Abstract
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. Copyright 2004, Oxford University Press.
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