CHANGE IN INSTITUIONS: THE DECLINE OF THE 'NO-LATERAL-HIRING' NORM AMONG LARGE LAW FIRMS, 1974-1990.

Abstract

In recent years, there has been growing interest among scholars in understanding the sources and processes of change in institutions. Much of the emerging scholarly literature has been concerned with investigating how change in broader, field-level institutions such as cultural logics and belief systems can influence change in organizational practices. Less understood are interorganizational norms and how they begin to break down. In this research, I examine the breakdown of such norms as a type of institutional change process. More specifically, I investigate the 'no-lateral-hiring' norm in the corporate law field and its subsequent breakdown. I document the emergence and the subsequent breakdown of the no-lateral-hiring norm. I then examine various forces that may have contributed to its decline. I focus in particular on the endogenous dynamics of its breakdown. I generally argue that purposive action on the part of actors may have played a role in promoting the breakdown of the no-lateral-hiring norm. I use panel data on large Chicago law firms and all the lawyers in these firms for the period 1974-1990 to test hypotheses about the breakdown of this norm. The results suggest that higher status firms were more likely to engage in lateral hiring, but the most elite firms were less likely to engage in the practice. They further suggest that firms that had previously engaged in lateral hiring were more likely to subsequently engage in the practice. Finally, firms that had lost personnel to other law firms were more likely to abandon the no-lateral-hiring norm.