Anti-Poaching Agreements, Innovation, and Corporate Value: Evidence from the Technology Industry

Abstract

In 2010, major Silicon Valley technology firms faced antitrust action for engaging in anti-poaching agreements. We show that firm-pairs with active bilateral agreements to not poach each other's employees experienced lower inventor cross-flow rates than concurrent cross-flows with comparable non-collusive firms. Accordingly, anti-poaching firms produced superior innovation output along diverging paths, particularly in technology areas covered by the agreements. These dynamics were reversed following the agreements' dissolution. Event-study tests around the dissolution show a negative stock returns response. Our results reveal important linkages between reduced employee turnover arising from firms' anticompetitive labor market conduct and their innovation and market valuations.

Keywords: Anti-Poaching Agreements, Antitrust, Human Capital, Innovation, Technology Industry

JEL Classification: G31, J21, J23, J24, J33, J42