directions on TP take center stage. Thus, the following research questions (RQs) are explored in this review:
RQ1. What is the publication trend (number of articles by year) of TP? RQ2. Where are the most influential publications (outlets, articles) of TP? RQ3. Who are the most prolific contributors (authors, countries, and institutions) of TP?
RQ4. What does existing research (themes, topics) inform us about TP? RQ5. Where can future research (avenues) explore to enrich our understanding of TP?
The rest of this review is organized as follows. First, we provide a brief overview of the TP literature. Following that, we describe the bibliometric methodology adopted in this review. Next, we report the results of the bibliometric analysis of TP research that we reviewed.
Finally, we present an agenda for future research to enrich the domain of TP.
2. Literature review
The first paper on TP was published in 1968. In this seminal paper entitled “Profit Centres, Transfer Prices and Mysticism,” the author dis- cussed about TP in budgeting (Wells, 1968).
In general, there are two methods for TP. The first method is market- based TP, which is calculated based on ongoing market-determined prices, and thus, is in-sync with arm’s length pricing. This method is straightforward with the least legal and compliance issues. The second method is non-market-based TP, which is calculated based on negotiated prices and cost-based prices along with a range of other considerations.
Examples of such considerations include dual pricing, tax differential, and import duty (Al-Eryani et al. 1990; Burns, 1983; Chalos & Haka, 1990). This method is common in imperfect competitive markets (Al- Eryani et al., 1990), wherein negotiated TP is found to be more effective and profitable when conducted in a personal face-to-face meeting as opposed to formal communication network in the form of a bidding process (Kachelmeier & Towry, 2002).
Wells (1968) contended that there is no situation where any form of
transfer price is useful or meaningful. Yet, later research on TP has invalidated this contention, which we call as “the Wells contention.” For example, Chalos and Haka (1990) evidenced that the divisional auton- omy in setting up TP would lead to higher profitability for divisions, though it may not necessarily be the same for the company. Nonetheless, they did suggest that having an incentive system based on both company and division profitability can lead to better negotiated TP and company profitability. Jacob (1996) added that tax arbitrage opportunities for intra-firm TP exist for organizations having large intra-firm sales transactions, which allow them to capitalize on the differences in tax structures in the regions that they operate. In that sense, TP can be used as a strategic tool for gaining competitive advantage and achieving corporate objectives by business conglomerates and multinational en- terprises (Cravens, 1997).
Other scholars have also invalidated the Wells contention albeit from a “darker” perspective—that is, TP as a tax avoidance tool (Davies et al., 2018; Grubert & Mutti, 1991; Klassen et al., 2017; Sari et al., 2020). In particular, scholars in this research stream argue that there is a tendency for organizations to shift their profits to a low-tax country. Grubert and Mutti (1991) conducted a study on multinational enterprises in the United States to analyze this phenomenon and found that TP may in- crease foreign direct investment in low-tax countries, but reduce pro- duction in the United States. They also found that tariffs had a mixed result on TP in arresting tax avoidance—that is, it is effective only to a certain extent (Grubert & Mutti, 1991). More recently, Davies et al.
(2018) highlighted that tax avoidance through TP accounts for approximately one percent of corporate tax in France. Their study also indicated that tax avoidance arising from TP can be mitigated if gov- ernments deter exports to tax heavens. Similarly, Sari et al. (2020) analyzed TP of 200 companies from 10 developing countries. Their study concluded that specific anti-avoidance rules (SAAR) regarding TP can help reduce tax evasion in developing countries.
To further explicate the TP literature, a bibliometric review on TP research is carried out. The specific methods and procedures of the re- view are explained in the next sections.
3. Methodology 3.1. Bibliometric search
The search for articles to be included in the review was conducted in early 2020 and was guided by a search strategy that we developed that consists of four stages: database search, scholarly filtration, language filtration, and subject filtration (see Fig. 1).
Stage 1 is database search. We chose Scopus due to (1) its coverage of publications that met a stringent set of requirements for indexing (e.g., scientifically and scholarly relevant), and (2) its comprehensiveness of bibliometric information for publications that it indexes. Indeed, Scopus is suitable for endeavors seeking to curate a large corpus for review (Paul et al., 2021), and it is a scientific database that is often recommended for bibliometric reviews (Donthu, Kumar, Mukherjee, et al., 2021). Impor- tantly, Scopus has been recognized as a high-quality source for biblio- metric data (Baas et al., 2020), and the correlation of its measures with those available from alternative scientific databases such as Web of Science is “extremely high” (Archambault et al., 2009), though the lat- ter’s coverage is less than the former (Paul et al., 2021), thereby making Scopus a more comprehensive yet high-quality data source for review.
We also chose to use “transfer pricing” as our search keyword due to its centrality as a concept in our review, and we chose to limit our search up to 2019 for pragmatic reasons (e.g., data availability, full year data), which are in line with the recommendations by Donthu, Kumar, Mukherjee, et al., 2021. The database search returned a result of 1198 articles.
Stage 2 is scholarly filtration. We chose to include only journal ar- ticles and conference proceedings, as they are usually (1) evaluated on the grounds of novelty, and (2) subjected to rigorous peer review, both
of which are essential criteria to (1) unpack knowledge diversity, and (2) report insights of the highest quality, respectively. We did not include other articles, such as books and book chapters, as they usually fall short on these criteria. The criteria here are in line with the recommendations by Paul et al. (2021). The scholarly filtration excluded 163 articles, and thus, included 1035 articles only.
