Until recently, the concept of tacit knowledge has been neglected by academics and managers alike, but this has now changed as tacit know-how has become recognized as playing a key role in firm growth and economic competitiveness. Tacit knowledge forms an important element in a firm's knowledge base and has a central role in organizational learning. This paper analyzes what is meant by tacit knowledge and outlines its main parameters and traits. The analysis stresses the need to view tacit knowledge in a dynamic setting, and that tacit knowledge can be acquired and transferred on a variety of levels: individual, group, firm and inter-firm basis. The paper then explores the policy implications of technology transfer initiatives which seek to shift tacit know-how between firms and analyzes the ways that this can be achieved.