ORGANIZATIONAL FAILURE, EDUCATIONAL PRESTIGE, AND THE

DIMINUTION OF CUMULATIVE CAREER ADVANTAGE

Christopher I. Rider*

Giacomo Negro

Peter W. Roberts

Goizueta Business School

Emory University

1300 Clifton Road

Atlanta, GA 30322

April 7, 2011

Word count: 12,993

Keywords: cumulative advantage, education, intraprofessional status, organizational failure, law firms

* Corresponding author: (404) 727-4198 or Chris_Rider@bus.emory.edu.

Financial support from Emory University‟s Goizueta Business School is acknowledged. We appreciate

constructive comments from Warren Boeker, Diane Burton, Heather Haveman, and seminar participants at the

2nd

People and Organizations Conference, the 2009 Organizational Ecology Workshop, the 2009 Institutions

and Innovation Conference, Dartmouth College, and the 2009 Academy of Management meetings.

ORGANIZATIONAL FAILURE, EDUCATIONAL PRESTIGE, AND THE

DIMINUTION OF CUMULATIVE CAREER ADVANTAGE

ABSTRACT

Studies of cumulative career advantage explicate increasing intraprofessional inequality over

time but neglect the question of whether or not countervailing processes can diminish

accumulated advantage. We theorize how one such process, organizational failure, diminishes

accumulated career advantages by reducing displaced employees‟ labor market bargaining

power. But, we also consider how status organizing processes influence the magnitude of

diminution. Specifically, we propose that educational prestige protects one‟s accumulated

advantage by influencing post-failure evaluations of job candidates. Leveraging a quasi-

experiment created by a prominent law firm‟s sudden failure, we test our theory by analyzing

224 firm partners‟ transitions to subsequent employers. Displaced by the firm‟s failure, most

partners regained employment at lower status employers but, independent of their observed

productivity at the failed firm, graduates of the most prestigious law schools were least likely to

experience intraprofessional status diminution. We conclude that countervailing processes can

diminish cumulative career advantage but that resources that enable accumulation (i.e.,

prestigious education credentials) also protect individuals against diminution.

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In many professions, occupants of high status positions receive disproportionate

recognition and support for their work. A common explanation for such disparities is that

initially small advantages of one individual or group over others exert positive causal effects on

future recognition and resources, amplifying the initial advantage and attracting further

recognition and resources (Merton 1968, 1988; Gould 2002). This advantage accumulation

process influences career attainment for a wide variety of professionals (Cole and Cole 1973;

Zuckerman 1977; Allison, Long, and Krauze 1982; Smith and Abbott 1983; Broughton and Mills

1980; Bielby and Bielby 1996; Fernandez-Mateo 2009) by structuring training and employment

opportunities, access to resources, and attention paid to one‟s work (Merton 1988). Cumulative

career advantage is, therefore, commonly invoked to explain why success breeds success, the

poor get poorer, and gaps between the haves and the have-nots increase over time (DiPrete and

Eirich 2006).

So powerful are cumulative advantage processes that accumulation is widely considered

difficult, if not impossible, to stop. Some propose that only a professional failure (Zuckerman

1988: 155) or other similarly negative event (Cole and Singer 1991) can diminish one‟s

accumulated career advantage. But, despite extensive scholarly work on cumulative career

advantage and on status attainment more generally (e.g., Blau and Duncan 1967; Merton, 1968;

Featherman and Hauser 1978; Gould 2002; Elman and O‟Rand 2004; Fernandez-Mateo 2009;

Bothner, Haynes, Lee, and Smith 2010), such conjectures remain speculative; prior research does

not investigate the cessation or reversal of advantage accumulation.

Studies of cumulative career advantage typically examine increasing disparities among

similar individuals‟ career trajectories over time. Sociological work on careers (see Rosenfeld,

1992 for a review) and, more specifically, organizational work on stratification (Kanter 1977;

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Cohen, Broschak, and Haveman 1998; Castilla 2008; Kalev 2009) pursue similar inquiries but

explicitly highlight the role of employers in structuring opportunities for some individuals to

accumulate and maintain career advantages over others. We, therefore, integrate organizational

work on careers and stratification (Baron and Bielby 1980; Baron 1984; Reskin 1993; Kerchkoff,

1995; Barnett, Baron, and Stuart 2000; Phillips 2001; Phillips and Sørensen 2003; Peterson and

Saporta 2004) with the cumulative advantage literature in considering how organizational

processes might diminish or eliminate one‟s cumulative career advantage.

