Facilitating knowledge transfer in organizations through incentive alignment and IT investment

Knowledge transfer plays a fundamental role in the success of knowledge management systems. Information technology facilitates knowledge sharing and learning. In this paper, we study the role of incentives and information systems in knowledge transfer. We incorporate both the reward and cost for knowledge sharing and learning in a modeling framework, capture the characteristics of both information system and incentives, and explore how the IT investment complements the incentives in facilitating knowledge transfer. We investigate the appropriate incentive mechanisms that can align the individual responses with the organization's optimal level of knowledge sharing and show that various organizational objectives (e.g., maximal profit, maximal knowledge flow, and minimal technology threshold for full sharing) can be achieved by designing different incentive schemes. We focus on the complementarity between information systems and incentives in knowledge transfer and determine the threshold level of information technology sophistication required to support full knowledge sharing.