Startup Acquisitions as a Hiring Strategy: Worker Choice and Turnover

Abstract

This study investigates the effectiveness of high-tech startup acquisitions as a hiring strategy (“acqui-hiring”) versus traditional hiring. Unlike regular hires who choose to join a new firm on their own volition, most acquired employees do not have a voice in the decision to be acquired. I theorize that this lack of choice instigates organizational mismatch, thereby elevating turnover rates among acquired workers. Using employee-level data from US Census, I find empirical support for higher turnover among acquired workers relative to regular hires, as well as the moderating role of organizational mismatch. Moreover, analysis of serial acquirers suggests that firms learn over time how to effectively retain acquired employees. Together, these results elucidate the conditions under which firms can harness new talent by acquiring startups.