Knowledge transfer through international inter-firm strategic alliances has recently become an essential source of competitive advantages of firms in the world economy. Existing studies on knowledge transfer have focused on the formal aspects such as the choice between equity and non-equity modes, failing to correctly capture the deeper and complex process in knowledge transfer, which is critical for the successful transfer. This paper analyzed the properties and characteristics of knowledge and various types of compensation for the transferred knowledge and the major processual issues regarding knowledge transfer from the perspectives of agency theory and the relation view of knowledge transfer. It also proposed a framework to guide the knowledge recipient's decision in choosing appropriate compensation types.
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