Use of IT in Law Firms as Enabler of Inter-Organisational Knowledge Networks

Petter Gottschalk
Department of Technology Management
Norwegian School of Management
Sandvika, Norway
petter.gottschalk@bi.no
 

Abstract

Law firms represent an industry that seems very well suited to knowledge management investigation. Law firms are knowledge intensive, and the use of advanced technology may well transform these organisations in the future. To examine knowledge management in Norwegian law firms, a study involving three phases of data collection and analysis was designed. This paper reports results from the last phase that comprised a survey of Norwegian law firms on the use of information technology to support inter-organisational knowledge management. Survey results indicate a significant positive relationship between the extent of IT use and the extent of firm co-operation and knowledge co-operation among law firms in Norway.

This is a Refereed Article published on 29 February 2000.

Citation: Gottschalk P, 'Use of IT in Law Firms as Enabler of Inter-Organisational Knowledge Networks', 2000 (1) The Journal of Information, Law and Technology (JILT). <http://elj.warwick.ac.uk/jilt/00-1/gottschalk.html>.New Citation as at 1/1/04: <http://www2.warwick.ac.uk/fac/soc/law/elj/jilt/2000_1/gottschalk/>

1. Introduction

A new perspective on knowledge in organisations is being created. Organisations are viewed as bodies of knowledge (Davenport et al., 1998), and knowledge management is considered an increasingly important source of competitive advantage for organisations (Nahapiet and Ghoshal, 1998). Law firms represent an industry which seems very well suited for knowledge management investigation (Lamb, 1999). Law firms are knowledge intensive, and the use of advanced technology may transform these organisations in the future (Terrett, 1998).

Little empirical research has been conducted on information technology (IT) support for knowledge management. Most published research develops recommendations for successful knowledge management without empirical basis (e.g., Davenport et al., 1998; Fahey and Prusak, 1998). The study presented in this paper complements existing research by focusing explicitly on the use of IT to support knowledge management in law firms, while contributing to the body of empirical knowledge management research (e.g., Alavi and Leidner, 1999; Ruggles, 1998).

To examine IT support for knowledge management in Norwegian law firms, a study involving three phases of data collection and analysis was designed. The first phase was an initial field study of the largest law firm in Norway, while the second phase was a survey of Norwegian law firms on intra-organisational IT-support for knowledge management (Gottschalk, 1999). To examine the use of IT to support knowledge networks, the third phase comprised a survey of Norwegian law firms on IT support for inter-organisational knowledge management. While results from the first and second phase were reported in the Journal of Information, Law and Technology (JILT) last year (Gottschalk, 1999), this paper reports results from the third phase.

2. Knowledge Networks

The term network has become the vogue in describing contemporary organisational arrangements. While it may be true, from a network perspective at least, that every market may be considered a network and that no business is an island, firms increasingly adopt a network organisation. In this case, the notion of a network refers to an organisational form with distinct structural properties, regardless of whether it is considered to be an intermediary form between or beyond markets and hierarchies (Sydow and Windeler, 1998). According to Easton (1992), one approach to networks is to regard them as aggregations of relationships. Most co-operative inter-organisational relationships among strangers emerge incrementally and begin with small, informal deals that initially require little reliance on trust because they involve little risk (Ring and Van de Ven, 1994).

A knowledge network can be defined as a group of persons and activities that co-operates and exchanges information. Seufert et al. (1999) use the term knowledge networking to signify a number of people, resources and relationships among them, who are assembled in order to accumulate and use knowledge primarily by means of knowledge creation and transfer processes, for the purpose of creating value. According to Palmer and Richards (1999), learning will in the future take place in knowledge networks rather than within organisations. This is supported by both Kraatz (1998 ), who found that networks can promote learning, and by Larsson et al. (1998), who found different strategies of learning in knowledge networks.

According to the research literature, trust seems to be the most dominating facilitator of inter-organisational knowledge exchange ( Nahapiet and Ghoshal, 1998). Trust may be defined as the confidence in the goodwill of others (Ring and Van de Ven, 1994).

