Benefits from Information and Communication Technology Facilitating Inter-organisational Knowledge Networks: The Case of Eurojuris Law Firms in Norway
 

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

Acknowledgement: This research was funded by the Research Council of Norway in the NOS Project.
 

Abstract

Businesses such as law firms have recently made large investments in information and communication technology. Eurojuris is a network of law offices in Europe, covering 650 different cities/locations in 19 countries with a total of 3000 lawyers. In Eurojuris Norway, there are 11 law firms with 90 lawyers. The Eurojuris law firms have invested in information and communication technology facilitating inter-organisational knowledge management. This research investigated benefits perceived from use of the network among Eurojuris law firms in Norway. Benefit concepts were derived from value activities, knowledge categories and knowledge levels. A survey was conducted, and survey results indicate that benefits are perceived by lawyers in problem-solving, choice, control and evaluation when they get access to knowledge at an advanced level. There were significant differences in benefits perceived. For example, benefits perceived from access to declarative knowledge were significantly greater than benefits perceived from access to administrative, procedural and analytical knowledge.

This is a refereed article published on 2 August 2001.

Citation: Gottschalk P, ' Benefits from Information and Communication Technology Facilitating Inter-organisational Knowledge Networks: The Case of Eurojuris Law Firms in Norway', Refereed article, 2001 (2) The Journal of Information, Law and Technology (JILT) <http://elj.warwick.ac.uk/jilt/01-2/gottschalk.html>.New citation as at 1/1/04: <http://www2.warwick.ac.uk/fac/soc/law/elj/jilt/2001_2/gottschalk/>.

1. Introduction

Eurojuris is a network of law offices in Europe, covering 650 different cities/locations in 19 countries with a total of 3000 lawyers. Eurojuris is made up of 18 national Eurojuris Associations, some of which may have permanent staff to manage their internal network. Each national member group federates strictly co-opted medium-sized law firms from its country. The objective of Eurojuris is to provide to companies, corporations, public authorities and private clients direct legal advice and local representation all over Europe. Europe does not have a single legal system. The method of conducting business varies from one country to another. Using local expertise from qualified lawyers, who are based on the spot where the client's problem arises, can be an effective way to serve the client or the correspondent lawyer. The local lawyer can draw on his knowledge of local authorities and procedures, speaks the language and is able to act effectively and promptly in his own environment. Using a relevant and local law firm also avoids the extra-costs of traveling expense. It may sometimes be inappropriate to use a large firm from the state capital when immediate advice may be more usefully and cost-effectively obtained at a decentralized location anywhere in Europe (Eurojuris, 2001 ).

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 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. A knowledge network may require the support of a technical infrastructure, a communications network and a set of information services. The information and communication technology provides partners in the network with the ability to directly communicate with each other.

Businesses such as law firms have made enormous investments in information and communication technology (ICT). Yet questions about the linkage between firm performance and ICT investments have puzzled researchers and practitioners over the last decade (Ryan and Harrison, 2000). Benefits from IT investments have been difficult to identify and isolate from other investments and developments in the firm. This research attempts to make a contribution to benefits research by studying benefits derived from ICT facilitating inter-organisational knowledge networks. Specifically, the research question is as follows:

The term network has become the vogue in describing contemporary organisational arrangements (Nohria, 1992). 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 cooperative 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 cooperates and exchanges information. According to Palmer and Richards (1999), learning will in the future take place in knowledge networks rather than within organisations. 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 supports this.

According to the research literature, trust seems to be the most dominating facilitator of inter-organisational knowledge exchange (Cummings and Bromiley, 1996, Grandori and Soda, 1995, Hansen, 1999, Nahapiet and Ghoshal, 1998, Wathne et al, 1996, Aadne et al, 1996). 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 (Bensaou, 1997). 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 coordination mechanisms. Their contention is based, firstly, on the spectacular cost reduction in communication the networks bring about, which thereby support many forms of widespread network use otherwise hardly feasible. Secondly, because IT networks may be employed as a stand-alone coordination 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.

