Do US pharmaceutical companies strategically shift income to international affiliates?. Issue 1 (18th April 2016)

• Record Type: Journal Article
• Authors: Brajcich, Andrew M.; Friesner, Daniel L.; Schibik, Tim J.
• Is Part Of: Multinational business review. Volume 24:Issue 1(2016)
• Page Start: 8
• Page End: 24
• Publication Date: 2016-04-18
• Subjects: Pharmaceutical industry -- Outsourcing -- Income shifting -- International taxation -- Tax competition; H26 -- F23; International business enterprises -- Periodicals; International business enterprises -- Accounting -- Periodicals; International business enterprises -- Management -- Periodicals; Comparative accounting -- Periodicals; Comparative management -- Periodicals; 338.88
• DOI: 10.1108/MBR-06-2015-0025
• Languages: English
• ISSNs: 1525-383X

Abstract

Abstract : Purpose: The purpose of this study is to empirically identify incentives that drive resource shifting by US pharmaceutical firms to comparatively low-tax jurisdictions. Design/methodology/approach: Using a panel of publicly listed companies, we investigate whether resource shifting is facilitated by two underlying factors. First, we examine whether pharmaceutical manufacturers whose intangible assets are disproportionately held as intellectual property are more or less likely to shift resources to jurisdictions outside of the USA. Second, we empirically determine whether manufacturers that derive most of their revenues from producing a specific type of product are more or less likely to shift income-producing resources to their international affiliates. Findings: The empirical results suggest that pharmaceutical factors do practice strategic resource shifting. Moreover, pharmaceutical manufacturers which produce biologic medications are significantly less likely than other manufacturers to practice resource shifting. We find no evidence to suggest that firms whose intangible assets are more composed of intellectual property are any more or less likely to practice resource shifting. Originality/value: To date, a plethora of studies exist which examine resource shifting in a large, general population of multinational corporations. However, there are relatively few studies that examine international resource shifting in the pharmaceutical industry.