On information sharing and incentives in R&D

I investigate the issue of endogenous spillover of R&D information across f irms through information exchange between their employees. Although the fir ms typically cannot observe and restrict communication between their employ ees in a direct way, they can regulate information flows through the incent ive schemes offered to the employees. This article focuses on two issues: c haracterization 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.