I develop a model of knowledge sharing in organizations where coordinated activity requires shared knowledge, and the propagation of knowledge is local and self-interested. Because propagation is local, shared knowledge takes time to spread across an organization. As a result, knowledge may be fragmented: multiple cliques may form that are unable to coordinate with each other. Because knowledge sharing is self-interested, fragmentation may persist over the long run even when it is socially inefficient.

The model has implications for organizational strategy. Fragmentation develops and persists when an organization grows too rapidly; consequently, managers of highly productive firms may deliberately constrain firm growth and eschew acquisition-based growth strategies in favor of organic growth. Also, shared knowledge is persistent, and organizations that undertake new activities may be unable to adjust their shared knowledge to adapt. Organizations may implement policies such as mentorship programs and job rotation to develop shared knowledge.