Individuals lose jobs when their employers fail (Haveman and Cohen 1994). Although

labor market institutions may reduce negative effects of unemployment (DiPrete and McManus

2000; DiPrete 2002; Gangl 2004, 2006), job loss generally increases one‟s chances of downward

socioeconomic mobility (Kuhn 2002). Consequently, organizational failure is one negative

trigger event (DiPrete and McManus 2000) that might diminish one‟s cumulative career

advantage. Although one‟s advantage may be diminished in several ways (e.g., wealth, income,

title), given the importance of hierarchical status distinctions in professions (Merton 1968;

Abbott 1981) we consider one‟s cumulative career advantage to be diminished when they lose

intraprofessional status. Specifically, if an individual regains employment at an organization that

is of lesser status than their former employer then this downward mobility reduces the

individual‟s intraprofessional status or, alternatively, diminishes their cumulative career

advantage over other professionals. We develop two related theoretical arguments; the first

applies equally to all individuals displaced by organizational failure and the second accounts for

differences in individuals‟ post-failure experiences.

First, we propose that organizational failures reduce displaced employees‟ labor market

bargaining power (Phillips 2001). All else equal, an individual‟s labor market bargaining power

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is greater when employed than when unemployed. By reducing the value of an individual‟s

current position to zero, organizational failure reduces the value that other employers must offer

displaced employees for their labor. Similarly, the closer an organization is to failing the lesser

is the bargaining power of employees. In short, organizational failure strengthens potential

employers‟ bargaining power at the expense of employees of failing or failed organizations. In

such weakened positions, professionals that accumulated advantages over the course of their

careers should find it difficult to maintain their intraprofessional status by negotiating positions

at employers of status equal to their prior employer. Organizational failure, then, can diminish,

if not eliminate entirely, displaced employees‟ cumulative career advantages by inducing

employment transitions at structurally unfavorable terms.

Second, we propose that individual bargaining power will also be reduced by post-failure

status organizing processes (Berger, Rosenholtz, and Zelditch 1980; Podolny 1993). Status-

based accounts of markets (Podolny 1993; Philips and Zuckerman 2001) suggest that potential

employers may refrain from hiring former employees of failing or failed organizations. Because

inter-organizational careers implicitly associate individuals‟ prior and current employers

(Sørensen 1999; Burton, Sørensen, and Beckman 2002), actors in product and factor markets

may doubt the quality of organizations that willingly associate with failure. Furthermore, status

characteristics theory (Berger, Cohen, and Zelditch 1966; Berger, Fisek, and Norman 1977)

indicates that association with failure is a negative status characteristic that will reduce

bargaining power. Thus, post-failure status organizing processes will also diminish displaced

employees‟ cumulative advantages.

Not all displaced employees will experience equivalent bargaining power reductions or,

consequently, advantage diminution. Status characteristics theory suggests that prospective

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employers form aggregate evaluations that reconcile job candidates‟ negative and positive

characteristics (Berger, Rosenholtz, and Zelditch 1980; Gorman 2006). If positive characteristics

offset bargaining power reductions, then displaced employees that vary in a positive status

characteristic should also vary in the severity of diminution. An individual‟s prior education is

an important positive status characteristic because education generally structures opportunities

for socioeconomic attainment (Blau and Duncan 1967; Useem and Karabel 1986; Kerckhoff and

Glennie 1999; Elman and O‟Rand 2004). In particular, prestigious education credentials

influence professional attainment when one‟s quality is difficult or costly to ascertain (Cole and

Cole 1973; Spence 1973; Zuckerman 1977; Long, Allison, and McGinnis 1979; Allison and

Long 1990). In evaluations of two job candidates of similar observable quality and an identical

negative characteristic (i.e., association with the same failure), the individual who graduated

from the more prestigious educational institution is likely to be viewed more favorably by

potential employers. If so, then reduced bargaining power and, consequently, the severity of

advantage diminution will be lesser the greater is one‟s educational prestige.

In essence, we argue that organizational failure diminishes displaced employees‟

accumulated career advantages by reducing their labor market bargaining power (i.e., the

“average treatment effect”) but that an individual status characteristic, educational prestige,

moderates the severity of diminution (i.e., “heterogeneous treatment effects”). Like a

“quantitative ethnography” (e.g., Peterson and Saporta 2004; Fernandez-Mateo 2009), we study

a single organizational failure and treat it as a negative trigger event capable of diminishing the

cumulative career advantages of high-status professionals. We analyze senior lawyers‟

employment transitions induced by the unexpected dissolution of a large, high status law firm.

