Pay inequality and job satisfaction of law firms: the role of strategic positioning

Ki Kyung Song and Eunyoung Whang

Journal of Accounting & Organizational Change, 2020, vol. 16, issue 2, 189-213

Abstract: Purpose - Using Porter’s (1980) generic strategy to define strategic positioning of law firms, this paper aims to explain why some law firms have more/less pay inequality than others do and examine the impact of pay inequality on law firms’ partners and the job satisfaction of their associates. Design/methodology/approach - This paper uses data fromThe American Lawyer. The strategic positioning, compensation and job satisfaction scores of 614 firm-year observations of US law firms are hand-collected over the period from 2007 to 2016. Findings - Non-equity partners at law firms with differentiation strategy (Porter, 1980) are more likely to build rainmaking ability than those at law firms relying on billable hours. As a result, law firms with differentiation strategy have a narrower pay gap between their equity and non-equity partners than those firms relying on billable hours. After controlling for the effects of strategy on pay inequality using two-stage and three-stage least squares models, this paper finds that a wider pay gap deprives associates of job satisfaction. Originality/value - Considering strategic positioning, this paper validates why some law firms have more/less pay inequality and proves how pay inequality affects job satisfaction.

Keywords: Pay inequality; Profitability ratio analysis; Strategic positioning; Law firms; Job satisfaction (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jaocpp:jaoc-07-2019-0080

DOI: 10.1108/JAOC-07-2019-0080

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