Incentivizing Knowledge Transfers

Zhonghong Kuang, Yi Liu and Dong Wei

Papers from arXiv.org

Abstract: We study the optimal design of relational contracts that incentivize an expert to share specialized knowledge with a novice. While the expert fears that a more knowledgeable novice may later erode his future rents, a third-party principal is willing to allocate her resources to facilitate knowledge transfer. In the unique profit-maximizing contract between the principal and the expert, the expert is asked to train the novice as much as possible, for free, in the initial period; knowledge transfers then proceed gradually and perpetually, while the principal offers lump-sum compensations to the expert right after verifying each transfer; even in the long run, a complete knowledge transfer might not be attainable. Our analysis sheds light on the success of several prominent cross-border technology transfers that took place in China's auto industry and Korea's high-speed rail development.

Date: 2025-07, Revised 2026-01
New Economics Papers: this item is included in nep-cta, nep-knm and nep-mic
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