2. Research Propositions

To comprehend the value that information and communication technology provides to organisations, we must first understand the way a particular organisation conducts business and how information systems affect the performance of various component activities within the organisation. Understanding how firms differ is a central challenge for both theory and practice of management. For a long time, Porter's value chain was the only value configuration known to managers. Stabell and Fjeldstad (1998) have identified two alternative value configurations. A value shop schedules activities and applies resources in a fashion that is dimensioned and appropriate to the needs of the client's problem, while a value chain performs a fixed set of activities that enables it to produce a standard product in large numbers. Examples of value shops are professional services, as found in medicine, law, architecture, and engineering. A value network links clients or customers who are or wish to be interdependent. Examples of value networks are telephone companies, retail banks and insurance companies.

A law firm can be defined as a value shop. The value creation logic is problem-solving by the change from an existing to a more desired state. There are five generic categories of primary value shop activities, illustrated in Figure 1 (Stabell and Fjeldstad, 1998):

Figure 1 Value Configuration Activities in a Law Firm as Value Shop

Information and communication technology facilitating inter-organisational knowledge networks may be important in all five value shop activities. However, it is expected that there are core law firm activities requiring more external communications than other law firm activities. Hence, our first research proposition:

A law firm can be understood as a social community specializing in the speed and efficiency in the creation and transfer of legal knowledge (Nahapiet and Ghoshal, 1998). Edwards and Mahling (1997) categorized the types of knowledge involved in the practice of law as administrative data, declarative knowledge, procedural knowledge, and analytical knowledge. Administrative data includes all of the nuts and bolts information about firm operations, such as hourly billing rates for lawyers, client names and matters, staff payroll data, and client invoice data. Declarative knowledge is knowledge of the law, the legal principles contained in statutes, court opinions and other sources of primary legal authority; law students spend most of their law school careers acquiring this kind of knowledge. Procedural knowledge involves knowledge of the mechanics of complying with the law's requirements in a particular situation: what documents are necessary to transfer an asset from Company A to Company B, or what forms must be filed where to create a new corporation. Declarative knowledge is sometimes labeled know-that and know-what, while procedural knowledge is labeled know-how (Nahapiet and Ghoshal, 1998). Finally, analytical knowledge pertains to the conclusions reached about the course of action a particular client should follow in a particular situation. Analytical knowledge results, in essence, from analyzing declarative knowledge (i.e. substantive law principles) as it applies to a particular fact setting. Information and communication technology facilitating inter-organisational knowledge networks may be important in all four knowledge categories. However, it is expected that there is a core law firm work to be done internally. Hence, our second research proposition:

Law firm knowledge can also be categorized according to knowledge level. Tiwana (2000 ) distinguishes between core knowledge, advanced knowledge and innovative knowledge:

Information and communication technology facilitating inter-organisational knowledge networks may be important at all three knowledge levels. However, it is expected that there is rising return at higher levels. Hence, our third research proposition:

Mountain (2001) addresses the question why law firms ought to invest in online legal services when studies to date show that there is no correlation between law firm technology capabilities and profitability. It divides online legal services into two types: digital delivery and legal web advisors. It uses the framework set out by Clayton Christensen (1997 ) in The Innovator's Dilemma to explain how legal web advisors is a disruptive technology that law firm competitors (i.e. accounting firms, dot-coms, and corporate clients) are beginning to harness to erode law firm margins. Unless law firms reinvent themselves as technology organisations, they could find themselves increasingly marginalised. Large law firms need to develop legal web advisors and should consider spinning off technology subsidiaries to do so. Small law firms need to link up with online advisory services on an application service provider basis (Susskind, 2000). Hence, our fourth research proposition:

