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33 J. Corp. L. 497 (2007-2008)
To Make or to Buy: In-House Lawyering and Value Creation

handle is hein.journals/jcorl33 and id is 501 raw text is: To Make or to Buy:
In-House Lawyering and Value Creation*
Steven L. Schwarcz**
In recent years, companies have been shifting much of their transactional legal work
from outside law firms to in-house lawyers, and some large companies now staff
transactions almost exclusively in-house. Although this transformation redefines the very
nature of the business lawyer, scholars have largely ignored it. This Article seeks to
remedy that omission, using empirical evidence as well as economic theory to help
explain why in-house lawyers are taking over, and whether they are likely to continue to
take over, these functions and roles of outside lawyers. The findings are surprising,
suggesting that in-house lawyers may now be performing work as high in quality as
outside lawyers and that the reputational value of outside lawyers may be significantly
diminishing.
I. IN TRO DU CTIO N  ........................................................................................................ 498
II. M ETHO DO LOG Y  ....................................................................................................... 500
III. H Y PO TH ESIS  ............................................................................................................ 503
A . D isinterm ediation  ............................................................................................... 503
B . Reducing  Agency  Costs  ...................................................................................... 505
C . E conom ies  of   Scale ............................................................................................. 506
D . E conom ies  of   Scope ............................................................................................ 508
E. Responsiveness and Ease of Communications .................................................... 509
F. Reputational Intermediary ..................................... 510
G. Client Privilege  and  Confidentiality ................................................................... 512
* Copyright © 2008 by Steven L. Schwarcz.
** Stanley A. Star Professor of Law & Business, Duke University School of Law; Founding Director, Duke
Global Capital Markets Center. E-mail: schwarcz@law.duke.edu. The author thanks, for their invaluable
comments, Kenneth Anderson, Jonathan Baker, Robert Bartlett, Victor Fleischer, Peter Joy, Carl D. Liggio, Sr.,
Gray MeCalley, Jr., Milton C. Regan, Barak Richman, Daniel Schwarcz, Gabe Shawn Varges, and Neil
Vidmar, and participants in faculty workshops at American University, Washington College of Law; Duke Law
School; The University of Georgia School of Law; Wake Forest University School of Law; and Washington
University School of Law, St. Louis. He also thanks D. Branch Furtado and Shawn G. Shelton for excellent
survey and research assistance and Joan Magat for excellent editorial assistance.

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