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Startup Acquisitions: Acquihires and Talent Hoarding

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  • Jean-Michel Benkert, Igor Letina, Shuo Liu

Abstract

We study how competitive forces may drive firms to inefficiently acquire startup talent. In our model, two rival firms have the capacity to acquire and integrate a startup operating in a possibly orthogonal market. We show that firms may pursue such acquihires primarily as a preemptive strategy, even when these transactions appear unprofitable in isolation. Thus, acquihires, even absent traditional competition-reducing effects, need not be benign as they can lead to inefficient talent allocation. Additionally, our analysis underscores that such talent hoarding can diminish consumer surplus and exacerbate job volatility for acquihired employees.

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  • Jean-Michel Benkert, Igor Letina, Shuo Liu, 2023. "Startup Acquisitions: Acquihires and Talent Hoarding," Diskussionsschriften dp2309, Universitaet Bern, Departement Volkswirtschaft.
    • Handle: RePEc:ube:dpvwib:dp2309
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    More about this item

    Keywords

    acquihire; talent hoarding; startup acquisition; competition;
    All these keywords.

    JEL classification:

    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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