Thursday, November 9, 2006
Posted by Alan Childress
Newly posted on the SSRN Law & Soc'y: Legal Prof. journal is this article by James Rebitzer (Case Western Res., Econ. Dept. [below left]) and Lowell Taylor (Carnegie Mellon U., Public Policy & Mgmt. [right], who often writes on minimum wage). It is entitled, "When Knowledge is an Asset: Explaining the Organizational Structure of Large Law Firms." Here is its abstract:
We study the economics of employment relationships through theoretical and empirical analyses of an unusual set of firms, large law firms. Our point of departure is the "property rights" approach that emphasizes the centrality of ownership's legal rights to control important, nonhuman assets of the enterprise. From this perspective, large law firms are an interesting and potentially important object of study, because the most valuable assets of these firms take the form of knowledge — particularly knowledge of the needs and interests of clients. We argue that the two most distinctive organizational features of large law firms, the use of "up or out" promotion contests and the practice of having winners become residual claimants in the firm, emerge naturally in this setting. In addition to explaining otherwise anomalous features of the up-or-out partnership system, this paper suggests a general framework for analyzing organizations where assets reside in the brains of employees.