Abstract This research examines the implications of complementarity of organizational design involving two key factors associated with transfer pricing, sourcing and compensation structure, on the behavior of negotiators determining transfer prices. The results demonstrate that the transfer pricing policy is perceived as unfair when organizational designs are not complementary compared to when the designs are complementary. Further, in the absence of complementary designs, the manipulative disposition of negotiators is a significant predictor of which negotiator will achieve higher outcomes in dyadic negotiations of transfer prices. Thus, the motivation of organizational members is not simply an exogenous variable to which the organizational design needs to be altered, but is endogenous to the system, being in part the result of the organizational design. This has implications for control systems since both the organization designs that define the scope of control systems and the behavior due to organizational designs are antecedents to the behavior from control systems.
Dipankar Ghosh (Wed,) studied this question.