Study on the incentive mechanism of knowledge transfer from the service provider in outsourcing

This paper builds and solves a Hotelling model to explore the incentive mechanism about the knowledge transfer from the service provider in outsourcing. The results show that the incentives from the client can improve the knowledge transfer effect level of the service provider efficiently, and the equilibrium piece rate is lower for the higher service provider´s degree of (constant absolute) risk aversion, larger service provider´s effort costs and greater outsourcing risk. In additional, the client´s incentive level can also enhance the client firm performance efficiently.