Total legal spend declines as companies grow, and seven more possible reasons why

Size matters, and the size of a company as measured by revenue affects its ratio of total legal spending to that revenue. That key ratio, total legal spending (TLS), made up of inside law-department spend plus the department’s external spend – declines the bigger companies become. Why?

An article of mine several years ago 08-01-28 Total Legal Spend declines with size proposed a number of reasons for this phenomenon, and I published a metapost about total legal spending (See my post of Aug. 27, 2008: why TLS declines with size; March 22, 2010: odd trend, because bigger companies use bigger law firms; and Aug. 21, 2008: total legal spend as percent of revenue with 9 references and one metapost.).

Even so, quite a few posts since then have proposed other possible explanations. Here they are with their propositions (See my post of; Sept. 1, 2008: greater expertise; Jan. 8, 2009: global spread of legal talent; Feb. 25, 2009: lower attrition rates of lawyers; March 8, 2009: network externalities; March 9, 2009: availability of discretionary funds; June 4, 2009: legal knowledge codifies with industry maturity; Sept. 26, 2009: all-star lawyers congregate.).

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