Introduction of Design Thinking in Arm's Length Analysis: A New Lens to Decode Real Commercial Behaviour

Transfer pricing has always claimed to reflect real commercial behaviour. In practice, however, the analysis typically relies on contracts, job descriptions, process charts, and financial outcomes. What remains invisible is the deeper human and organizational logic that shapes how cross-border decisions are actually made. This analytical blind spot explains why many transfer pricing positions appear defensible on paper but collapse under audit scrutiny. This article proposes the integration of Design Thinking methodology into Arm's Length Analysis as a structured approach to understanding how people think, decide, collaborate, and create value inside complex multinational systems. By applying Design Thinking principles, transfer pricing practitioners can anchor their analyses in behavioural reality rather than documentary narrative, thereby improving both the accuracy and defensibility of their positions.