Startup Acquisitions as a Hiring Strategy: Worker Choice and Turnover

42 Pages Posted: 12 Oct 2018 Last revised: 20 Mar 2020

Date Written: March 1, 2020

Abstract

This study investigates the effectiveness of high-tech startup acquisitions as a hiring strategy (“acqui-hiring”) versus traditional hiring. Using population-level data from US Census, I find that acquired workers exhibit significantly greater rates of turnover than regular hires, especially among high-earning individuals. I explore a theoretical mechanism based on the premise that, unlike regular hires who voluntarily choose to join a new firm, most acquired employees do not have a voice in the decision to be acquired. I posit that this lack of worker choice instigates organizational mismatch, thereby elevating turnover rates among acquired workers. Moreover, I document that firms learn from prior acquisitions how to effectively retain acquired employees. Together, these results elucidate the conditions under which firms can harness new talent by acquiring startups.

Keywords: Entrepreneurship, Mergers and Acquisitions, Human Capital, Startups, Hiring

JEL Classification: L26, G34, J63, M50

Suggested Citation

Kim, J. Daniel, Startup Acquisitions as a Hiring Strategy: Worker Choice and Turnover (March 1, 2020). Available at SSRN: https://ssrn.com/abstract=3252784 or http://dx.doi.org/10.2139/ssrn.3252784

J. Daniel Kim (Contact Author)

The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

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