IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/123852.html
   My bibliography  Save this paper

Startup Noncompetes in the Shadow of Acquihiring

Author

Listed:
  • Tsubuteishi, Kyogo

Abstract

Non-compete agreements (NCAs) restrict employee mobility and often play important roles in startups, such as preventing leakage of intellectual property. In this article, I propose an additional role of NCAs in startups as a potential countermeasure to acquihiring by developing a model of labor market competition between a potential acquirer and a startup. In the model, the potential acquirer has two options to hire the startup's employee, direct hiring (poaching) and acquihiring — the acquisition of a company to hire its talented employees. NCAs may either induce or prevent acquihiring by affecting the profitability from each hiring strategy for the potential acquirer. I identify the conditions under which NCAs prevent acquihiring and demonstrate that stricter NCA regulation may distort worker allocation and/or reduce worker welfare. This result indicates that, in the context of high-tech industries where acquihiring is relatively prevalent, increased regulation of NCAs could weaken startups, facilitate acquihiring by Big Tech firms, and ultimately reinforce their market power.

Suggested Citation

  • Tsubuteishi, Kyogo, 2025. "Startup Noncompetes in the Shadow of Acquihiring," MPRA Paper 123852, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:123852
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/123852/1/MPRA_paper_123852.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    non-compete agreement; startup; acquihiring; labor mobility; monopsony; antitrust implications; welfare consequences; waterbed effect;
    All these keywords.

    JEL classification:

    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
    • 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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:123852. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.