Eurojuris Norway represents a strategic alliance for inter-firm knowledge transfer (Mowery et al, 1996). Use of information technology for inter-firm knowledge transfer is likely to be influenced by benefits perceived, and vice versa. Hence, our fifth research proposition:

On their website, Eurojuris Norway argues why their network is of importance. If these arguments are actually supported by Eurojuris Norway lawyers, then one would expect higher benefits perceived from participating in the network. Hence, our sixth research proposition:

3. Research Method

The sample was comprised of 90 lawyers in 11 Eurojuris law firms in Norway. Out of 90 questionnaires mailed, 19 were returned, providing a response rate of 21%. All 19 respondents were lawyers, 9 of them were law firm partners. Average number of lawyers in responding firms was 11 lawyers, average number of employees was 14, and the responding lawyer had been with the firm for 13 years on average.

All constructs in this research were measured as multiple item scales as listed in Table 1. The first column contains the construct for use of IT in inter-firm knowledge transfer between Eurojuris law firms. The second column lists the items used to measure the construct. The third and final column shows the reliability of the multiple item scale measured using Cronbach's alpha. Table 1 shows that all scales have an acceptable reliability above 0,7 (Hair et al. 1998 ).

Table 1: Reliability of Multiple Item Scales

Table 2 contains descriptive statistics and correlations between study variables. The Likert-scale in the questionnaire was running from 1 (completely disagree) to 9 (completely agree). Agreement was concerned with benefits from each variable. Hence, an average score in Table 2 of less than 5 does indicate that the respondent did not report benefits from that variable. This means that use of information and communication technology facilitating inter-organizational knowledge transfer was not associated with benefits for neither problem finding nor execution. It was associated with some benefits for problem solving, choice, and control and evaluation. Overall usefulness of ICT in Eurojuris was reported quite high (6.62). Furthermore, ICT was not associated with any benefits for knowledge categories (administrative, declarative, procedural and analytical knowledge). ICT use was marginally associated with benefits for advanced knowledge, but not for core or innovative knowledge. There was little support for the suggestion that the Eurojuris ICT-based network has contributed to avoiding the innovator's dilemma, and there was even less support for the opposite suggestion that without Eurojuris, online legal services would be impossible for the law firm. Finally, usefulness measured by knowledge transfer found some agreement in this survey.

When looking at the standard deviations, there seems to be a strong agreement concerning the extent of usefulness (s.d. of 1.00). There seems to be little agreement concerning declarative knowledge and concerning the innovator's dilemma.

Statistical significance of .01<p at ** and .05<p at *

Table 2: Descriptive Statistics and Correlations

4. Research Results

Research propositions were tested as hypotheses using statistical techniques. The first proposition argued that benefits from information and communication technology facilitating inter-organizational knowledge networks will be greater for core value shop activities (e.g; problem solving and choice) than for other value shop activities (problem finding, execution and control). In Table 3, all five value shop activities are listed. The Table contains t-statistics for differences between each pair of activities. The table shows that there are significantly more benefits associated with the core value shop activity of problem solving than with problem finding, execution and control. The Table also shows that there are significantly more benefits associated with the core value shop activity of choice than with problem finding, execution and control. Hence, our first research proposition finds full support in the data collected in this research.

Statistical difference significant at p<.01 at ** and p<.05 at *

Table 3: Differences in Benefits for Value Activities

The second proposition argued that benefits from information and communication technology facilitating inter-organizational knowledge networks will be greater for administrative and declarative knowledge than for procedural and analytical knowledge. Table 4 shows t-statistics between each pair of knowledge categories. We find significant differences for declarative knowledge, providing support for the suggestion that benefits are greater for declarative knowledge than for other knowledge categories except analytical knowledge. We do not find support for the other part of this proposition concerning administrative knowledge.