A knowledge network may require the support of a technical infrastructure, a communications network and a set of information services, i.e. an information architecture. The information and communication system provides partners with the ability to directly communicate with each other (Monge et al., 1998). Information systems have long been considered important vertical integration mechanisms within firms; more recently they have come to be seen as powerful horizontal integrators for managing interdependence between firms (Grandori and Soda, 1995). Grandori and Soda (1995 ) further claim that IT networks deserve a place among inter-organisational co-ordination mechanisms. Their contention is based, firstly, on the spectacular cost reduction in communication the networks bring about, which thereby support many forms of wide-spread network use otherwise hardly feasible. Secondly, because IT networks may be employed as a stand-alone co-ordination mechanism - based on machines rather than on human or organisational means - in an inter-firm relationship.

One advantage of knowledge networks among law firms is that they share a common language (Nahapiet and Ghoshal, 1998). According to the Wall Street Journal Europe (1999), law firms look to join forces. Alliances between law firms are motivated by the increase in cross-border business, and networks help law firms go global. In Norway, the local, well established law firms feel threatened by international law firms which often are involved in both auditing and consulting and which seem to be advanced in their IT support for knowledge management (DN, 1999). Local law firms' response is increased use of IT and search for membership in knowledge networks. It is believed that information-technology-enabled partnerships between law firms in their core business activity of legal advice will strengthen their competitive position. To understand the issues facing law firms, an initial field study was conducted.

3. Research Model and Hypotheses

Based on reviewed literature, the research model in figure 1 and two research hypotheses were developed. Firstly, law firms that use IT more extensively to share knowledge will co-operate more extensively with other law firms. Recent developments in technology have considerably increased the opportunities for knowledge combination and exchange (Nahapiet and Ghoshal, 1998). Information and communication systems provide the ability of partners to directly communicate with each other (Monge et al., 1998). Secondly, knowledge networks between law firms will be supported by IT (Gandori and Soda, 1995; Monge et al., 1998). Hence,

Figure 1: Inter-Organisational Research Model

4. Research Method

The sample was comprised of 247 law firms in Norway. The desired informants in this research were lawyers with special interest or responsibility for IT. Out of 247 questionnaires mailed, 90 were returned, providing a response rate of 37%. On average, the responding law firms had ten lawyers, and the respondent had been in the firm for ten years. A firm of ten lawyers in Norway implies that there are a few partners, some non-partner lawyers and a support staff of four or five.

Three multiple item scales were used to measure the constructs, one for the dependent variable and three for independent variables as listed in table 1. They all have acceptable reliability. Table 2 contains descriptive statistics and correlations between study variables.

Table 1: Reliability of Multiple Item Scales

Table 2: Descriptive Statistics and Correlations

5. Research Results

The hypothesis testing was carried out using simple regression. Table 3 lists the results of regression analysis between the independent variable and the two dependent variables. The independent, i.e. explanatory, variable is the extent of IT support for knowledge management, while the dependent variables are the extent of firm co-operation and knowledge co-operation. We are looking for the extent to which IT use can explain variation in firm co-operation and knowledge co-operation among law firms in Norway. 53 percent of the variation in firm co-operation can be explained by the extent of IT use, while 45 percent of the variation in knowledge co-operation can be explained by the extent of IT use. Both relationships are significant, thereby providing support for both hypothesis 1 and hypothesis 2.

Table 3: Multiple Regression between Use of IT and Predictors

6. Discussion

It seems that inter-organisational knowledge management is at an early stage in Norwegian law firms as indicated by the low mean scores in table 2. To the extent inter-organisational knowledge management takes place among law firms, information technology is used to a limited extent, achieving an average score of 2,39 on a scale from 1 (low) to 6 (high).

Very few Norwegian law firms seem to be involved in knowledge networks as defined by Sydow and Windeler (1998), who argue that the notion of a network refers to an organisational form with distinct structural properties. Only a few law firms are nodes in networks such as Eurojuris, Lex Norvegica, American Law Firm Association (ALFA), Proteus, and Multilaw. The largest number of respondents indicating one network, were Eurojuris firms.

