On the Benefits of Withholding Knowledge in Organizations

Matthias Kräkel

International Journal of the Economics of Business, 2005, vol. 12, issue 2, 193-209

Abstract: Transferring knowledge to an agent makes him more successful or productive, which is beneficial for the principal. However, knowledge transfer also increases the agent's outside option. I identify two reasons for withholding knowledge — to reduce labor costs within a principal-agent relationship, and to weaken the agent in case of a separation. Moreover, the role of synergy is discussed both for building up a principal-agent relationship and for transferring knowledge. While synergy is decisive for knowledge transfer, cooperation between the principal and agent may even take place in the absence of synergy. Furthermore, I analyze whether the principal is more likely to transfer knowledge to a more able or to a less able agent. Finally, the advantages and disadvantages of a noncompetition clause are briefly discussed.

Keywords: Competition; Incentives; Knowledge Transfer; Limited Liability; Organizations; JEL Classifications: J3; M5 (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (1)

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DOI: 10.1080/13571510500127493

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