Stage 3 is language filtration. We chose to include articles written in English that were retained in Stage 2 only. This filtration was required as (1) we are native English speakers, and (2) translation works are impractical for reviews with large datasets (e.g., bibliometric reviews).
The criteria here are in line with the recommendations by Donthu, Kumar, Mukherjee, et al., 2021. The language filtration excluded 82 articles, and thus, included 953 articles only.
Stage 4 is subject filtration. We choose to include articles in (1) economics, econometrics, and finance, (2) business, management, and accounting, and (3) decision sciences that were retained in Stage 3 only.
This filtration was required as these Scopus-defined subject areas were the broadest and most relevant to “business,” which is the overarching discipline where TP is situated. The criteria here are in line with the recommendations by Donthu, Kumar, Mukherjee, et al., 2021; Paul, Lim, O’Cass, Hao, & Bresciani, 2021. The subject filtration excluded 218 articles, and thus, included 735 articles only.
In total, 463 articles were excluded as a result of scholarly, language, and subject filtration. The remaining 735 articles that survived the filtration process are progressed for bibliometric review, which will be explained in the next section.
3.2. Bibliometric analysis
This review conducted a bibliometric analysis of the TP literature (see Fig. 2). Using 735 articles that were retained from the bibliometric search in Scopus, we conducted a series of bibliometric-based analyses.
In particular, we conducted publication, global citation, and social network analyses to describe the publication trends (RQ1) and the leading con- tributors (authors, countries, and institutions) (RQ2) and publications (outlets, articles) (RQ3) of TP research. In addition, we used VOSviewer to enrich our exploration of the leading contributors (RQ2) and publi- cations (RQ3) through co-authorship, local citation, and PageRank ana- lyses. The same software was used to map the intellectual structure of TP (RQ4) through keyword co-occurrence analysis, which can also help future research to identify avenues for future exploration (RQ5). Finally, we utilized Gephi to visualize the networks in our review, where appropriate. The combination of bibliometric analysis techniques and enrichment techniques are in line with the recommendation by Donthu, Kumar, Mukherjee, et al., 2021 for a well-done bibliometric review.
4. Results
The review indicates that the earliest article on TP was published in 1968, and that the total number of articles indexed in Scopus since then and up to 2019 after scholarly, language, and subject filtration is 735 articles. The next sections provide detailed information on the biblio- metric attributes and research themes relating to TP research in our Fig. 1.Search and filtration strategy for bibliometric review.
review.
4.1. Publication trend (RQ1)
The distribution of articles by year of publication indicates that TP has gained increasing scholarly interest over the last 50 years (see Fig. 3). Most TP research were published in 2018 (n =54), a year that experience a growth of 108 percent in TP research as compared to the previous year (n =26). Interestingly, TP research mostly appeared in single digits every year prior to 1990s, and double digits in the mid- 1990s onwards and into the new millennium, which can be attributed to the proliferation of globalization in the later era.
4.2. Publication outlet (RQ2)
The distribution of articles by publication outlet shows that European Journal of Operational Research is the most prolific home for TP research (n =22 articles) (see Table 1). This is followed by Contemporary Ac- counting Research, International Journal of Production Economics, and Management Accounting Research, each hosting 15 articles on TP. Most publication outlets on this list are journals that are ranked “A*” or “A” by the Australian Business Deans Council or “4*,” “4,” or “3” by the Asso- ciation of Business Schools, which suggests that TP research is welcomed at premier journals.
Fig. 2. Analysis strategy for bibliometric review.
Fig. 3. Publication trend of TP research (1968–2019).
4.3. Publication performance (RQ2) 4.3.1. Global citations
Global citations refer to the number of citations received without any filtration (e.g., discipline) (Baker, Pandey, Kumar, and Haldar, 2020). In this review, the article with the highest number of global citations is
“Marketing in the Network Economy” (n = 615 citations), followed by
“Contracting Theory and Accounting” (n =370 citations) (see Table 2).
Noteworthily, TP appears to play a secondary role in most articles on this list, as seen through the article titles.
4.3.2. Local citations
Local citations refer to citations received from the articles in the review corpus (Baker et al., 2020). In other words, local citations are
computed based on citations received from 735 articles on “transfer pricing” that were retrieved from Scopus and retained after scholarly, language, and subject filtration. In this review, the article with the highest number of local citations is “On the Economics of Transfer Pricing” (n =172 citations) (see Table 3), followed by “Specific Investment under Negotiated Transfer Pricing: An Efficiency Result” (n = 38 citations).
Noteworthily, TP appears to play a primary role in most articles on this list, as seen through the article titles, thereby highlighting the impor- tance of examining local citations.
4.4. Authors (RQ3) 4.4.1. Leading authors
The distribution of articles by authors indicates that Guttorm Schjelderup from NHH Norwegian School of Economics has published the most articles on TP (n =11 articles) (see Table 4). Out of the 11 articles that Schjelderup has published, three articles were co-authored with Pascalis Raimondos-Møller and another three articles were co- authored with Dirk Schindler (see Table 5). His seminal article enti- tled “Transfer Pricing as a Strategic Device for Decentralized Multinationals”
is one of his top-cited TP articles (Schjelderup & Sorgard, 1997). Note- worthily, Schjelderup’s contributions have also positioned NHH Nor- wegian School of Economics as the most prolific institution in the TP domain, with the institution’s 11 out of 14 TP articles (co)authored by Schjelderup (see Table 6).
