Les Cahiers de Recherche - HEC Paris
Alleviating Managerial Dilemmas in Human-Capital-Intensive Firms Through Incentives: Evidence from M&A Legal Advisors
() and Philipp Meyer-Doyle
Abstract: Research summary
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 firmspecific 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.
The study highlights the dilemmas when professional
service firms allocate their key individuals to incoming projects and the
role that monetary incentives play in aggravating or alleviating these
dilemmas. In the context of UK M&A law firms we find that partners have a
tendency to be attached to too many projects and not to share enough work,
which is exacerbated when individual monetary incentives are stronger.
Firms adopting a seniority based incentive system (lockstep system) are
able to alleviate this effect. This implies that there is a tradeoff
between rewarding personal performance versus balancing workloads and
fostering collaboration among professionals.
Keywords: Human-Capital-Intensive Firms; Human Capital; Managerial Dilemmas; Incentives; Capabilities; Micro-foundations; Mergers and Acquisitions; Law firms; (follow links to similar papers)
45 pages, September 27, 2015
Before downloading any of the electronic versions below
you should read our statement on
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Full text versions of the paper:
Questions (including download problems) about the papers in this series should be directed to Sandra Dupouy ()
Report other problems with accessing this service to Sune Karlsson ()
or Helena Lundin ().
Design Joakim Ekebom