The extent to which a knowledge-intensive firm should induce cooperation between its employees is analyzed in a model of relational contracting between a firm (principal) and its employees (two agents). The agents can cooperate by helping each other, i.e. provide effort that increases the...

Knowledge-intensive firms (KIFs) specialize in expertise, especially esoteric knowledge that few other firms possess. KIFs must keep their knowledge up-to-date, so they need to learn continually. However, their ability to satisfy clients depends on the close relations that some of KIFs'...