The authors contributing to the second and third highest number of articles on TP are Susan C. Borkowski (n =nine articles) and Thomas Pfeiffer (n =seven articles), respectively. Interestingly, the majority of Borkowski’s articles were single-authored papers. In contrast, Pfeiffer worked with multiple authors in the TP domain. The citation count was highest for Schjelderup (n =2995 citations), followed by Pfeiffer (n = 2142 citations) and Borkowski (n =2097 citations).
4.4.2. Leading author collaborations
Co-authorship analysis provides details about the nature and scope of collaborations between co-authors, which is akin to a social network of scholars working in a common domain (Donthu, Kumar, Mukherjee, Table 1
Top contributing journals to TP research.
Journal title ABDC
rank ABS
rank Number of articles(s)
European Journal of Operational Research A* 4* 22
Contemporary Accounting Research A* 4 15
International Journal of Production
Economics A 3 15
Management Accounting Research A* 3 15
Accounting Review A* 4* 13
Accounting, Organizations and Society A* 4* 13
Journal of Public Economics A* 3 13
Review of Accounting Studies A* 4 13
International Tax and Public Finance B 2 12
International Journal of Accounting A 3 11
Accounting and Business Research A 3 10
Journal of International Accounting,
Auditing and Taxation B 3 10
Note: Top contributing journals with 10 or more published articles on TP. ABDC rank =as per Australian Business Deans Council 2019 Journal Ranking List. ABS rank =as per Association of Business Schools 2018 Journal Quality Guide.
Table 2
Most cited articles on TP based on global citations.
Rank Article title Author(s) Year Citations
1 Marketing in the network
economy Achrol R.S. and
Kotler P. 1999 615
2 Contracting theory and
accounting Lambert R.A. 2001 370
3 Modeling and design of global logistics systems: A review of integrated strategic and tactical models and design algorithms
Goetschalckx M., Vidal C.J., and Dogan K.
2002 335
4 Bargaining under incomplete
information Chatterjee K. and
Samuelson W. 1983 308
5 Decentralized multi-echelon supply chains: Incentives and information
Lee H. and Whang S. 1999 294
6 Do countries compete over
corporate tax rates? Devereux M.P., Lockwood B., and Redoano M.
2008 256
7 Lessons from behavioral responses to international taxation
Hines Jr. J.R. 1999 253
8 Global supply chain model with transfer pricing and transportation cost allocation
Vidal C.J. and
Goetschalckx M. 2001 209 9 Designing the boundaries of
the firm: From “make, buy, or ally” to the dynamic benefits of vertical architecture
Jacobides M.G. and
Billinger S. 2006 171
10 Tax-motivated transfer pricing and US intra-firm trade prices
Clausing K.A. 2003 169
Note: Top 10 articles with the highest number of global citations according to Scopus.
Table 3
Most cited articles on TP based on local citations.
Rank Article Author(s) Year Citations
1 On the economics of transfer
pricing Hirshleifer J. 1956 172
2 Specific investment under negotiated transfer pricing:
An efficiency result
Edlin A. and
Reichelstein S. 1995 38 3 Strategic transfer pricing Alles M. and Datar
S. 1998 37
4 International corporate transfer prices and government policy
Copithorne LW. 1971 36
5 Taxes, tariffs and transfer pricing in multinational corporate decision making
Grubert H. and
Mutti J. 1991 36
6 Negotiated versus cost-based
transfer pricing Baldenius T., Reichelstein S., and Sahay S.A.
1999 31
7 Transfer pricing Emmanuel C. and
Mehafdi M. 1996 30
8 Transfer pricing rules and
corporate tax competition Elitzur R. and
Mintz J. 1996 27
9 The theory of the multinational firm: Optimal behavior under different tariff and tax rates
Horst T. 1971 25
10 A model of cost-based transfer
pricing Vaysman I. 1996 25
Note: Top 10 articles with the highest number of local citations derived using VOSviewer.
et al., 2021). Indeed, research has shown that collaborations can contribute to interchange of ideas that lead to novel research, wherein team synergies enhance chances of getting published in quality journals (Acedo, Barroso, Casanueva and Gal´an, 2006).
Our review indicates that Grant Richardson and Grantley Taylor are the most productive co-authors on TP (n =six articles) (see Table 5).
Both authors were based in Western Australia, but they were affiliated with different institutions (see Table 4). Next on the list of leading co- author collaborations in TP are Anil Arya and Brian Mittendorf and Z.
Lin and R. M. K Wong with four articles each.
4.5. Countries (RQ3) 4.5.1. Leading countries
The distribution of articles by countries indicates that authors from 55 countries have contributed to and published research on TP. The country-wise analysis reveals that the United States is the biggest
contributor to TP research (36.7%). This is followed by the United Kingdom (9.5%), China (6.7%), Germany (6.4%), and Canada (5.7%) (see Fig. 4).
4.5.2. Leading country collaborations
Gephi’s network visualization was used to illustrate the social net- works of country collaborations contributing to TP research (see Fig. 5).
