AI-Enabled Business Models in Legal Services: From Traditional Law Firms to Next-Generation Law Companies?
37 Pages Posted: 12 Jul 2019 Last revised: 27 Aug 2019
Date Written: July 12, 2019
What will happen to law firms and the legal profession when the use of artificial intelligence (AI) becomes prevalent in legal services? This paper addresses this question by considering specific AI use cases in legal services, and by identifying four AI-enabled business models (AIBM) which are relatively new to legal services. These AIBMs are different from the traditional professional service firm (PSF) business model at law firms, and require complementary investments in human resources, intra-firm governance and inter-firm governance. Law firms are experimenting with combinations of business models. We identify three patterns in law firm experimentation: first, combining the PSF business model with the legal process and/or consulting business models; second, vertically integrating the software vendor business models; and third, accessing the software vendor models from third-party vendors to take advantage of contracting for innovation. These differences in law firm responses are due to differences in perceived adjustment costs in resource transfer and how they deal with conflicting resources that detract from operating AIBMs. While predicting the future is not possible, we conclude that how today’s law firms transform themselves into tomorrow’s next generation law companies depends on their willingness and ability to invest in necessary complements.
Keywords: Artificial intelligence, business models, complementarities, professional service firms, legal services
JEL Classification: J24, K40, L14, L22, L84, O33
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