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How Green Was My Valley? An Examination of Tournament Theory as a Governance Mechanism in Silicon Valley Law Firms

Published online by Cambridge University Press:  01 January 2024

Bruce M. Price
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Abstract

The tournament model is a widely used mechanism to control opportunistic behavior by associates in law firms. However, this mechanism can only operate in certain economic (and social) circumstances. When those circumstances do not exist, the model breaks down, and with it the ability to control opportunism in the absence of some alternative mechanism. Prior research has not investigated whether the utilization of a tournament model prevents the opportunistic behaviors identified as grabbing, leaving, and shirking. In order to test the limits of the tournament model, it is necessary to find particular historical moments when the economic environment radically challenges assumptions/premises of the model. The dot-com bubble in Silicon Valley provides precisely such a time and place. This article demonstrates limits to the applicability of tournament theory. Those limits are to be found in the economic environment in circumstances in which: (1) exogenous reward structures offer many multiples of internal rewards; (2) demonstrably high short-term rewards outside the firm starkly contrast with the delayed long-term rewards inside the firm; (3) the managerial strata reduce their emphasis on long-term recruiting of potential partners in favor of short-term productivity by young associates; and (4) firms develop departmental leverage ratios in excess of their capacity to monitor, mentor, and train recruits.

Type
Of General Interest
Information
Law & Society Review , Volume 37 , Issue 4 , December 2003 , pp. 731 - 764
Copyright
© 2003 Law and Society Association.

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Footnotes

I am indebted to Professors Doug Guthrie, Walter W. Powell, Geoffrey Miller, and Wolf Heydebrand for their thoughtful comments on earlier drafts of this article. Earlier versions of this article were presented at the Social Science Research Council's Program on the Organization as a Social Institution, Berkeley, CA, 2002; the Joint Law and Society and Canadian Law and Society Conference, Vancouver, B.C., 2002; and the Tenth Anniversary Celebration of New York University's Institute for Law and Society, 2003. I am grateful to the anonymous reviewers for their valuable assistance and to Editor Joseph Sanders for his extensive and insightful comments.

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