Firm/Employee Matching: An Industry Study of American Lawyers

We study the sources of match-specific value at large American law firms by analyzing how graduates of law schools group into law firms. We measure the degree to which lawyers from certain schools concentrate within firms and then analyze how this agglomeration can be explained by "natural advantage" factors (such as geographic proximity) and by productive spillovers across graduates of a given school. We show that large law firms tend to be concentrated with regard to the law schools they hire from and that individual offices within these firms are substantially more concentrated. The degree of concentration is highly variable, as there is substantial variation in firms' hiring strategies. There are two main drivers of variation in law school concentration within law offices. First, geography drives a large amount of concentration, as most firms hire largely from local schools. Second, we show that school-based networks (and possibly productive spillovers) are important because partners' law schools drive associates' law school composition even controlling for firm, school, and firm/school match characteristics and when we instrument for partners' law schools.