How anticipated employee mobility affects acquisition likelihood: Evidence from a natural experiment |
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| Authors: | Kenneth A Younge Tony W Tong Lee Fleming |
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| Affiliation: | 1. Krannert School of Management, Purdue University, West Lafayette, Indiana, U.S.A.;2. Leeds School of Business, University of Colorado, Boulder, Colorado, U.S.A.;3. Coleman Fung Institute, University of California, Berkeley, California, U.S.A. |
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| Abstract: | This study draws on strategic factor market theory and argues that acquirers' decisions regarding whether to bid for a firm reflect their expectations about employee departure from the firm post‐acquisition, suggesting a negative relationship between the anticipated employee departure from a firm and the likelihood of the firm becoming an acquisition target. Using a natural experiment and a difference‐in‐differences approach, we find causal evidence that constraints on employee mobility raise the likelihood of a firm becoming an acquisition target. The causal effect is stronger when a firm employs more knowledge workers in its workforce and when it faces greater in‐state competition; by contrast, the effect is weaker when a firm is protected by a stronger intellectual property regime that mitigates the consequences of employee mobility. Copyright © 2014 John Wiley & Sons, Ltd. |
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| Keywords: | acquisition human capital employee mobility employee noncompete agreements |
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