Organizational Behavior and Human Decision Processes Vol. 82, No. 1, May, pp. 150–169, 2000 doi:10.1006/obhd.2000.2893, available online at http://www.idealibrary.com on Knowledge Transfer: A Basis for Competitive Advantage in Firms Linda Argote Carnegie Mellon University and Paul Ingram Columbia University This concluding article in the special issue of Organizational Behavior and Human Decision Processes on the foundations of knowledge transfer in organizations argues that the creation and transfer of knowledge are a basis for competitive advantage in firms. The article builds on a framework of knowledge reservoirs to show why knowledge transfer can be difficult and to identify the kinds of knowledge that are most difficult to transfer to differ- ent contexts. The article develops the proposition that interac- tions among people, tasks, and tools are least likely to fit the new context and hence are the most difficult to transfer. This theoretical result illuminates how organizations can derive com- petitive advantage by transferring knowledge internally while preventing its external transfer to competitors. Because people are more similar within than between organizations, interactions involving people transfer more readily within than between firms. By embedding knowledge in interactions involving people, organizations can both effect knowledge transfer internally and impede knowledge transfer externally. Thus, knowledge embed- ded in the interactions of people, tools, and tasks provides a basis for competitive advantage in firms.  2000 Academic Press The ability to transfer knowledge from one unit to another has been found to contribute to the organizational performance of firms in both the manufacturing We thank Joel Baum, Aime ´e Kane, Bill McEvily, Dick Moreland, Ron Ophir, Ray Reagans, and Peter Roberts for their helpful comments. Address correspondence and reprint requests to Linda Argote, Graduate School of Industrial Administration, Carnegie Mellon University, Pittsburgh, PA 15213. E-mail: argote@cmu.edu. 150 0749-5978/00 $35.00 Copyright  2000 by Academic Press All rights of reproduction in any form reserved.