Monday, December 4, 2023
The U.S. Department of Justice initiated antitrust action in 2010 against major Silicon Valley technology firms engaging in anti-poaching agreements. Under labor market collusion, cartel firms experienced lower inventor departure rates relative to comparable non-cartel firms. Accordingly, cartel firms produced superior innovation output over the collusive period, particularly in technology areas covered by the agreements, while their dissolution was accompanied by a reversal of this trend. Event-study tests around the unanticipated antitrust action show a negative returns response. Our results reveal important linkages between reduced employee turnover arising from firms' anti-competitive conduct in labor markets and their innovation and valuations.