In particular, the social network analysis reveals four major social net- works in TP research. The first major social network involves the United States, which is at the heart of international collaborations with Australia, Canada, China, Hong Kong, Israel, and South Korea. The second major social network involves the United Kingdom, which is a lynchpin for international collaborations with Austria, Germany, India, Japan, Spain, and Switzerland. The third major social network is Euro- pean centric, which involves international collaborations primarily be- tween Belgium, France, and Italy. Finally, the fourth major social network is Scandinavian centric, which involves international collabo- rations mainly between Denmark and Norway.
4.6. Institutions (RQ3)
The distribution of articles by institutions indicates that NHH Nor- wegian School of Economics in Norway is the leading institution contributing to TP research (n =14 articles) (see Table 6). This is fol- lowed by Texas A&M University and New York University in the United States, Tilburg University in Netherlands, and University of Oxford in the United Kingdom, each contributing 10 articles on TP. Most in- stitutions contributing eight or more articles on TP are in the United States, with the rest located across Asia (e.g., Hong Kong), Europe (e.g., Netherlands, United Kingdom), and Scandinavia (e.g., Denmark, Norway).
4.7. Themes (RQ4)
A PageRank analysis was performed to unpack the major themes underpinning the intellectual structure of TP. PageRank measures the overall prestige of an article as it reflects the citations gained by an article from highly-cited articles (Ding & Cronin, 2011). In that sense, it is possible that an article that is ranked highly on PageRank may be ranked lower on global or local citations and vice versa (Ding, Yan, Frazho, & Caverlee, 2009). That being said, PageRank remains as an important measure to report in bibliometric reviews, as its value resides in its ability to discern the quality of an article, wherein high-quality articles are those deemed as an important or a “must cite” article among highly-cited articles (Donthu, Kumar, Mukherjee, et al., 2021).
Moreover, PageRank can be used for clustering to reveal the themes in a review domain, thereby providing dual benefits for bibliometric reviews.
In this review, the PageRank analysis organically produced six major clusters (see Table 7), with 10 of the most prestigious articles reported for each cluster.
Cluster 1, which embodies the theme of transfer pricing and tax policy, emerged as the biggest cluster (n =168 articles), with Jacob’s (1996) article entitled “Taxes and Transfer Pricing: Income Shifting and the Volume of Intrafirm Transfers” receiving the highest score on PageRank (PR = 0.006710) as result of being cited the most by highly-cited articles despite receiving only 263 global citations. This is followed by articles by Hines Jr. (1999) (PR =0.004520) and Reilly and Witt (1995) (PR = 0.003486).
Cluster 2, which encapsulates the theme of transfer pricing and in- ternational business, emerged as the second largest cluster (n =169 ar- ticles), with Rugman’s (1980) article entitled “Internationalization Theory and Corporate International Finance” receiving the highest score on PageRank (PR =0.017922). This is followed by articles by Wei- chenrieder (1996) (PR = 0.012611) and Reese et al. (1989) (PR = 0.012416).
Table 4
Top contributing authors to TP research.
Author Affiliation Number of articles
(s) Schjelderup, G. NHH Norwegian School of
Economics 11
Borkowski, S.C. La Salle University 9
Pfeiffer, T. University of Vienna 7
Balachandran, K.R. New York University 6
Baldenius, T. Columbia University 6
Eden, L. Texas A&M University 6
Lo, A.W.Y. Lingnan University 6
Richardson, G. Macquarie University 6
Taylor, G. Curtin University 6
Emmanuel, C. University of Glasgow 5
Matsui, K. Kobe University 5
Ronen, J. New York University 5
Note: Top contributing authors with five or more published articles on TP.
Table 5
Top author collaborations in TP research.
Author 1 Author 2 Number of article(s)
Richardson G. Taylor G. 6
Arya A. Mittendorf B. 4
Lin Z. Wong R.M.K. 4
Balachandran K.R. Li S.-H. 3
Baldenius T. Reichelstein S. 3
De Waegenaere A. Wielhouwer J.L. 3
Nerudov´a D. Solilov´a V. 3
Raimondos-Møller P. Schjelderup G. 3
Schindler D. Schjelderup G. 3
Note: Top author collaborations with three or more published articles on TP.
Table 6
Top institutions in TP research.
Institution Country Number of article(s)
NHH Norwegian School of Economics Norway 14
New York University United States 10
Texas A&M University United States 10
Tilburg University Netherlands 10
University of Oxford United Kingdom 10
Copenhagen Business School Denmark 9
La Salle University United States 9
Lingnan University Hong Kong 9
Stanford University United States 9
Columbia University United States 8
New York University United States 8
University of Glasgow United Kingdom 8
Note: Top institutions with eight or more published articles on TP.
Cluster 3 (n =135 articles), which epitomizes the theme of transfer pricing and management organization, and Cluster 4 (n =77 articles), which exemplifies the theme of transfer pricing and supply chains, were the next biggest clusters, with Amershi and Cheng’s (1988) article entitled “Implementable Equilibria in Accounting Contexts: An Exploratory Study” (PR = 0.029946) and Li and Atkin’s (2002) article entitled
“Coordinating Replenishment and Pricing in a Firm” (PR = 0.002418) scoring the highest on PageRank, respectively.
Finally, Cluster 5 (n =19 articles), which represents the theme of transfer pricing and institutional environment, and Cluster 6 (n =13 arti- cles), which signifies the theme of transfer pricing and processes, were the smallest clusters, with Hanson’s (1975) article entitled “Transfer Pricing in the Multinational Corporation: A Critical Perspective” (PR =0.001913) and Swieringa and Waterhouse’s (1982) article entitled “Organizational Views of Transfer Pricing” (PR =0.002177) scoring the highest on Pag- eRank, respectively.
