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

A third research implication relates to methods. We suspect that the dearth of research
on sourcing decisions in legal services is due to the absence of good data and the difficulty in
making causal inference. Despite their still relatively short time-series (i.e. seven years) and
limited cross-sectional coverage (i.e. Fortune 500 firms), our panel data provide us with
advantages relative to single firm case narratives (e.g. Smith, 2001) or one-time crosssectional
surveys (e.g. Schwarcz, 2008). Most importantly, the panel nature of our ALM data
permit us to use state-of-the-art dynamic panel estimators. In this way, we give future
researchers guidance on how to address challenges of mutual causation in other plural
sourcing contexts where panel data is increasingly available and dynamic panel estimators
increasingly expected.
Implications for practice
The findings of this study draw practitioners’ attention to a few, yet important, aspects
of the sourcing decisions in legal services. Some of them may appear paradoxical. First, in
legal circles, the last two decades have seen vigorous debate on the proper size and scope of
work for in-house lawyers. One view championed by the US giant, General Electric
(Heineman, 2010; Smith, 2001), argues for substantially increasing the number of in-house
lawyers and giving them primary if not exclusive responsibility for legal transactions and
litigation cases. In-house lawyers are expected to increasingly play a dual role of being a
lawyer and a business partner (Green, 2012). The chief legal officer (CLO) is said to be ‘one
of the mightiest figures in the C-suite’ 6 . This is because the 2002 Sarbanes-Oxley Act, the
2010 Dodd-Frank Act and the 2008 financial crisis have heightened the need for compliance
and risk management, making companies turn to lawyers to prevent corporate bosses from
going to jail and to fend against endless threats of lawsuits. Our study indicates that whilst the
power and status of GC may be on the rise, the resulting trend towards insourcing leads to
6 ‘A guardian and a guide’, Schumpeter column, The Economist April 7, 2012
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