- 05 Jul 2006
- Working Paper
What’s Law Got to Do with It: A Systems Approach to Management
Executive Summary — Mainstream management theory often ignores the influence of law on the competitive environment and on the resources of the firm. The author attempts to spark greater academic interest in the legal aspects of management by proposing a systems approach to law and management "that explains how law affects the competitive environment, the firm's resources, and the activities in the value chain." Key concepts include:
- There is a variety of legal tools that managers can use as part of their market strategy to increase realizable value and manage risk.
- Firms operate within a broader social context, which can affect both how existing laws are interpreted and applied and how laws are changed in the future.
- The use of law to create competitive advantage is a wide-open area for academic study.
This paper embeds legal considerations in mainstream management theory and frameworks. It proposes a systems approach to law and management that explains how law affects the competitive environment, the firm's resources, and the activities in the value chain. This is a dynamic model that recognizes that firms and markets are part of a broader system of society and that managerial actions will affect the law and how it is interpreted and applied over time. The paper suggests that the ability of managers to communicate effectively with counsel and to work together to solve complex problems and leverage the resource advantages of the firm-what this paper refers to as "legal astuteness"-may in certain contexts be a dynamic capability providing competitive advantage. A key objective of the paper is to spark greater academic interest in the legal aspects of management and to provide a theoretical predicate for multi-disciplinary empirical work on the role of law and legal astuteness in the achievement and sustainability of competitive advantage.