The paper analyzes the organization of the R&D activity in an incomple
te contract framework. It provides theoretical foundations: (a) to und
erstand how the allocation of property rights on innovations may affec
t both the frequency and the magnitude of these innovations; (b) to ra
tionalize commonly observed features in research employment contracts,
such as shop rights, trailer clauses, and the ''hired for'' doctrine;
(c) to discuss the robustness of the so-called Schumpeterian hypothes
es to endogenizing the organization of R&D; and (d) to provide a ratio
nale for confinancing arrangements in research activities.