Purpose – The purpose of this paper is to conduct an investigation into knowledge-sharing mechanisms by empirically testing the role that context plays in the transfer of actionable knowledge, and, in turn, for innovation. Design/methodology/approach – A multiple-respondents survey was performed in 72 business units of companies belonging to the ICT, pharmaceutical and food industries in Greece. In total, 295 useful questionnaires were collected using a multiple respondent strategy. All constructs were measured with multi-item scales and validated using exploratory factor analyses. A total of seven hypotheses were generated following a literature review on the key determinants of context for effective knowledge sharing. The hypotheses were tested using ordinary least squares regression. Findings – The research shows that when units pursue knowledge transfer between their different actors, contextual factors such as trust, motivation to transfer knowledge, management support and learning orientation are crucial for fostering knowledge transfer and innovation. This contribution is important since the need for developing an organizational context where knowledge transfer and innovation flourish is constantly put forth in the business press, while the empirical and research based evidence for its importance has been scarce. Research limitations/implications – There is a research need in knowledge sharing theory to define and identify an integrated model concerning the contextual factors that enable the knowledge sharing process. Having established a firm relationship between organizational context and innovation, the research also sets a foundation for further exploring the organization-environment link in terms of leveraging organizational knowledge dynamics. Originality/value – The research is a first attempt to show that the construct “perceived usefulness of knowledge” is a critical proxy of knowledge transfer effectiveness, as well as to find support for its positive relation to innovation.