Optimal Decision on Knowledge Transfer and Human Capital Investment in a Team Environment

In this paper, the effects on the optimal decision was studied, when agents are presented with the option of human capital investment besides working on their own tasks and transferring knowledge to each other within a team environment where each member will be rewarded not only on the basis of own productivity but additionally on the basis of the whole team's total output. The key findings of this paper are that agent's decisions to help one another have economic content and are strongly influenced by promotion-based incentives. In addition, the contents of the contract also affect the agent's decision on human capital investment, the negative effect for a large expected promotion prize on transferring knowledge efforts is lessened when the firm is better able to credit the agent for transferring knowledge to others.