A buyer’s technical knowledge may increase the efficiency of its supplier. Suppliers, however, frequently maintain relationships with additional buyers. Knowledge disclosure then bears the risk of benefiting one’s own rival due to opportunistic knowledge transmission through the common supplier. We show that in one-shot relationships no knowledge disclosure takes place because the supplier has an incentive to transmit and, anticipating that, buyers refuse to disclose any of their knowledge. In repeated relationships knowledge disclosure is stabilized by larger technological proximity between buyers and suppliers and destabilized by the absolute value of the knowledge.
Review of Industrial Organization – Springer Journals
Published: Feb 12, 2008
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