On the Benefits of Withholding Knowledge in Organizations |
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Authors: | Matthias Kräkel |
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Affiliation: | Department of Economics, BWL II , University of Bonn , Adenauerallee 24–42 , D‐53113 Bonn , Germany E-mail: m.kraekel@uni‐bonn.de |
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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. |
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Keywords: | Competition Incentives Knowledge Transfer Limited Liability Organizations JEL Classifications: J3, M5 |
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