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Six primary drivers of total legal spending

Let’s round up six candidates that pump up total legal spending for an industry. I list them in order of declining effect as I perceive them.

Heavy Regulation. The amount, complexity, flux and level of enforcement of regulations drives legal spend (See my post of Dec. 14, 2005: legal intensity of regulation; Feb. 25, 2008: service providers for bill and regulation tracking; and April 19, 2006 # 1: complexity of federal employment regulations.).

Significant R&D. Intellectual property requires large servings of legal talent and expenditures (See my post of Aug. 10, 2010: R&D and patent intensity; March 2, 2009: R&D with 12 references; and Sept. 20, 2010: R&D spend related to legal spend with 8 references.).

Mass Torts. Wide-scale legal exposure, such as asbestos, tobacco, lead paint and drugs tigation, pile up legal staff and bills (See my post of April 5, 2005: size of department justifies national counsel; July 16, 2005: national coordinating counsel; Oct. 24, 2005: FMC arrangement; Nov. 25, 2006: the OxyContin pyramid; Dec. 3, 2006: national coordinating counsel and their benefits; Feb. 18, 2007: ethical concerns with local counsel; Dec. 6, 2007: national discovery counsel; and June 10, 2008: specialized counsel, including coordinating counsel.).

Industry Transformation. Competitive upheavals in an industry’s technology platform or offerings means alliances, litigation, acquisitions, patents and other legally-intensive activities (See my post of Aug. 16, 2010: technological intensity and total factor productivity.). The Betamax-VHS fight provides a memorable example.

Rapid Growth. The early, high-rate-of-growth years of an industry necessitate lawyers for a wide range of purposes (See my post of May 12, 2010: profit margins of companies with 6 references.).

Corporate Concentration. Anti-trust issues complicate the legal posture of many mature industries that have a few, large companies (See my post of Aug. 5, 2010: the Herfindahl index; and Oct. 22, 2006: Gini coefficients.).

Surprisingly, what doesn’t seem to drive either legal staff numbers or budgets is globalization, by which I mean when companies expand their operations and sales around the world (See my post of March 1, 2009: creating a one-department culture with 7 posts and 5 metaposts.).

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