Articles

Alleviating Managerial Dilemmas In Human-Capital-Intensive Firms Through Incentives: Evidence From M&A Legal Advisors

O. CHATAIN, P. MEYER-DOYLE

Strategic Management Journal

February 2017, vol. 38, pp.232-254

Departments: Strategy & Business Policy, GREGHEC (CNRS)

Keywords: Human-Capital-Intensive Firms, Human Capital, Managerial Dilemmas, Incentives, Capabilities, Micro-foundations, Mergers and Acquisitions, Law firms

http://ssrn.com/abstract=2693097


We examine how human-capital-intensive firms deploy their human assets and how firm-specific human capital interacts with incentives to influence this deployment. Our empirical context is the UK M&A legal market, where micro-data enable us to observe the allocation of lawyers to M&A mandates under different incentive regimes. We find that law firms actively equalize the workload among their lawyers to seek efficiency gains while ‘stretching’ lawyers with high firm-specific capital to a greater extent. However, lawyers with high firm-specific capital also appear to influence the staffing process in their favor, leading to unbalanced allocations and less sharing of projects and clients. Paradoxically, law firms may adopt a seniority-based rent-sharing system that weakens individual incentives to mitigate the impact of incentive conflicts on resource deployment


JavaScriptSettings