Organizational Ability and Performance in U.S. Legal Services Firms

Suggested Citation
Rajiv D. Banker, Tracie S. Frost, Muktak K. Tripathi and Eunyoung Whang (2021), “Organizational Ability and Performance in U.S. Legal Services Firms”, Data Envelopment Analysis Journal: Vol. 5: No. 1, pp 83-113.
Publication Date: 22 Jun 2021
© 2021 R. D. Banker et al.
Law and Economics,  Performance measurement,  Financial reporting,  Econometric models
U.S. professional (legal) services, DEA efficiency, organizational ability, American Lawyer (AM LAW) Top 100, performance, strategic choices, human resources, experience


In this article:
1 Introduction
2 Background and Literature
3 Research Design and Method
4 Empirical Results
5 Conclusion
Appendix I: Sample Procedure
Appendix II: Variable Definitions


We quantify organizational ability for U.S. legal services firms using the two-stage data envelopment analysis (DEA) method of Demerjian et al. (2013). In the first stage, we estimate the DEA-based, technical efficiency of legal services firms following the production frontier approach. In the second stage, we measure organizational ability as the residual from the DEA + OLS model after controlling for efficiency determinants. We validate the measure by showing the persistence of organizational ability and the predictability of firms’ future financial performance. Furthermore, we contribute to the literature examining professional service firms and organizational ability by identifying the determinants of ability through different classes of human resources and experience.


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