56 Pages Posted: 1 Mar 2011
Date Written: December 1, 2010
The economic downturn has had significant effects on law firms, and is causing many of them to rethink some basic assumptions about how they operate. In important respects, however, the downturn has simply intensified the effects of some deeper trends that preceded it, which are likely to continue after any recovery that may occur.
This paper explores one of these trends, which is corporate client insistence that law firms disaggregate their services into discrete tasks that can be delegated to the least costly providers who can perform them. With advances in communications technology, there is increasing likelihood that some of these persons may be located outside the formal boundaries of the firm. This means that law firms may need increasingly to confront the make or buy decision that their corporate clients have regularly confronted for some time. The potential for vertical disintegration is a relatively recent development for legal services, but is well-established in other sectors of the global economy.
Empirical work in several disciplines has identified a number of issues that arise for organizations as the make or buy decision becomes a potentially more salient feature of their operations. Much of this work has focused in particular on the implications of relying on outsourcing as an integral part of the production process. This paper discusses research on: (1) the challenges of ensuring that work performed outside the firm is fully integrated into the production process; (2) coordinating projects for which networks of organizations are responsible; (3) managing the transfer of knowledge inside and outside of firms that are participants in a supply chain; and (4) addressing the impact of using contingent workers on an organization’s workforce, structure, and culture. A review of this research suggests considerations that law firms will need to assess if they begin significantly to extend the process of providing services beyond their formal boundaries.
Discussing the research also is intended to introduce concepts that may become increasingly relevant to law firms, but which currently are not commonly used to analyze their operations. Considering how these concepts are applicable to law firms may prompt us to rethink how to conceptualize these firms and what they do.
This paper therefore is a preliminary attempt to explore: (1) the extent to which law firms may come to resemble the vertically disintegrated organizations that populate many other economic sectors and (2) the potential implications of this trend for the provision of legal services, the trajectory of legal careers, and lawyers’ sense of themselves as members of a distinct profession.
Keywords: Legal Services, Law Firms, Corporate Governance, Law and Economics
JEL Classification: K00, K20, K22
Suggested Citation: Suggested Citation
Regan, Jr., Milton C. and Heenan, Palmer T., Supply Chains and Porous Boundaries: The Disaggregation of Legal Services (December 1, 2010). Fordham Law Review, Vol. 78, pp. 2137-2191, 2010; Georgetown Law and Economics Research Paper No. 11-04. Available at SSRN: https://ssrn.com/abstract=1772802