Skill Disruption and Post-Acquisition Employee Exit

In knowledge-intensive industries, many acquisition targets are selected for their human capital. Acquisitions can also, however, trigger employee departure, reducing the very asset the acquirer originally wanted to obtain. To better understand this issue and its underlying factors, we argue that, when acquisitions disrupt the complementarity between employee skills and employer activities, they diminish human capital productivity in the value-creation process, which ultimately drives exit decisions. We predict that employees with specialized skills are more strongly affected by disruption than generalists, while the effect of individual disruption on employee exit becomes weaker if the acquisition target as a whole is more distant to the acquirer. Analyzing vertical acquisitions in the U.S. video-game industry, we find strong evidence for our hypotheses. Our findings have implications for the likely success of related and unrelated acquisitions.