This approach holds constant the reason for the inter-organizational transition (i.e., a failing or

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failed organization), economic conditions at the time of transition, and the institutions governing

the labor market. Prior to its sudden and unexpected failure, the firm was one of the most

highly-regarded law firms for technology companies. Industry observers were shocked and

partners embarrassed when the firm dissolved surprisingly in February of 2003 due to financial

mismanagement (Glater 2003). By displacing many high status lawyers, the firm‟s failure

enables us to test whether or not countervailing processes diminish cumulative career advantage

and if failure-related diminution varies across similarly advantaged individuals.

Analyses of 224 partners‟ employment transitions reveal that most partners‟ cumulative

career advantages were diminished. Most regained employment at firms of lower

intraprofessional status. But, their labor market outcomes varied widely and so, too, did the

prestige of the 62 different law schools that granted their law degrees. Consistent with

bargaining power arguments, the further in advance of failure a partner obtained their subsequent

position the less likely they were to experience downward mobility (i.e., regain employment at a

lower status employer); those who remained with the firm until dissolution were most likely to

experience downward mobility. Most importantly, graduates of the most prestigious law schools

were least likely to experience downward mobility, independent of exit timing, productivity,

geographic location, area of legal practice, and other individual characteristics. We conclude

that countervailing processes can indeed diminish cumulative career advantage but that

educational prestige protects individuals against diminution.

The Rise and Fall of Brobeck, Phleger, and Harrison.

Brobeck, Phleger, and Harrison, LLP (“Brobeck”), a high status law firm, dissolved in

February of 2003. Founded in San Francisco in 1926, Brobeck rose to national prominence in

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the 1990s. The firm was widely-regarded as one of the premier law firms for technology

companies, employing over 900 lawyers and over 200 partners in 14 cities worldwide at its peak.

In 2000, Brobeck generated $476 million in revenue and $1.2 million in profits per partner and in

2002 the firm was ranked as the twenty-sixth most prestigious firm in the U.S., according to the

Vault Guide to the Top 100 Law Firms (Vault 2002; hereafter referred to as “the Vault 100”).

Brobeck‟s collapse was surprising to many legal professionals. Although law firm dissolutions

are not uncommon (Phillips 2001, 2002; Heinz 2009), firms as large as Brobeck rarely dissolve.1

As the technology boom turned to bust in 2001 and 2002, Brobeck‟s revenues declined

and the firm‟s debts loomed larger. Brobeck‟s partnership secured a $40 million loan from

Citibank so that, even as the firm declined in 2002, partners received capital distributions in

anticipation of their annual bonuses (Glater 2003). Such practices are common in large law

firms but given Brobeck‟s financial position this was viewed by industry observers as misguided

at best and fraudulent at worst. Many doubted that Brobeck could service its debt obligations

and meet partners‟ bonus expectations. Matters were further complicated by the departures of

partners who left for jobs at competitors, including the firm‟s chairman who left in the middle of

2002 and took sixteen partners to a rival firm. This combination of decreasing revenues,

increasing debt, and partner defections accelerated Brobeck‟s demise.

In 2002, Brobeck negotiated with Citibank on the terms of a $90 million outstanding

debt. Saddled with expensive office leases, Brobeck cut costs by laying off or offering severance

packages to employees, halting employee reimbursements for firm expenses, and, unbeknownst

to many firm employees, even neglecting to pay administrative fees for Brobeck‟s $160 million

401(k) plan (Glater 2003). But, by the end of the year Brobeck was still deeply in debt to

Citibank and other creditors. On January 30, 2003, after failed merger talks with Morgan, Lewis

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and Bockius, another high status law firm, Brobeck‟s chairman surprisingly announced that the

firm would dissolve. Brobeck officially dissolved in February of 2003 and entered Chapter 7

bankruptcy that September.

While some industry observers attributed the failure to financial mismanagement (Heinz

2009), others attributed the firm‟s demise to partner greed. The trustee for the Brobeck estate

claimed that Brobeck‟s former partners steered the firm into a “death spiral” by “taking for

themselves and spending on leasehold improvements more than $100 million in excess of

Brobeck‟s net income for 2001 and 2002” (Young 2005). So negative was the fallout that The

New York Times reported that many partners “were embarrassed by the collapse of the firm and

no longer wanted to have their names associated with it” (Glater 2003).

Brobeck‟s dissolution induced partners‟ employment transitions to other firms. Some left

prior to dissolution but most remained until the firm‟s dissolution was officially announced.

