This paper deploys Transaction Cost Economics (TCE) to elaborate on the shortcomings of "mainstream" transfer pricing in multinational firms. Departing from the notion that multinationals increasingly (re-)organize their business along multinational value chains irrespective of jurisdictional borders, the paper discusses the nature of the multinational firm and the problem of choosing the right intra-group (transfer) price. The mainstream transfer pricing approach derived from the Arm´s Length Principle is deemed inappropriate for globalized MNEs. Referring to the value chain model, the paper suggests that "entrepreneurial coordination" is the key performance feature to be used for valuing business activity and for allocating-for tax transfer pricing purposes-standard markups and residual profits along the value chain.