On Information Sharing and Incentives in R&D

Abstract

I investigate the issue of endogenous spillover of R&D information across firms through information exchange between their employees. Although the firms typically cannot observe and restrict communication between their employees in a direct way, they can regulate information flows through the incentive schemes offered to the employees. The article focuses on two issues: characterization of the optimal incentive schemes, and the link between the nature of the firms' interaction in the product market and the intensity of information exchange between the employees.