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

58 Pages Posted: 31 Jan 2003

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)

Date Written: January 2003

Abstract

What is the role of firms and markets in mediating the division of labour? This Paper uses confidential microdata from the Census of Services to examine law firms' boundaries. We first examine how the specialization of lawyers and firms increases as lawyers' returns to specialization increase. In fields where lawyers increasingly specialize with market size, the relationship between the share of lawyers who work in a field-specialized firm and market size indicates whether firms or markets more efficiently mediate relationships between lawyers in this and other fields. We then examine which pairs of specialists tend to work in the same versus different firms; this provides evidence on the scope of firms that are not field-specialized. We find that whether firms or markets mediate the division of labour varies across fields in a way that corresponds to differences in the value of cross-field referrals, consistent with Garicano and Santos' (2001) proposition that firms facilitate specialization by mediating exchanges of economic opportunities more efficiently than markets.

Keywords: Industry structure, theory of the firm, specialization, law firms, legal services, economics or organization

JEL Classification: D20, L10, L20, L80

Suggested Citation

Garicano, Luis and Hubbard, Thomas N., Specialization, Firms and Markets: The Division of Labour between and within Law Firms (January 2003). CEPR Discussion Paper No. 3699. Available at SSRN: https://ssrn.com/abstract=375621

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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