Bulend Terzioglu
Lecturer, Australian Catholic University, Australia.
Adam Steen
Professor, Australian Catholic University, Australia.Sowing the Seeds of Transfer Pricing Conflict
There is research evidence that suggests that conflicts that emanate
from transfer pricing have far-reaching adverse consequences for
interdivisional cooperation, sharing of information, goal congruence,
employee motivation and performance. Conflict remains, however, a
relatively less explored aspect of transfer pricing in the accounting
literature. It is acknowledged that although conflict cannot be totally
eliminated, some conflict may be even desirable. It is essential to gain
insight to the complexities inherent in conflict and resolution methods
so as to minimise undue strain on individuals affected. The aim of this
paper is therefore to identify and examine the nature of transfer pricing
conflicts and the manner in which these conflicts are resolved.
The data for the present study were gathered from 80 service firms
in Australia via a postal questionnaire and 11 face-to-face interviews
with managers who are directly involved in transfer pricing. The results
of the survey reveal that the vast majority of organizations experience
frequent conflicts brought about by transfer pricing, with opportunistic
behaviour the most commonly cited reason, and that most conflicts are
resolved through negotiation between the disputing parties, followed
by a forced solution from top management. These results add further
evidence that transfer pricing continues to contribute to significant
interdivisional conflict with no resolution yet apparent.
This study represents the first empirical attempt to investigate the
transfer pricing conflict exclusively in a service setting, and develops an
enhanced understanding of factors that give rise to conflicts, and the
prevailing practices of conflict resolution methods.