IDEAS home Printed from https://ideas.repec.org/a/taf/tprsxx/v57y2019i9p2901-2925.html
   My bibliography  Save this article

Transfer pricing and channel structure of a multinational firm under overseas retail disruption risk

Author

Listed:
  • Baozhuang Niu
  • Yaoqi Liu
  • Feng Liu
  • Carman K.M. Lee

Abstract

Considering a chain-to-chain competition model, we formulate a new multinational firm's (MNF's) trade-off between global tax-planning gains (via transfer pricing) and channel decentralisation loss. In the presence of an established MNF's competition, it is optional for the new MNF to operate two divisions (one for domestic manufacturing and one for overseas retailing) or one integrated division selling products to an independent overseas retailer at a wholesale price. For the former, we characterise the new MNF's transfer pricing strategies and find that interestingly, MNFs might both keep profits in high-tax region due to the tense competition in the retailing stage. For the latter, we find that the new MNF's channel decentralisation via wholesaling can be a win–win situation for the established MNF and itself, when the new MNF's overseas retail cost is in a moderate range. We further examine the new MNF's overseas retail disruption risk and find that, this risk drives the new MNF to lower the transfer price sharply and intensifies the retail competition. We use contraction mapping argument to show the uniqueness of the system equilibrium.

Suggested Citation

  • Baozhuang Niu & Yaoqi Liu & Feng Liu & Carman K.M. Lee, 2019. "Transfer pricing and channel structure of a multinational firm under overseas retail disruption risk," International Journal of Production Research, Taylor & Francis Journals, vol. 57(9), pages 2901-2925, May.
    • Handle: RePEc:taf:tprsxx:v:57:y:2019:i:9:p:2901-2925
    DOI: 10.1080/00207543.2018.1516902
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/00207543.2018.1516902
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/00207543.2018.1516902?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Niu, Baozhuang & Mu, Zihao & Cao, Bin & Gao, Jie, 2021. "Should multinational firms implement blockchain to provide quality verification?," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 145(C).
    2. Niu, Baozhuang & Li, Qiyang & Liu, Yaoqi, 2020. "Conflict management in a multinational firm's production shifting decisions," International Journal of Production Economics, Elsevier, vol. 230(C).
    3. Niu, Baozhuang & Ruan, Yiyuan & Yu, Xinhu, 2024. "Purchasing new for remanufacturing: Sourcing co-opetition, tax-planning and data validation," International Journal of Production Economics, Elsevier, vol. 273(C).
    4. Zhang, Xuefeng & Li, Guo & Liu, Mengqi & Sethi, Suresh P., 2021. "Online platform service investment: A bane or a boon for supplier encroachment," International Journal of Production Economics, Elsevier, vol. 235(C).
    5. Niu, Baozhuang & Shen, Zifan & Xie, Fengfeng & Liu, Yaoqi & Xu, Xin, 2022. "Real-time payment in cross-border operations considering local competition and tax-planning," International Journal of Production Economics, Elsevier, vol. 245(C).
    6. Zhong, Yuanguang & Yang, Tong & Zillmann, Stefan & Cao, Bin, 2022. "The role of government regulatory policies in financing capital-constrained retailers under competition," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 157(C).
    7. Niu, Baozhuang & Zhang, Nan & Xu, Haotao & Chen, Lei & Ji, Ping, 2022. "Inviting MNFs’ green offshoring: Is it an effective way to coordinate economic and environmental sustainability?," International Journal of Production Economics, Elsevier, vol. 254(C).
    8. Changwen Li & Bin Cao & Yong-Wu Zhou & T. C. Edwin Cheng, 2023. "Pricing, coalition stability, and profit allocation in the pull assembly supply chains under competition," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 45(3), pages 977-1011, September.
    9. Zhang, Ting & Wang, Yulan & Shen, Bin & Prak, Dennis, 2023. "Welfare-maximizing tariff versus trade-surplus-maximizing tariff: Impacts on multinational firm competition," International Journal of Production Economics, Elsevier, vol. 264(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:tprsxx:v:57:y:2019:i:9:p:2901-2925. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/TPRS20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.