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On the Benefits of Withholding Knowledge in Organizations

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  • Matthias Krakel

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.

Suggested Citation

  • Matthias Krakel, 2005. "On the Benefits of Withholding Knowledge in Organizations," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 12(2), pages 193-209.
  • Handle: RePEc:taf:ijecbs:v:12:y:2005:i:2:p:193-209
    DOI: 10.1080/13571510500127493
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    References listed on IDEAS

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    1. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, January.
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    Cited by:

    1. Kräkel, Matthias & Sliwka, Dirk, 2006. "Should You Allow Your Agent to Become Your Competitor? On Non-Compete Agreements in Employment Contracts," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 99, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    2. Moore, Fiona, 2012. "Identity, knowledge and strategy in the UK subsidiary of an Anglo-German automobile manufacturer," International Business Review, Elsevier, vol. 21(2), pages 281-292.

    More about this item

    Keywords

    Competition; Incentives; Knowledge Transfer; Limited Liability; Organizations; JEL Classifications: J3; M5;

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • M5 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics

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