The Last Hour: How Digitalization has Transformed Firms in the Legal Industry

Abstract: This licentiate thesis explores how digitalization has transformed firms in the legal industry. Based on a qualitative study of 22 law firms I explore what digitalization has entailed for firms and its wider effects. The aim is to understand the digital transformation of the industry as well as the effects for individual law firms. The analysis targets changes to the distinctive characteristics of law firms as well as the implications for their practices. The key finding is that digitalization has caused massive changes to their previous characteristics of high knowledge intensity, low capital intensity and a professionalized workforce, which in turn has altered the competitive context and triggered a variety of business responses. For instance, many new firms are challenging the logic of hourly billing and are creating alternatives to this practice. This suggests that we are approaching the last hour for the hourly dominance among law firms. However, the data show a split between firms, where it is mainly new players that employ new practices while incumbents remain largely the same. By applying a lens of institutional theory, I uncover why and argue that the dominant logic of law firms makes it difficult for incumbents to adapt to digitalization, whereas new firms use the institutional complexity introduced by digitalization to exploit new opportunities by adapting or creating new practices. These changes have resulted in a heterogeneity among law firms making one single categorization of them impossible. Therefore, this thesis propose that we update our existing assumptions about law firms in particular, and professional service firms in general, in order to explain and forecast their behavior moving forward.