This Article has described a market, the market for elite law firm associates, that contains a broad set of actors and a fairly rigid and elaborate set of processes. We argue these processes are consistent with risk-aversion in response to uncertainty imposed by market structure. The actors include not only those who will work with one another—the current students or future associates and hiring part- ners—but also professional recruiting coordinators and professional career services staff. The latter pair provide institutional memory and information-sharing functions and have legitimate claims to pro- fessional knowledge, or “jurisdiction” in Andrew Abbott’s terminol- ogy.248
The process begins, usually, with on-campus interviewing in the fall of a student’s second-year of law school. At the top end of the market, students bid on interview slots and employers have no op- tion but to interview students who select them; that is, the inter- views are not prescreened. Based on the interviews, students are se- lected for callbacks, usually consisting of multiple interviews, after which a firm will use some procedure to determine whether to extend an offer for summer employment to the student. If the student ac- cepts an offer, he or she will become a summer associate, after which he or she will probably, but not always, be made an offer to become an associate after graduation.
What is striking about the process is, first, its cost and uncer- tainty. Firms hire their primary source of human capital and future stakeholders after but a year of law school. In other words, there is little basis on which to evaluate candidates. Even if one knows how they did in tough courses such as Constitutional Law, or whether they made law review, firms could benefit by waiting to learn how the students performed in other difficult courses such as Federal Courts, or whether they became editor-in-chief of the law review, or finished first in moot court. Selecting so early in law school deprives firms of considerable information when making an important choice. Second, selecting new associates from law school at all may be unwise for firms. Since “virtually all of the skills and dispositions that associates need to be good lawyers must be learned on the
job,”249ceteris paribus, it would make the most sense to hire new as-
sociates laterally. This would benefit law firms in two ways. First, they would have a greater empirical track record on which to judge prospective associates: all of law school and the more dispositive post-law school career. Second, they would externalize post-law school training costs onto another firm; in other words, firms would be able to engage in free-riding.
Third, there is a considerable degree of redundancy across the market. This is a consequence of what NALP terms the “central dy- namic[]” of the legal market: “A large number of employers [compet- ing] fiercely for a small portion of the student pool.”250 Firms expend
a great deal of time and energy doing the same tasks, with regard to the same candidate, when that candidate will in the end become a full-time associate at but one firm and a summer associate at but two at most.
Much of this uncertainty is caused by the fact that legal recruiting takes place in a decentralized matching market. Decentralized mar- kets unravel, and that is what has happened: firms hire law stu- dents, and they hire law students early in law school. Furthermore, firms may be more inclined to shy away from laterals because the market operates to designate anyone looking for a job, as a 3L or thereafter, as bearing a higher likelihood of being a lemon. This ad- verse selection problem only increases the pressure to hire law stu- dents and to hire them early. Additionally, decentralized matching markets exacerbate the redundancy already present in the law firm associate selection process. Because firms cannot be certain of their competitors’ recruiting strategies, to say nothing of their own pre- ferred candidates’ ultimate decisions, they must engage in a certain degree of risk-averse behavior, one sensible strategy being to inter- view and hire broadly. And finally, because avoiding lemons takes on such importance, not only must firms interview many candidates, they must interview each of those many candidates many times.
We conjecture that the reason the market for elite law firm asso- ciates has remained decentralized is because of industrial organiza- tion. The large law firm, as a partnership, consists almost exclusively of the lawyers who work for it and must signal its quality to a variety of audiences, including a sophisticated clientele. Each of these fac- tors—the importance of human capital, the corporate governance structure of the firm, and the need to signal quality—renders associ- ate selection extremely important. Taken together, along with a fragmented industry comprised of many players, these factors may go a long way toward explaining why the elite sector of the legal profes-
249. Wilkins & Gulati, Reconceiving, supra note 14, at1608. 250. See HISTORY, supra note 45.
sion has failed to centralize its recruiting function along the lines of medicine.
If we are correct, scholars prescribing centralized matching as a curative for market failure may be naïve. Market inefficiencies from decentralized matching do not simply imply that cooperation ought to prevent such inefficiencies. Rather, they suggest market structure and industrial organization have impeded cooperation in the first place. Accordingly, one ought not to expect or prescribe centralized matching in markets whose industrial organization precludes it. Structure is, if not outcome determinative, highly influential in de- termining process.
B. Theoretical Relevance