Price Mechanism for Knowledge Transfer: An Integrative Theory

  • Authors:

  • Ming-Hui Huang;Eric Wang;Abraham Seidmann

  • Affiliations:

  • The Department of Information Management, National Taiwan University;The School of Management, National Central University, Taiwan;The William E. Simon Graduate School of Business Administration, The University of Rochester

  • Venue:
  • Journal of Management Information Systems
  • Year:
  • 2007

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Abstract

Knowledge transferred in the open market via a price mechanism enjoys the benefits of avoiding internal competition, learning from external competitors, and accmulating diversified knowledge. In the market, users can access a repository of knowledge for a single price (repository pricing) or knowledge items in the repository can be sold individually (knowledge pricing). However, users have been found to prefer repository pricing but not the knowledge in the repository. This irrationality can cause market failure because users derive a suboptimal level of utility from the knowledge repository, and vendors have contradictory pricing and knowledge strategies. We empirically examine a joint explanation from two competing theoretical perspectives that accounts for this inconsistency nicely: The mental accounting perspective endorses repository pricing because it entices users with the benefits of the whole repository, whereas the transaction decoupling perspective finds expression in individually priced knowledge because it prevents the discrete benefit of knowledge from becoming obscure. By integrating the two theoretical perspectives and considering price, knowledge, and user characteristics simultaneously, the results offer important implications for the market transfer of knowledge. Repository pricing attracts users and is essential to initiate the transfer process, whereas knowledge pricing generates knowledge preference and is thus an effective approach for learning.