We model a value chain, which consists of two stages of value creation. Within this model we show how the relative importance of general and idiosyncratic knowledge interacts with the hold up problem to determine the comparative advantages of markets, hierarchies, and cooperatives. In our model a market form is (weakly) dominated by a cooperative organization. We show that cooperatives (hierarchies) are an efficient response to the hold up problem if idiosyncratic (general) knowledge is important. A trade off arises if both general and idiosyncratic knowledge is important for value creation. This trade off determines the choice between cooperatives (idiosyncratic knowledge is relatively more important) and hierarchies (general knowledge is relatively more important).