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Substituting Talent with Transactions: Acquisitions as Responses to Immigration Restrictions

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  • Jens Friedmann
  • Britta Glennon
  • Exequiel Hernandez

Abstract

We examine how firms respond to talent scarcity caused by restrictive immigration policies. We argue that when firms cannot build capabilities internally through hiring, they alter their boundaries by engaging in corporate acquisitions to make up for the foregone talent and capabilities. Using data on 3,861 U.S. firms and their use of the H-1B visa program (2001-2020), we leverage two exogenous shocks—the 2004 H-1B cap reduction and the 2007-2008 visa lottery—and find causal evidence that firms make more acquisitions as their exposure to immigration restrictions rises. This effect is stronger for deals with purposes related to the skills of the foregone talent, for small acquisitions, for domestic targets, and for targets in places with higher concentrations of skilled workers.

Suggested Citation

  • Jens Friedmann & Britta Glennon & Exequiel Hernandez, 2025. "Substituting Talent with Transactions: Acquisitions as Responses to Immigration Restrictions," NBER Working Papers 34248, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:34248
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    More about this item

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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