Working Paper: CEPR ID: DP18573
Authors: Heski Barisaac; Justin P. Johnson; Volker Nocke
Abstract: It is often argued that startups are acquired for the sole purpose ofhiring specialized talent. We show that the goal of such acquihires might be to shut down the most relevant labor market competitor. This grants the acquirer monopsony power over specialized talent. As a consequence, acquihiring may harm employees and be socially inefficient. We explore the robustness of these effects, allowing for private benefits associated with working at a startup, varying bargaining protocols, multiple employees with and without complementarities, and private information.
Keywords: Acquihiring; Acquisitions; Monopsony Power; Specialized Labor Markets; Competition Policy
JEL Codes: J42; L13; M12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| acquihiring (G34) | reduced competition (L19) |
| reduced competition (L19) | lower wages and benefits for employees (J31) |
| acquihiring (G34) | monopsony power (J42) |
| monopsony power (J42) | lower wages and benefits for employees (J31) |
| acquihiring (G34) | socially inefficient outcomes (D61) |
| direct hiring (M51) | higher wages and benefits for employees (J38) |
| private benefits at startups (J32) | employee decisions (M51) |