Reconfiguration Through Acqui-Hires: Redeployment and Retention of Human Capital Post-Acquisition

Abstract

Research on acquisition integration has focused on how acquirers integrate the products or services of targets into the acquiring firms. Acqui-hires are different from traditional technology acquisitions because they primarily target the talent that resides in the human capital of the acquired start-ups. Given that acqui-hiring firms want to utilize the acquired talent to develop further technologies, the redeployment and retention of human capital post-acquisition is particularly critical. However, our understanding of the rationale behind post-acqui-hire integration decisions and the impact of acquirer’s integration decisions on strategic human capital outcomes are limited. We argue that post-acqui-hire redeployment of human capital is influenced by the disruptiveness of the acqui-hire’s know-how to the incumbent’s current technology. Applying a dynamic capabilities framework, we find that when the acquired start-up has disruptive (vs. complementary) know-how, the acqui-hired team is preserved (vs. fragmented) and integrated as a whole into the acquirer’s disrupted business unit, and the founder of the acquired start-up is assigned to a high status position. Furthermore, we examine how the lack of fit between acquired know-how type and integration choice may influence the exit decision of the acqui-hired founder from the acquiring firm. We show that a lack of fit between acquired know-how type and integration mode has a positive relationship with the premature exit of acqui-hired founders.