Offshore software development by Korean companies is mainly led by big SI (System Integration) companies. They open Offshore Development Centers (ODC) in developing countries such as India, China, and Vietnam to source software development for their mother companies. Firms with ODC consider transferring knowledge such as business and cultural knowledge as the most complicated yet essential process for the success of offshore development. This study investigates whether the selection of a governance mechanism is related with knowledge transfer and thus the success of offshore development. The results of this study indicate that a hierarchical governance mechanism is appropriate for transferring company-specific, sensitive, complex knowledge in offshore software development.