Rewarding knowledge sharing under measurement inaccuracy

Knowledge sharing is a critical step for successful knowledge management. However, sharing knowledge not only requires time and effort of a knowledge worker but also reduces the unique value or power that the worker enjoys in the organization. Therefore, for successful knowledge sharing, a reward system is used to compensate knowledge sharing activities. In this paper, we consider a situation where there exists measurement inaccuracy in the actual amount of knowledge shared by risk-averse workers. We analyze the optimal reward system for knowledge sharing and the optimal investment to address measurement inaccuracy. Through the analysis, a simple optimal reward system is derived. This system is linear in the amount of knowledge sharing and compensates for the workers’ costs of knowledge sharing and risk-bearing. Additionally, the optimal investment to improve measurement accuracy is characterized by balancing the investment cost against the workers’ risk-bearing cost. Finally, a comparative statics analysis is conducted to investigate the effect of changes in exogenous factors on the optimal reward system, the amount of knowledge sharing, and the amount of optimal investment. Insights from our analysis can contribute to the better management of knowledge sharing through reward systems and the effective implementation of a knowledge management system.