Standards across borders: Crossborder diffusion of the arm's length standard in North America

The arm's length standard is used by corporate income tax authorities to price international intracorporate transactions and allocate intracorporate income and expenses of multinational enterprises. In this paper, we examine the socio-historical evolution of transfer pricing regulation in North America. We develop a model of crossborder diffusion of standards, using institutional theory and the logic of embeddedness, that focuses on three components of crossborder diffusion: timing, motivation and form. Our model is then applied to the evolution and diffusion of the arm's length standard within North America from 1917 to the present. © 2000 Elsevier Science Ltd. All rights reserved.