Fig. 4. TP research across countries.
4.8. Topics (RQ4)
A keyword co-occurrence analysis was conducted using all keywords of 735 articles in VOSviewer to unpack the topics, which can reveal the interest, in TP research (see Fig. 6). The premise underlying this analysis suggests that keywords are representative of the content of the article (Comerio & Strozzi, 2019). Importantly, the co-occurrence of keywords helps to create an understanding of a domain’s intellectual structure (Ding, Chowdhury, & Foo, 2001; Donthu, Kumar, Mukherjee, et al., 2021), and in this case, the topics in the intellectual structure of TP through a periodical lens.
The keyword co-occurrence network indicates several noteworthy trends. Early research on TP up to 2008 were centered around bread-and- butter issues of multinationals, such as cost allocation, pricing, perfor- mance management, and specific investments. The next wave of TP research between 2008 and 2012 were focused on divisionalization and internationalization issues, such as decentralization, international taxa- tion, international transfer pricing, and international trade. There was also a quick burst in interest of coordination and growth issues between 2012 and 2014, as seen through the keyword occurrences of supply chain management, outsourcing, and investment. Since 2014, TP research have mostly concentrated on compliance and tax management issues, such as tax avoidance, tax havens, tax planning, and profit shifting, which happen among multinationals at a global level, as seen through keyword occurrences such as global supply chain, FDI, OECD, and multinational companies and corporations. Game theory was also observed as a prominent lens used in the TP domain.
Tax-avoidance, which emerged as the most significant topic in the keyword co-occurrence network, has been discussed in the majority of TP papers (i.e., biggest keyword after “transfer pricing,” and as big a keyword as “transfer prices”). The seminal paper on tax-avoidance by Bartelsman and Beetsma (2003) discusses about income shifting using TP to avoid corporate tax. The TP policies, which were established for facilitating intra-firm trade for conglomerates, were utilized by many multinational enterprises to evade tax by leveraging tax arbitrage op- portunities between economic regions. Various authors such as Haufler and Schjelderup (2000) and Marques and Pinho (2016) have also dis- cussed about profit shifting using TP to low-tax countries. The broad- ening of the tax base, implementation of arm’s length pricing, and TP compliance index were few solutions explored in the extant literature.
5. Reflections and ways forward
The extant literature was analyzed to map the bibliometric attributes and the knowledge structure of the TP domain. In general, the biblio- metric analysis shed light on the leading authors, countries, institutions, outlets, articles, themes, and topics of TP research from 1968 to 2019, which encompass a period of about 50 years. In particular, the co- authorship, citation, keyword co-occurrence, PageRank, publication, and social network analyses that we performed and reported in our re- view have enabled us to answer four RQs and to provide eight major takeaways:
(1) TP research has grown exponentially over the years, with most articles appearing in recent years (RQ1);
(2) Guttorm Schjelderup, the United States, and the NHH Norwegian School of Economics were the top contributing author, country, and institution of TP research (RQ2);
(3) Grant Richardson and Grantley Taylor were the most productive co-authors in TP (RQ2);
(4) the United States and the United Kingdom served as lynchpins for TP collaborations (RQ2);
(5) the European Journal of Operational Research was home to most articles on TP, followed by Contemporary Accounting Research, International Journal of Production Economics, and Management Accounting Research (RQ3);
(6) the articles by Achrol and Kotler (1999) and Hirshleifer (1956) had the highest global and local citations, respectively, whereas the articles by Jacob (1996), Rugman (1980), Amershi and Cheng (1988), Li and Atkins (2002), Hanson (1975), and Swieringa and Waterhouse (1982) had the highest PageRank scores in their respective clusters (RQ3);
(7) the research themes on TP encapsulates the foundational under- standing of transfer pricing in conjunction with tax policy (Cluster 1), international business (Cluster 2), management or- ganization (Cluster 3), supply chains (Cluster 4), institution environment (Cluster 5), and processes (Cluster 6) (RQ4); and (8) the research topics on TP that evolve over time revolved around
bread-and-butter (up to 2008), divisionalization and interna- tionalization (2008 to 2012), coordination and growth (2012 to 2014), and compliance and tax management (2014 onwards) is- sues, with tax avoidance emerging as the most researched topic on TP (RQ4).
Our reading of the top 10 articles from each cluster emerging from the PageRank analysis and our scrutiny of the co-occurrence networks from the keyword co-occurrence analysis shaped our understanding of existing research and proposals for future research on TP.
In particular, existing research on TP was mainly about using TP as a tax avoidance tool, particularly by business conglomerates and multi- national enterprises. Indeed, tax avoidance through TP was a consistent issue, with almost every article in our review mentioning this issue as a passing reference or using this issue as a central theme for research. The common narrative explicates that TP is strategically employed to manage transactions so that most profits are shown in a tax-haven or a comparatively low-tax country. The arm’s length pricing was often discussed alongside tax avoidance aspects in most TP articles, and thus, the guidelines and frameworks informing this principle have also evolved over the years with inputs from and for scholars, practitioners, and policy makers.
