The Puzzle and Persistence of Biglaw Clustering

Abstract

Elite U.S.-based global law firms (“Biglaw” firms) concentrate in the costliest districts of superstar cities, especially two neighborhoods in Manhattan. This pattern has persisted despite both the dispersal of Biglaw clients across less-dense, lower-cost U.S. geographies and the development of telework capacity. It suggests a puzzle: law is among the occupations most conducive to remote work, yet Biglaw prior to the coronavirus pandemic required in-person work in the priciest places—meaning it paid (and continues to pay) a premium on both of its biggest expenses, wages and real estate. How might this equilibrium be explained, and what might lead it to change?

This Article contends that Biglaw clustering reflects a management preference for the exploitation of proven strategies over the exploration of novel and uncertain ones—but that the pandemic telework experience is eroding this dichotomy. This analysis has direct implications for private international law (“PIL”) practice, where large-scale transactions and disputes are handled by Biglaw firms and involve significant international travel. This Article contributes to a growing literature on telework’s impacts on cities, labor markets, and industries, and is the first to extend that focus to Biglaw and PIL.

A post-pandemic Biglaw embrace of dispersal via telework would destabilize standard accounts of collaboration in agglomeration economies. While the Article expresses skepticism about that outcome, it identifies a mechanism by which it might plausibly come about. Crucially, this mechanism—the replacement of an exploit vs. explore choice with two different exploit options—posits as the key driver not technology but management learning and innovation that quickened during the pandemic.

Keywords: urban economics, law and economic geography, locational economics, spatial economics, transaction costs, agency costs, information costs, Biglaw, telework, ICT, law and economics, private international law, COVID-19 pandemic, coronavirus, organizational behavior, innovation

JEL Classification: K00, K20, K40, R12, R30