The interests of joint venture partners

Transfer pricing can be used to preserve the multinational firm’s share in the profit generated by a joint venture.To accomplish this objective, the multinational firm charges the joint venture high transfer prices.Of course, this kind of practice would create conflict between the multinational firm and the foreign partner in the joint venture, because the foreign partner prefers low transfer prices.This is why the transfer pricing policy should be agreed upon prior to the establishment of a joint venture.