ABSTRACT
Transfer pncmg by multinational enterprises (MNEs) has received considerable attention from academics, host-country governments and international organizations. This research has taken essentially four forms: (1) theoretical analyses of the conditions under which MNEs might find it to their advantage to charge transfer prices that do not reflect market, arm's-length prices (Mathewson and Quirin, 1979, Chapters 4-6; Abdel-Khalik and Lusk, 1974); (2) studies that focus on the transfer pricing practices of one or a small number of MNEs (Tang, 1979, 1980; Arpan, 1972a); (3) studies that use large-sample, often highly aggregate data to draw inferences on the extent of manipulation of transfer prices by MNEs (Vaitsos, 1974); and (4) studies that examine the implications of transfer pricing for management in accounting, marketing, finance, control, personnel evaluation, etc. (Barrett, 1977; Benke and Edwards, 1980; Finnie, 1978; and Merville and Petty, 1978). This paper helps to link the theoretical and the descriptive analyses of the determinants of the level at which MNEs set transfer prices. It uses data collected in 1978 on the import and export pricing practices of 111 MNEs that operated 153 subsidiaries in six light manufacturing industries in the five countries of the ASEAN region: Thailand, Malaysia, Singapore, Indonesia and the Philippines.! It uses these data to test hypotheses concerning the determinants of the transfer price policies and the extent by which non-market transfer prices differed from market-based prices for imports and exports,by the MNEs in the sample.
