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 from The 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.
