The question of the management of the transfer process and transfer pricing is an important one for managers and academics alike (Colbert and Spicer, 1995). Yet, in general, our current knowledge on several aspects of transfer pricing process is limited. One question which arises in relation to transfer pricing in service organizations is whether there is an association between the transfer price and the internal customer's perception of value emanating from the transaction. An inappropriate transfer pricing system can give rise to a number of adverse effects which can include among other things, maldistribution of economic resources, negative motivation for reducing costs (Lesser, 1987), lack of goal congruence and inequitable performance evaluation (Cravens and Shearon, 1997). The gap in the literature on transfer pricing in the service sector applies equally in the Australian setting. This is despite the significant and increasing contribution of the service sector to both GDP and employment. The objective of this research is to explore the domestic transfer pricing practices of service organisations in Australia with the emphasis placed on examining whether, in internal transactions, the domestic transfer price had any influence on the value perceived by the internal buyer. Because the extant transfer pricing theories cannot explain the value perceived by the internal customer in internal exchange of goods and services, an exploratory research methodology is adopted and no assumptions are made about the relationship. PDF created with pdfFactory trial version www.pdffactory.com 3 Data were gathered from survey responses from eighty service organisations and thirteen face-to-face interviews. Survey data were sought at two levels. Questions of a strategic nature were directed to corporate management while questions pertinent to transfer pricing and value were sought from the divisional management who are actually involved in such transfers. Exploratory factor analysis was used to analyze the data. The findings indicate that cost-based transfer pricing was the most preferred method, and in internal transactions, and responsiveness of the internal supplier was the key factor for internal buyers. The research found that service organisations are external customer oriented and internal customer issues are secondary. The research results also demonstrate that no significant association exists between transfer pricing and internal customer perceived value. The current research contributes to the transfer pricing literature by providing insights to locus of transfer pricing decisions, transfer pricing methods employed by service organizations in Australia, objectives of transfer pricing systems, conflicts arising during from the transfer pricing process and the role of transfer prices on the value perceived by internal customers. As a research topic, this study is pioneering as it integrates for the first time, the constructs of transfer price and value in internal transactions. Another unique feature of this research is that it was carried out in another important but under-researched context of service organisations.
| Identifer | oai:union.ndltd.org:ADTP/210322 |
| Date | January 2007 |
| Creators | Terzioglu, Bulend, bulend.terziogluu@acu.edu.au |
| Publisher | RMIT University. Accounting and Law |
| Source Sets | Australiasian Digital Theses Program |
| Language | English |
| Detected Language | English |
| Rights | http://www.rmit.edu.au/help/disclaimer, Copyright Bulend Terzioglu |
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