Statistical difference significant at p<.01 at ** and p<.05 at *

Table 4: Differences in Benefits for Knowledge Categories

The third proposition argued that benefits from information and communication technology facilitating inter-organizational knowledge networks will be greater at higher levels of knowledge. From Table 5 we see that there are significantly more benefits associated with advanced knowledge than with core knowledge, thereby providing support for more benefits at higher knowledge levels when moving from core to advanced knowledge. However, when moving from advanced knowledge to innovative knowledge there are no more benefits. Hence, the third proposition is only partly supported in the collected data. In fact, the collected data indicate that advanced knowledge is the best knowledge level for IT support as advanced knowledge is significantly higher than both core and innovative knowledge in Table 5.

Statistical difference significant at p<.01 at ** and p<.05 at *

Table 5: Differences in Benefits for Knowledge Levels

The fourth proposition suggests that the Eurojuris network has provided law firms with options to avoid the innovator's dilemma. This hypothesis was tested by comparing two variables. The first variable suggests that ICT in Eurojuris has enabled the law firms to provide online legal services. The second variable suggests that without ICT in Eurojuris, it would be impossible for the law firms to provide online legal services. Table 2 shows that there is little support for the suggestion that Eurojuris has enabled online legal services (average score 4.94). There is even less support for the suggestion that it is impossible without Eurojuris to provide online legal services (average score 4.25). No statistically significant difference was found between with-Eurojuris (4.94) and without-Eurojuris (4.25). Hence, the fourth proposition finds no support in the collected data.

The fifth proposition suggests that the extent of information technology use for inter-firm knowledge transfer is related to benefits perceived in value shop activities, transfer of knowledge categories, transfer at knowledge levels, and perceived avoidance of the innovators dilemma. To test this proposition, multiple regression was applied (Hair et al, 1998). Knowledge transfer was defined as the dependent variable, while the other variables were defined as independent variables. However, with only 19 observations, multiple regression analysis cannot be justified, making it impossible in this research to test proposition five.

The sixth and final proposition suggests that the extent of agreement with website arguments for IT usefulness in the network is related to benefits perceived from the network. Simple regression analysis was applied between usefulness and each of the benefits variables as listed in Table 6. A significant relationship was found between perceived usefulness according to the web and perceived benefits from information and communication technology facilitating inter-organization knowledge network of Eurojuris, for half of the benefits categories. An interpretation of this result is that respondents who agree with statements on the web concerning the usefulness of the Eurojuris network also find more benefits using the network for problem-finding, problem-solving, access to declarative knowledge, access to advanced knowledge, access to innovative knowledge, and enabling avoidance of the innovator's dilemma.

Table 6: Usefulness according to the Eurojuris Web as Predictor of Perceived Benefits

5. Discussion

The research question was:

We found, as listed in Table 2, that benefits are perceived in some, but not all, suggested areas. First, benefits are perceived in three out of five value activities: problem-solving, choice, and control and evaluation. Second, benefits are perceived in one out of three knowledge levels: advanced knowledge. Hypotheses testing indicated that there are significant differences between benefits of various value activities, knowledge categories and knowledge levels.

When little benefits are perceived in the early late stage of value creation in law firms, then this suggests that law firms may have a long way to go to do e-business as suggested by Susskind (2000). When little benefits are perceived in procedural and analytical knowledge, then this suggests that the Eurojuris network has not yet explored the potential of co-operation on a case-by-case basis. When little benefits are perceived in core knowledge, then this suggests that the Eurojuris network has not yet explored the potential of closer administrative joint support. Implications for Eurojuris Norway could be that they should first strengthen the functions and contents that already are successful, such as information for problem-solving, choice, and control and evaluation at the advanced stage of knowledge. The next step could be to explore online legal services, and thereafter information for other tasks could be strengthened.

6. Conclusion

Benefits are perceived from using information and communication technology facilitating the inter-organizational Eurojuris knowledge network. Benefits are perceived by lawyers in problem-solving, choice, control and evaluation at the advanced stage of knowledge. However, in many other areas, little benefits are perceived.

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