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

Ki Kyung Song, Eunyoung Whang

Research output: Contribution to journalArticlepeer-review

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 from The 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.

Original languageEnglish (US)
Pages (from-to)189-213
Number of pages25
JournalJournal of Accounting and Organizational Change
Volume16
Issue number2
DOIs
StatePublished - Jul 23 2020

All Science Journal Classification (ASJC) codes

  • Accounting
  • Economics, Econometrics and Finance(all)
  • Strategy and Management
  • Organizational Behavior and Human Resource Management

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