Interestingly, the European Journal of Operational Research emerged as the major outlet for TP articles, though our review also acknowledges the presence of accounting and finance journals, which dominated the rest of the top publication outlets for TP research on our list. One possible reason that could explain this observation is the central role that TP plays in business operations, as highlighted by Erickson (2012), which includes functional areas such as manufacturing and supply
Fig. 5. Country collaborations in TP research.
Table 7
Most prestigious articles on TP based on PageRank.
Author(s) Article title Year Source title PageRank
Cluster 1: Transfer pricing and tax policy (n =168)
Jacob J. Taxes and transfer pricing: Income shifting and the volume of intrafirm
transfers 1996 Journal of Accounting Research 0.006710
Hines Jr. J.R. Lessons from behavioral responses to international taxation 1999 National Tax Journal 0.004520
Reilly B., Witt R. English league transfer prices: Is there a racial dimension? 1995 Applied Economics Letters 0.003486 Oyelere P.B., Emmanuel C.R. International transfer pricing and income shifting: Evidence from the UK 1998 European Accounting Review 0.003429
Swenson D.L. Tax reforms and evidence of transfer pricing 2001 National Tax Journal 0.002989
Clausing K.A. Tax-motivated transfer pricing and US intrafirm trade prices 2003 Journal of Public Economics 0.002824 Az´emar C., Corcos G. Multinational firms’ heterogeneity in tax responsiveness: The role of
transfer pricing 2009 World Economy 0.002675
Peralta S., Wauthy X., van Ypersele
T. Should countries control international profit shifting? 2006 Journal of International Economics 0.002599
Borkowski S.C. The transfer pricing concerns of developed and developing countries 1997 International Journal of Accounting 0.002513 Olibe K.O., Rezaee Z. Income shifting and corporate taxation: The role of cross-border intrafirm
transfers 2008 Review of Accounting and Finance 0.002470
Cluster 2: Transfer pricing and international business (n =167)
Rugman A.M. Internalization theory and corporate international finance 1980 California Management Review 0.017922 Weichenrieder A.J. Transfer pricing, double taxation, and the cost of capital 1996 Scandinavian Journal of Economics 0.012611 Reese R.A., Henneberry S.R.,
Russell J.R. Transfer pricing in multinational firms: A review of the literature 1989 Agribusiness 0.012416
Jensen O.W. Transfer-pricing and output decisions: The dynamic interaction 1986 Decision Sciences 0.011419
Scoppola M. Trade policies and the strategies of multinationals in the international grain
market 1993 Agribusiness 0.010090
Vaysman I. A model of cost-based transfer pricing 1996 Review of Accounting Studies 0.008471
Schjelderup G., Sørgard L. Transfer pricing as a strategic device for decentralized multinationals 1997 International Tax and Public Finance 0.007284 Elitzur R., Mintz J. Transfer pricing rules and corporate tax competition 1996 Journal of Public Economics 0.007029 Choi Y.K., Day T.E. Transfer pricing, incentive compensation and tax avoidance in a multi-
division firm 1998 Review of Quantitative Finance and
Accounting 0.005667
Jones C.S. Transfer pricing and its misuse: Some further considerations 1981 European Journal of Marketing 0.005310 Cluster 3: Transfer pricing and management organization (n =135)
Amershi A.H., Cheng P. Implementable equilibria in accounting contexts: An exploratory study 1988 Contemporary Accounting Research 0.029946 McAulay L., Tomkins C.R. A review of the contemporary transfer pricing literature with
recommendations for future research 1992 British Journal of Management 0.022457
Naert P.A. Measuring performance in a decentralized firm with interrelated divisions:
Profit cost center versus cost center 1973 Engineering Economist 0.018355
Holmstrom B., Tirole J. Transfer pricing and organizational form 1991 Journal of Law, Economics, and
Organization 0.013720
Jordan J.S. Accounting-based divisional performance measurement: Incentives for
profit maximization 1990 Contemporary Accounting Research 0.011175
Wagenhofer A. Transfer pricing under asymmetric information: An evaluation of
alternative methods 1994 European Accounting Review 0.011071
Tisdell C.A. Transfer pricing: Technical and productivity change within the firm 1989 Managerial and Decision Economics 0.010584 Lall S. Transfer-pricing by multinational manufacturing firms 1973 Oxford Bulletin of Economics and
Statistics 0.009825
van der Meer-Kooistra J. The coordination of internal transactions: The functioning of transfer
pricing systems in the organizational context 1994 Management Accounting Research 0.009407 Tomkins C. Making sense of cost-plus transfer prices where there are imperfect
intermediate good markets by a ‘pragmatic-analytical’ perspective 1990 Management Accounting Research 0.009128 Cluster 4: Transfer pricing and supply chains (n =77)
Li Q., Atkins D. Coordinating replenishment and pricing in a firm 2002 Manufacturing and Service Operations
Management 0.002418
Vidal C.J., Goetschalckx M. Global supply chain model with transfer pricing and transportation cost
allocation 2001 European Journal of Operational Research 0.002080
Lee H., Whang S. Decentralized multi-echelon supply chains: Incentives and information 1999 Management Science 0.002059 Goetschalckx M., Vidal C.J., Dogan
K. Modeling and design of global logistics systems: A review of integrated
strategic and tactical models and design algorithms 2002 European Journal of Operational Research 0.001987 Kouveils P., Lariviere M.A. Decentralizing cross-functional decisions: Coordination through internal
markets 2000 Management Science 0.001641
Cravens K.S., Shearon Jr. W.T. An outcome-based assessment of international transfer pricing policy 1996 International Journal of Accounting 0.001592 Wilhelm W., Liang D., Rao B.,
Warrier D., Zhu X., Bulusu S. Design of international assembly systems and their supply chains under
NAFTA 2005 Transportation Research Part E: Logistics
and Transportation Review 0.001408
Lakhal S.Y. An operational profit sharing and transfer pricing model for network-
manufacturing companies 2006 European Journal of Operational Research 0.001404
