 Startup Noncompetes in the Shadow of AcquihiringMPRA Paper from University Library of Munich, Germany 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. Keywords: non-compete agreement; startup; acquihiring; labor mobility; monopsony; antitrust implications; welfare consequences; waterbed effect (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:123852 Access Statistics for this paper More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC. |
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