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

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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 30
usiness benefits only if resource co-specialization benefits are exploited. In other words, our broad sample statistical study demonstrates that insourcing is less desirable when there are no co-specialization opportunities. Second, plural sourcing strategies are not a transition towards the dominance of one or the other mode. Instead, it is a self-reinforcing, sustainable alternative system of service production, closely supported by the nature of relational contracts with external suppliers. The multi-sourcing of legal services, including the use of law firms and other service providers such as legal process outsourcing (LPO) providers, is now well recognized in legal practice and scholarship (Regan et al., 2010; Sako, 2009; Susskind, 2008). But to date, the TCE-focused analysis in legal scholarship has not been able to explain the co-existence of multiple sourcing modes. Our plural sourcing framework provides a clear rationale for multisourcing. It also gives a limited, yet significant, range of factors that affect the mix of multiple sourcing modes. In particular, our findings suggest that ‘panel reviews’ leading to the selection of fewer law firms can co-exist with heavy reliance on outsourcing. Limitations and further research A number of limitations of this study are worth noting. The first limitation in the analytical framework is self-imposed to simplify the analysis. Plural sourcing in legal services in full manifestation involves multiple sourcing modes (make, buy, ally) from multiple types of providers other than law firms, including LPO providers, legal technology providers, and contract lawyers. By limiting our analysis to the co-existence of ‘make’ and ‘buy’ only from law firms, we did not take into account the impact of the growth of providers other than law firms on the number of law firms and the consequent make-buy balance. The second limitation lies in available data. Our study links the number of in-house lawyers to the number of outside law firms, not the number of external counsel or hours spent by these lawyers. In an ideal world, we would have better data on internal to external legal 31
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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
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Executive Summary of Key Findin
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General Counsel with Power? 201
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Page 109 and 110: al., 2009), plural sourcing (Bradac
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Page 117 and 118: also distinct from economies of sco
Page 119 and 120: In case studies of innovating firms
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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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