Linking career paths, firm organization, and industry structure in legal services

In three related papers, my thesis explores the links between career paths, firm organization, and industry structure in legal services. The first section, in joint work with George P. Baker, explores how changes in the nature of the relationship between law firms and their clients may have implications for each of these three dimensions. We find evidence consistent with a shift towards a commodity relationship and an increased reliance on business-getting. Specifically, we find some evidence for a disappearance of the mid-sized firm and strong evidence of a rise in the largest firms and multi-office firms. We find that leverage is increasing, though mostly in the smaller and mid-sized firms. We find that promotion clocks are increasingly longer and that firms are lessening their use of "up-or-out" promotion policies. Section 2 further explores the relationship between school connections and career outcomes for associate lawyers. I find that partners within law firms are non-randomly clustered with respect to the law schools attended. I find evidence that having attended the same law school as a greater fraction of partners in a firm increases the probability that an associate is promoted. Empirical tests suggest that favoritism rather than efficient behavior may explain the observed pattern of promotions. The effect of law school connections is concentrated at the office-level consistent with favoritism both in the form of enrichment on the job and discrimination at promotion. In section 3, I explore the synergies in law firm mergers. Increasing diversification in geography or legal specialties enables firms to more efficiently serve clients. Alternatively, mergers may fix inefficiencies in internal governance mechanisms that prevent firms from downsizing. Geographic and practice area diversification appear to be the focus in some, but not all acquisitions. I also find evidence (using broadly aggregated legal specialties) that pure scale mergers are not an infrequent occurrence. Scale acquisitions are largely associated with higher levels of capacity reduction and lower post-merger growth when compared to scope mergers. For all acquisition strategies, lawyers leaving firms exit private practice and move to less prestigious firms in greater fractions than for organic turnover.