Wang Y., Gerchak Y. Capacity games in assembly systems with uncertain demand 2003 Manufacturing and Service Operations
Management 0.001313
Kouvelis P., Gutierrez G.J. The newsvendor problem in a global market: Optimal centralized and
decentralized control policies for a two-market stochastic inventory system 1997 Management Science 0.001281 Cluster 5: Transfer pricing and institutional environment (n =19)
Hanson J.S. Transfer pricing in the multinational corporation: A critical appraisal 1975 World Development 0.001913 Falvey R.E., Harold O. F. National ownership requirements and transfer pricing 1986 Journal of Development Economics 0.001381 Lall S. Transfer pricing and developing countries: Some problems of investigation 1979 World Development 0.001349 Kant C. Endogenous transfer pricing and the effects of uncertain regulation 1988 Journal of International Economics 0.001289 Rugman A.M. Internalization is still a general theory of foreign direct investment 1985 Weltwirtschaftliches Archiv 0.001048 Samuelson L. The multinational firm with arm’s length transfer price limits 1982 Journal of International Economics 0.001004 Prusa T.J. An incentive compatible approach to the transfer pricing problem 1990 Journal of International Economics 0.000862
Kant C. Multinational firms and government revenues 1990 Journal of Public Economics 0.000782
(continued on next page)
chains (Li & Atkins, 2002; Toktay & Wei, 2011). Upon detailed scrutiny, we observe that the TP articles published in the European Journal of Operational Research primarily focus on transfer pricing across supply chains, wherein TP is a popular practice among companies to transfer price relating to inventory and transportation cost. In that sense, though research from the accounting perspective is dominant, the operations perspective remains valuable as it elucidates how and why companies transfer price, thereby providing context to TP.
Another interesting observation is the emergence of Achrol and Kotler’s (1999) article on “Marketing in the Network Economy” as the most globally cited article. The article focuses on different aspects of networked organizations, which includes transfer pricing, from a mar- keting perspective. Nonetheless, the topic of transfer pricing appears to be peripheral in the article’s narrative, which explains why the article does not feature among the top locally cited articles. That is to say, though the article may be highly popular in the field of marketing, it is less popular among scholars who wish to gain in-depth insights on transfer pricing. More importantly, this observation highlights the util- ity of scrutinizing both global (i.e., unfiltered) and local (i.e., filtered) citations in order to unpack the true state of affairs in a review domain (Donthu, Kumar, Mukherjee, et al., 2021).
Besides that, we also observed that authors and institutions from Europe and the United States have dominated most research on TP, though contributions from Australia, China, India, and Japan have also witnessed encouraging growth in recent years. In most instances, countries such as the United States and the United Kingdom have served as lynchpins in TP-related research collaborations, which will likely continue in the near future given their continued prominence in recent years, as observed herein this review.
Moreover, game theory was a popular lens in TP research. This included game theory manifestations such as cooperative game (Leng &
Parlar, 2012; Rosenthal, 2008), coordination game (Radaelli, 1998), collaborative game (Clempner, 2019), and the Nash bargaining game (Clempner & Poznyak, 2017). Most of these articles focused on taxation and tax planning while analyzing how TP can be strategically employed for reducing cost and improving profitability.
Our reflections of existing research on TP suggests that scholars, moving forward, can analyze firms that have used TP to gain strategic cost advantages as compared to firms that use TP as a tax-avoidance mechanism. Big data tools backed by machine learning algorithms and new visualization programs such as Power BI and Tableau can support research endeavors in this direction by making it easy to classify, analyze, and interpret large sets of secondary data (Pandey et al., 2020).
Such research, in turn, would provide insights about various TP prac- tices and its impact on pertinent areas such as revenue, profitability, tax commitment, and compliance ratings.
Moreover, TP is arguably relevant in times of crises such as the
COVID-19 pandemic, where cost escalation and constraints in intra-firm movement are prominent. That is to say, organizations will need to revisit their TP policies, as a situation like the COVID-19 pandemic had not been envisaged while formulating intra-firm transactions. Indeed, many conglomerates are revisiting their value chain, revising items in the intra-firm transaction list, and looking at TP policies in their own organizations besides taking cues from large successful companies regarding best practices in managing such issues in times of crises (Rak
& Rak, 2020). Moving forward, we endeavor to extrapolate our pro-
posals for future research in greater detail in the next sections (RQ5).
5.1. Leveraging TP beyond compliance and tax avoidance
TP has been traditionally analyzed from a compliance and tax avoidance perspective (Davies et al., 2018; Klassen et al., 2017; Sari et al., 2020). However, TP can also be used to reduce cost, enhance process efficiency, and rationalize intra-firm transactions.
In particular, the use of big data and machine learning techniques can help organizations gather new insights regarding TP, wherein such insights can help organizations in their decision-making, such as whether products and services should be procured from third parties or within their own group of companies (Tian et al., 2016). In that sense, organizations should use TP strategically by considering the long-term implications of the entire conglomerate. Such an approach can help organizations move beyond a single product or a service decision to a more holistic perspective when taking intra-firm TP transaction de- cisions into consideration.