Information was collected on software and systems used to support inter-organisational knowledge management in law firms. As seen in table 4, the firms' responses indicate that word processing was the dominant software, followed by electronic mail and external legal data bases. A separate column reflects reports from those law firms that scored more than three on the IT support scale. When the two columns are compared, IT-intensive law firms seem to have a relatively more extensive use of electronic mail and internal data bases.

Table 4: IT Support for Inter-Organisational Knowledge Management

Four types of information-technology-enabled inter-organisational partnerships have been identified in the research literature: transaction processing, inventory movement, process linkage, and knowledge linkage (Alavi et al., 1997). When classifying the different software products and systems in table 4, both transaction processing and inventory movement seem irrelevant for law firms. Process linkage (P) and knowledge linkage (K) seem relevant. In table 4, high usage software and systems may be classified as both P (ranks 1, 4, 5 and 7) and K (ranks 2, 3, 6 and 8). Alavi et al. (1997) claim that K is the most advanced form of partnership. Table 4 illustrates that IT provides limited support for the advanced form.

Aadne et al. (1996) found that the willingness to provide different types of knowledge and information to other firms is often determined by inter-organisational trust. A separate, simple regression between inter-organisational trust and knowledge co-operation did not, however, confirm their finding. This is surprising, since trust seems to be the most frequently mentioned facilitator of inter-organisational knowledge exchange in the research literature (Grandori and Soda, 1995; Nahapiet and Ghoshal, 1998).

The software and systems items in table 4 represent the extent to which each of them is used for inter-organisational knowledge management. Treated as statistical items, they all load on one factor with a reliability of 0.85. This measurement scale represents an alternative dependent variable. To predict the extent of software and systems use, the same three independent variables were used. The regression equation was significant, explaining 16% of the variation in software and systems use. This time, only knowledge co-operation was a significant predictor. Compared with the previous regression, this supplementary regression confirms the dependence of IT use on knowledge co-operation, rather than firm co-operation or inter-organisational trust.

7. Future Research

Several suggestions for future research are relevant based on concerns of the current study. First, the theoretical framework guiding this research should be improved. Knowledge is not something that is out there which can be stored in a container (knowledge management systems). Rather, knowledge is something that is embedded in social relationships and everyday activities. A clear distinction can be made between knowledge management and knowledge management systems, and a clear distinction should also be made between intra-organisational knowledge management systems and inter-organisational knowledge management systems. The essential theoretical issues should be isolated and distilled in future research. An improved theoretical framework will provide stronger support for current and revised research hypotheses.

Second, key constructs should be explored. The whole literature on technology acceptance and social influence in technology adoption process will prove helpful. More evidence should be provided for the reliability and validity of the measures used.

Third, methodology concerns should be overcome in future research. The research is about an organisational level phenomenon, and multiple firms may be considered a necessary condition for testing a between-organisation relationship.

8. Conclusion

This paper explored some important and contemporary issues concerning knowledge management by viewing organisations as knowledge systems. Studying law firms can produce many useful insights on how organisations and individuals are managing their knowledge, as these firms are knowledge intensive - and almost entirely knowledge based - organisations. More empirical research is needed in the knowledge management field, and this paper reported empirical results from Norwegian law firms on their use of IT to support their knowledge management practice. IT plays a critical role in inter firm knowledge management efforts.

The inter-organisational study documents that the extent of law firm co-operation and the extent of knowledge co-operation were significantly impacted by the use of IT to support inter-organisational knowledge management.

This research has made a contribution to the knowledge-based view of the firm applied to professional service firms. It is suggested that future research focus on two in-depth perspectives of the current research. First, work processes in which law firms co-operate should be pursued. Second, the role of specific technologies in inter-organisational knowledge management should be investigated. In addition, future research should attempt to improve instruments to measure constructs in this research.

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