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

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  • Ki Kyung Song
  • Eunyoung Whang

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.

Suggested Citation

  • Ki Kyung Song & Eunyoung Whang, 2020. "Pay inequality and job satisfaction of law firms: the role of strategic positioning," Journal of Accounting & Organizational Change, Emerald Group Publishing Limited, vol. 16(2), pages 189-213, May.
    • Handle: RePEc:eme:jaocpp:jaoc-07-2019-0080
    DOI: 10.1108/JAOC-07-2019-0080
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