Date: April 12, 2013 Topic: The Shrinking ... - Georgetown Law

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is unbalanced. This minimizes data loss while preserving the orthogonality among the errors (Arellano et al., 1995; Roodman, 2006). Finally, we use standard errors that are robust to heteroskedasticity and arbitrary patterns of autocorrelation within firms. RESULTS Descriptive statistics and preliminary analysis Descriptive statistics and pair-wise correlations are reported in Table 2. The sample mean for In-house lawyers is 5.37, suggesting that firms employ on average 3.62 lawyers per billion dollar of sales. The raw number of in-house lawyers at Fortune 500 firms sampled exhibited substantial variation ranging from a handful to more than 1200 in certain firms such as General Electric. The sample mean of Outside law firms is 1.83, meaning that firms reported on average nine outside law firms as undertaking legal work on their behalf in a given year. Those numbers ranged from one to more than 50 outside law firms. Other key variables comport with intuition in large, established firms. Pair-wise correlations are largely intuitive. Variables corresponding to the five hypotheses for testing all exhibit the predicted positive sign when correlated with the dependent variable. Overall, these descriptive statistics indicate substantial variation in both the dependent variable and key independent variables with initial correlations consistent with our theoretical framework and related hypotheses. Figures 1A-E present results from Lowess analyses 4 of In-house lawyers and make and buy determinants related to Hypotheses 1-3 and 5 (Internationalization, R&D intensity, Advertising intensity, and Outside law firms), and from comparative bar-chart analyses of Inhouse lawyers related to Hypothesis 4 (General counsel on TMT). The pattern of results in all figures indicates preliminary support for Hypotheses 1-5. Lowess analyses indicate that In-house lawyers increases with our independent variables. Comparative bar-chart analyses 4 Lowess analyses compute linear regressions around each observation of given determinant (e.g., Internationalization) with neighborhood observations chosen within some sampling bandwidth and weighted by a tri-cubic function. Based on the estimated regression parameters, In-house lawyers values are computed. Combinations of determinants and In-house lawyers are then connected, yielding a Lowess curve. 22
of sample means indicate more in-house lawyers when GCs are on the TMT. This difference is significant at the 5% level. - Insert Figures 1A-E about here - Regression analysis Table 3 presents the results of our regression analysis. Models 1-2 present fixedeffects specifications while Models 3-5 present results from the system GMM estimator. Simpler fixed-effects models suggest that the lagged dependent variable, In-house lawyers it-1 , explains roughly 30% of variation in the dependent variable. We noted previously, however, that the lagged dependent variable coefficient estimates in fixed-effects regressions are typically biased downwards (Nickell, 1981). When the number of time-periods, t, are few as here, the downward bias can be substantial as corrected system GMM regression results demonstrate. Coefficients on In-house lawyers it-1 jump from 0.310 and 0.305 in Models 1-2 to 0.973, 0.882 and 0.883 in Models 3-5. All estimates are significant at the 1% level. Model 3 reports one-step system GMM results with the lagged dependent variable and controls only. Models 4-5 are fully-specified and report one- and two-step system GMM results (the two-step estimator is corrected for downward bias in the computed standard errors (Windmeijer, 2005)). Diagnostics at the bottom of each column suggest that key estimation assumptions hold. The Arellano-Bond z test for second- and higher-order autocorrelation is not statistically significant. This is not weakened by the number of instruments as instrument count is lower than the number of firms (Roodman, 2006). Hansen’s J test, a variant of the Sargan test of overidentifying restrictions, fails to reject the null hypothesis that the instruments generated are exogenous. Taken together, these results confirm the appropriateness of our system GMM strategy as a response to possible bias in estimation related to the endogenous and/or predetermined nature of certain regressors. - Insert Table 3 about here - 23
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Date: April 12, 2013 Topic: The Shr
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REFERENCES Alavi, M., Leidner, D. E
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Table 1: Representative Excerpts fr
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Table 2: Descriptive Statistics Var
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Table 4: Results of Individual Fixe
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1 DECONSTRUCTING BIG LAW The Future
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The Stanford Law School Research Pr
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2011 General Counsel with Power
Page 77 and 78: Executive Summary of Key Findin
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Page 107 and 108: Resource Co-Specialization and Supp
Page 109 and 110: al., 2009), plural sourcing (Bradac
Page 111 and 112: ely more on R&D resources, advertis
Page 113 and 114: and from transferring best practice
Page 115 and 116: specialized tasks such as complex a
Page 117 and 118: also distinct from economies of sco
Page 119 and 120: In case studies of innovating firms
Page 121 and 122: knowledge. This translates into a r
Page 123 and 124: To be included in our sample, we re
Page 125 and 126: Law firms. In order to measure the
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Page 139 and 140: Dick the Butcher, wishes for lawyer
Page 141 and 142: Gulati R, Puranam P. 2006. Compleme
Page 143 and 144: Sako M. 2013. Professionals between
Page 145 and 146: Table 3. Panel data regression mode
Page 148 and 149: The Shrinking Pyramid: Implications
Page 150 and 151: Limiting the Damage of Lateral Part
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Date: April 12, 2013 Topic: The Shrinking ... - Georgetown Law

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