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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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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp500
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    References listed on IDEAS

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    1. 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.
    2. Gautier, Axel & Lamesch, Joe, 2021. "Mergers in the digital economy," Information Economics and Policy, Elsevier, vol. 54(C).
    3. 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.
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    Cited by:

    1. Lefouili, Yassine & Madio, Leonardo, 2025. "Mergers and Investments: Where Do We Stand?," TSE Working Papers 25-1617, Toulouse School of Economics (TSE).

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    More about this item

    Keywords

    Acquihiring; acquisitions; monopsony power; specialized labor markets; competition policy;
    All these keywords.

    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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