In the knowledge economy era, knowledge empowering matters for the competitiveness of SOE in the mixed ownership reform. Based on the perspective of tacit knowledge sharing, this paper builds a mixed oligopoly model to study the optimal mixed ownership structure and its impact on social welfare. We find that: First, the private enterprise has incentives to share tacit knowledge if and only if equity share acquired by it is larger than a certain threshold (hereafter called equity transfer threshold). Mixed ownership that without knowledge sharing cannot improve welfare. Second, the equity transfer threshold that exactly incentivizes knowledge sharing corresponds to the optimal ownership structure. At this optimal ownership structure, the social welfare can be improved if and only if the SOE’s absorptive capacity is higher than a certain threshold and the knowledge value lies in a reasonable range. Further analysis shows that equity transfer threshold that incentivizes knowledge sharing remains robust after we consider explicit knowledge transfer, increasing marginal cost, differentiated duopoly and the multitask of stateowner. Meanwhile, in the vertical industrial chain structure, the private firm has endogenous incentives to share tacit knowledge, but the ownership structure still matters for social welfare. Finally, if the knowledge value is the private enterprise’s private information, a feasible contract can be designed to screen the knowledge type. This study enriches the theory of mixedownership firm, provides analytical framework and guidance for the practice of mixedownership reform.