More importantly, the excessive focus on compliance and tax avoidance in the case of most TP instances should be reduced, as such a focus can lead to sub-optimal performance of the conglomerate. Future scholars should therefore focus on developing best practices on leveraging TP for the long-term benefit of organizations, such as by analyzing extensive primary TP data alongside secondary accounting data, and to use that information to (re)develop TP guidelines and frameworks, especially that which is cognizant of contemporary re- alities, such as the networks transpiring in today’s digital economy.
Thus, the following research question is proposed for future research:
RQ1. How can TP guidelines and frameworks be (re)configured and improved to synchronize intra-firm transactions in the short and long run in light of contemporary realities in a digital economy?
5.2. Comparative mapping and continuous improvement of TP rules and regulations
Given that TP is a global rather than a country- or region-specific phenomenon, we encourage future scholars, as a community Table 7 (continued)
Author(s) Article title Year Source title PageRank
Ahiakpor J.C.W. The profits of foreign firms in a less developed country – Ghana 1986 Journal of Development Economics 0.000701 Balachandran K.R., Ronen J. Incentive contracts when production is subcontracted 1989 European Journal of Operational Research 0.000680 Cluster 6: Transfer pricing and processes (n =13)
Swieringa R.J., Waterhouse J.H. Organizational views of transfer pricing 1982 Accounting, Organizations and Society 0.002177 Sacks S.R. Transfer prices in decentralized self-managed enterprises 1977 Journal of Comparative Economics 0.001019 Borkowsk S.C. Choosing a transfer pricing method: A study of the domestic and
international decision-making process 1992 Journal of International Accounting,
Auditing and Taxation 0.000983
Spicer B.H. Towards an organizational theory of the transfer pricing process 1988 Accounting, Organizations and Society 0.000913 Spicer B.H., Ballew V. Management accounting systems and the economics of internal
organization 1983 Accounting, Organizations and Society 0.000813
Kilmann R.H. The costs of organization structure: Dispelling the myths of independent
divisions and organization-wide decision making 1983 Accounting, Organizations and Society 0.000778
Sacks S.R. Divisionalization in large Yugoslav enterprises 1980 Journal of Comparative Economics 0.000691
Dejong D.V., Forsythe R., Kim J.-
O., Uecker W.C. A laboratory investigation of alternative transfer pricing mechanisms 1989 Accounting, Organizations and Society 0.000616
Ronen J. Social costs and benefits and the transfer pricing problem 1974 Journal of Public Economics 0.000607
Colbert G.J., Spicer B.H. A multi-case investigation of a theory of the transfer pricing process 1995 Accounting, Organizations and Society 0.000432
endeavor, to comprehensively map TP rules and regulations across the top trading nations in the world. This endeavor, in our view, can help scholars, practitioners, and policy makers to better locate the com- monalities and differences of TP rules and regulations amongst actively trading nations.
The outcome of the comparative mapping exercise can also serve as inputs for improving TP rules and regulations of nations and suprana- tional unions such as ASEAN and the European Union. The revisions in TP rules and regulations based on these inputs can help to optimize tax collection besides facilitating seamless intra-firm business transactions.
The findings can also help organizations to gain a bird’s eye view of complex TP laws in various countries and to support them in their compliance and documentation efforts in international business. Thus, we propose the following research question for future research:
RQ2. What are the similarities and differences across TP rules and regulations and how can they be (re)configured and improved to promote accountability, ethics, and transparency among business conglomerates and multinational enterprises engaged in intra-firm transactions?
5.3. Role of leadership in implementing TP practices
The implementation of TP in an organization is highly dependent on top management. To the best of our knowledge, there has been no study, to date, on TP that probes into this issue. The public disclosure of in- formation is one of the most important parts of TP filing. In particular, important TP-related documents require top management approval as tax information, arm length pricing, and financial detail disclosures in TP are linked to tax compliance. The leadership style of top management can therefore have an impact on the level of transparency in disclosure, tax compliance orientation (e.g., compliance versus strategic use of TP),
and tax data management. Thus, we put forth the following research question for future research:
RQ3. What is the role of leadership and organizational culture in TP and how do they shape the development and implementation of progressive TP practices?
5.4. Innovative approaches for arm length pricing
Innovative approaches in arm length pricing are another potentially fruitful research avenue within the TP domain. Most organizations in countries that are members of the Organization for Economic Co- operation and Development (OECD) and the United States calculate arm length pricing using the most appropriate method (MAM). Yet, the calculation for arm length pricing in the case of cross-border trans- actions can vary depending on the countries where intra-firm trans- actions occur. Future scholars may explore this issue deeper using large data sets to suggest novel approaches in arm length pricing imple- mentation. Thus, we propose that future research explore the following research question:
RQ4. What innovative methods (can) avail for arm length pricing and how do (would) they fare for intra-firm transactions across different countries?
5.5. Global TP norms
Global TP norms that establish the standard for TP is another avenue that could be explored. Future scholars should devise a mechanism where commonalities are covered in global TP norms. Other criteria or guidelines should also be considered, such as country-wise practices.
This is akin to the Patent Cooperation Treaty, where one can apply for a Fig. 6. Research themes on TP.