Knowledge markets in firms: knowledge sharing with trust and signalling

Knowledge sharing and learning are critically important to the success of knowledge management. In this research, we study the design of incentive rewards to facilitate knowledge transfer utilizing an internal knowledge market within organizations. The internal knowledge market is modelled as a marketplace where knowledge providers can send signals about their knowledge and learners may voluntarily acquire the knowledge based on the signals. Three types of knowledge recipients are differentiated with respect to their signalling threshold functions: knowledge connoisseur, knowledge public, and knowledge dilettante. In addition, a knowledge recipient may be either humble or arrogant, with different propensities for learning characterized by different learning inhibition cost functions. For different knowledge recipients, we study the knowledge providers’ best signalling strategies and the firm's optimal design of reward structures. Knowledge providers will adopt different signalling strategies if they lack the necessary trust that knowledge recipients will accurately report their learning. We analyse how the firm can offer learning rewards and employ IT support to improve the trust so as to increase knowledge transfer. This research provides valuable insights for practitioners to manage an internal knowledge market.