Henderson and Zorn: Statistical analysis of lateral hiring by law firms, and explanations

Professor William Henderson of Indiana University and Professor Dr. Christopher Zorn of Penn State University have published Is Reliance on Lateral Hiring Destabilizing Firms?, American Lawyer, 3 February 2014.

The article presents results of a statistical analysis of the lateral hiring of partners among law firms, and then discusses theoretical explanations for the results. The article is a very interesting example of the application of data analysis to legal institutions.

Here are excerpts of the article

[…] The market for lateral partners is a brisk one. Since 2000, the volume has varied between 1,900 and 3,500 lateral moves annually, with the volume peaking during the frothy days of 2007 and 2008.

[…] we sought to test a fairly simple hypothesis: Do firms that engage in more lateral partner hiring become more profitable over time? […]

Last year, using an arsenal of multivariate statistical methods, we were unable to find a relationship between a lateral partner hiring strategy and higher law firm profitability […]. […] the data is telling us that for most law firms there is no statistically significant relationship between more lateral partner hiring and higher profits.

Here is a good question — why [is lateral partner hiring still so frequent]? […] In the absence of organic growth, incoming lateral partners provide evidence that the firm is still vital and attractive. […]

For more details, please see the complete article.

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