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This paper examines tacit knowledge transfer for competitive advantage. In a usual outsourcing business from Customer to EMS firm, only explicit knowledge is exchanged and know-how is transferred from Customer to EMS firm. However, in the case of the successful EMS firm, there was a case that the tacit knowledge including know-how was reversely transferred from the firm to the customer. Requirements of the customer stimulate inactive tacit knowledge of the firm from the production engineering (PE) points of view, which leads to the suggestion to be made to the customer. This activates the related tacit knowledge on the customer side and yields improved design by the customer to match the PE to maximize quality and productivity in volume production in the EMS firm. In this case, two kinds of tacit knowledge existed in both parties are activated separately by exchange of explicit knowledge. This co-activation process practically achieves tacit knowledge transfer. Tacit knowledge activated and transferred through this co-activation mechanism complements the gap of knowledge existed between the design of new products on the customer side and PE on the firm side, and can be a source of competitive advantage for the both parties.