On Incentives for an Efficient Flow of Knowledge within Multinationals

Abstract

In this paper we develop a principal-agent, game-theoretic model of an MNC, intended to add to the understanding of how smart choices between incentives, monitoring, and structures_x000D_ are linked to an effective intra-firm flow of knowledge. We find that the equilibrium_x000D_ depends on the efficiency of substituting incentives for monitoring. Our study sheds light on arguments within the international management field about monitoring, incentives for managers,_x000D_ and managing knowledge transfer between subsidiaries.