Specialization, Firms, and Markets: The Division of Labor within and between Law Firms

Posted: 22 Sep 2009

See all articles by Luis Garicano

Luis Garicano

IE Business School; Centre for Economic Policy Research (CEPR)

Thomas N. Hubbard

Northwestern University - Department of Management & Strategy; National Bureau of Economic Research (NBER)

Multiple version iconThere are 3 versions of this paper

Date Written: October 2009

Abstract

This article uses confidential microdata from the Census of Services to examine law firms' field boundaries. We find that the share of lawyers working in field-specialized firms increases as market size increases and lawyers field specialize, indicating that transaction costs among lawyers, and not just complementarities in clients' demands, affect law firms' field boundaries. Moreover, we find that this pattern is mainly true when looking at fields where lawyers are involved in dispute resolution rather than in structuring transactions. We then analyze which combinations of specialists tend to work in the same firm and which tend not to do so. We relate our results to theories of law firms' boundaries from the organizational economics literature. Our evidence leads us to eliminate risk sharing as an important determinant of firms' field boundaries and narrows the set of possible monitoring or knowledge sharing explanations. (JEL D23, J44, L14, L84)

Suggested Citation

Garicano, Luis and Hubbard, Thomas N., Specialization, Firms, and Markets: The Division of Labor within and between Law Firms (October 2009). The Journal of Law, Economics, & Organization, Vol. 25, Issue 2, pp. 339-371, 2009. Available at SSRN: https://ssrn.com/abstract=1476646 or http://dx.doi.org/10.1093/jleo/ewn003

Luis Garicano (Contact Author)

IE Business School ( email )

Calle MarĂ­a de Molina, 11
Madrid, 28006
Spain

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Thomas N. Hubbard

Northwestern University - Department of Management & Strategy ( email )

Kellogg School of Management
2001 Sheridan Road
Evanston, IL 60208
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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