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Acquihiring for Monopsony Power

Author

Listed:
  • Heski Bar-Isaac

  • Justin P. Johnson

  • Volker Nocke

Abstract

It is often argued that startups are acquired for the sole purpose of hiring 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.

Suggested Citation

  • Heski Bar-Isaac & Justin P. Johnson & Volker Nocke, 2024. "Acquihiring for Monopsony Power," CRC TR 224 Discussion Paper Series crctr224_2024_500, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2024_500
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    References listed on IDEAS

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    1. Prado, Tiago S. & Bauer, Johannes M., 2022. "Big Tech platform acquisitions of start-ups and venture capital funding for innovation," Information Economics and Policy, Elsevier, vol. 59(C).
    2. Katz, Michael L., 2021. "Big Tech mergers: Innovation, competition for the market, and the acquisition of emerging competitors," Information Economics and Policy, Elsevier, vol. 54(C).
    3. Weiyi Ng & Toby E. Stuart, 2022. "Acquired employees versus hired employees: Retained or turned over?," Strategic Management Journal, Wiley Blackwell, vol. 43(5), pages 1025-1045, May.
    4. Gautier, Axel & Lamesch, Joe, 2021. "Mergers in the digital economy," Information Economics and Policy, Elsevier, vol. 54(C).
    5. Kenneth A. Younge & Tony W. Tong & Lee Fleming, 2015. "How anticipated employee mobility affects acquisition likelihood: Evidence from a natural experiment," Strategic Management Journal, Wiley Blackwell, vol. 36(5), pages 686-708, May.
    6. Emanuele Tarantino & Chiara Fumagalli & Massimo Motta, 2020. "Shelving or Developing? The Acquisition of Potential Competitors under Financial Constraints," Working Papers 1197, Barcelona School of Economics.
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    Cited by:

    1. Benkert, Jean-Michel & Letina, Igor & Liu, Shuo, 2025. "Startup acquisitions: Acquihires and talent hoarding," European Economic Review, Elsevier, vol. 178(C).
    2. Luca Verginer & Federica Parisi & Jeroen Lidth de Jeude & Massimo Riccaboni, 2025. "Acquisitions as catalysts for inventor departures in the biotechnology industry," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 12(1), pages 1-12, December.
    3. Yassine Lefouili & Leonardo Madio, 2025. "Mergers and Investments: Where Do We Stand?," Working Papers hal-05129593, HAL.

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    More about this item

    Keywords

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    JEL classification:

    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation

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