On Information Sharing and Incentives in R&D

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. Copyright 2001 by the RAND Corporation.