The make-or-and-buy decision for in-house legal department : a concurrent sourcing approach

Abstract

With massive trends affecting the manner in which legal services are delivered and will frame the way In-house legal departments consider the make-or-buy decision. This study explored the make-or-buy decision considering a comprehensive academic framework, utilising Transaction Cost economics, Neoclassical economics and Capabilities economics to determine the economic drivers of a concurrent sourcing choice where In-house legal departments both make-and-buy legal services. Mixed methodology research included 12 in-depth interviews with Chief Legal Officers/Head of Legal or Head of legal function for qualitative purposes and a questionnaire distributed to all 486 members of the Corporate Counsel Association of South resulting in 32 valid responses, to triangulate and validate the qualitative results. Both interview schedule and the questionnaire were adapted from Parmigiani's (2007) concurrent sourcing academic framework. From the results of interviews, an inherent complexity arose in the distinction between generalised and specialised legal services. The results demonstrated support for the Neoclassical and Capabilities economics, through economies of scale and scope and firm and supplier expertise, over Transaction Cost economics considerations. Institutional knowledge and the mitigation of legal risk were two exogenous factors that arose and which influence the make-or-buy decision for In-house legal departments. This offered a composite interpretation to develop a decision tree model to be considered by In-house legal departments in the make-or-buy decision. The model assists In-house legal departments to consider the choice of legal services provider depending on the type of services required, be that generalised or specialised/Internal or External legal services, resulting in value-adding legal services delivery that helps to deliver the organisations overall goals and objectives.