Strategic Information Revelation in an R&D Race with Spillovers

The paper analyzes how spillovers in the product market affect the incentives of firms to reveal information about their innovative productivity. Such spillovers create a free-rider effect in the patent race that countervails the familiar business-stealing effect. The equilibrium disclosure strategy of firms depends on the size of the spillover. For extreme spillovers firms fully disclose, but for intermediate spillovers firms either partially disclose or conceal all information. Strategic disclosure may change the effect of spillovers on expected equilibrium profits. Whereas the expected profit is single-peaked for any fixed disclosure rule, it need not be single-peaked for equilibrium disclosure