Brobeck‟s former competitors faced a dilemma. Many former Brobeck partners maintained

impressive client rosters and generated substantial profits. Therefore, if a firm did not hire

former Brobeck partners then their rivals might gain a competitive advantage by doing so. But,

competitors also experienced negative labor market feedback based on their similarity and

proximity to Brobeck (e.g., Jonsson, Greve, and Fujiwara-Greve 2009). Law school students

asked in job interviews “How do I know you‟re not another Brobeck?” (Young 2003). The

bankruptcy proceedings would also attract negative attention to any firm that hired former

Brobeck partners involved in the proceedings. Furthermore, the Brobeck estate threatened to sue

Brobeck partners‟ subsequent employers for causing the firm‟s dissolution and bankruptcy.

This set of post-failure circumstances severely reduced Brobeck partners‟ labor market

bargaining power. Obviously, continued employment at Brobeck was no longer an option. As

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one industry consultant puts it, “It's not like they were recruited away as lateral partners -- these

people changed jobs because they had to” (Schmitt 2005).

Faced with clients who might take their business to rivals, partners had to quickly regain

employment for themselves and their teams. Their abilities to negotiate employment offers at

law firms of similar status were severely constrained by the fact that their prospective employers

were well aware of these pressures. One partner stated, “The lights were going to go out. We

only had two weeks to make a move.” while another offered a more vivid analogy, “I think

there's a lifeboat mentality to jump in the first nice lifeboat...” (Schmitt 2005). Not all

prospective employers would tolerate the negative feedback in service and labor markets that

hiring former Brobeck partners would likely cause. Even partners who left several months prior

to the firm‟s dissolution found their bargaining positions weakened by widespread industry

rumors of Brobeck‟s finances. As this narrative demonstrates, Brobeck‟s failure seems more

than sufficient to weaken the labor market bargaining power of individuals seeking to preserve

their cumulative career advantages by maintaining their intraprofessional status.

Theory

Cumulative career advantage processes typically operate according to three principles.

First, individuals within a group exhibit initially small differences in observable ability. Second,

recognition and resources are allocated in ways that favor those who demonstrate ability early in

their careers. Third, over time, these individuals leverage resources and recognition granted to

them to attract yet more of both. Together, these three principles account for increasing

inequality over time among professionals who, initially, are only slightly different in terms of

observable ability.

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The classic example of cumulative career advantage is Merton‟s (1968) “Matthew

Effect,” which explains how famous scientists receive great recognition for their contributions to

science while relatively unknown scientists receive little or no recognition for otherwise

comparable contributions. Because evaluating scientific contributions is difficult, scientists‟

early contributions and institutional affiliations attract resources to support future work and

recognition for their contributions. Over time, this produces stratification in science through a

self-reinforcing cycle: early contributions lead to investigative opportunities that garner further

visibility, recognition, and resources enabling further contributions and so on. Importantly,

functionally-relevant criteria govern resource allocation and enable advantages to accumulate for

scientists who demonstrate promise early in their careers (Zuckerman 1988). So, what is most

remarkable about cumulative advantage is not increasing inequality itself but, rather, the causal

significance of initially small distinctions at such early stages of one‟s career.

Within professions, researchers interpret temporally increasing disparities in cohort

members‟ production rates, status attainment, or income as evidence of cumulative career

advantage. For example, physicists whose early papers were heavily cited continued to be highly

productive over time while physicists whose early papers received few citations exhibited

declining production in subsequent years (Cole and Cole 1967). Another study revealed that

inequality in the distributions of both publications and citations was greater for cohorts of older

chemists, physicists, and mathematicians than for younger cohorts (Allison and Stewart 1974).

In chemistry, inequality in publication counts increases as cohorts age (Allison, Long, and

Krauze 1982).

Corroborating evidence from other professions is plentiful. For example, a study of

almost 4,000 clergy members drawn from 21 religious denominations found that resources (i.e.,

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congregation members, expenditures, and support staff) were distributed more equally in

younger than in older cohorts (Broughton and Mills 1980). The increasing gap in earnings for

male and female screenwriters was attributed to an industry-level cumulative advantage process

that favored men over women (Bielby and Bielby 1996). A longitudinal, within-individual and

within-organization analysis of highly-skilled, information technology professionals found that

the gender gap in pay increased with individual tenure at the staffing agency responsible for

matching employers and employees (Fernandez-Mateo 2009).

Despite extensive research on cumulative career advantage and sustained interest in

inequality, previous work does not examine processes or events that may slow or stop the

accumulation of advantage (c.f., Cole and Singer 1991). But, this lack of empirical attention

belies sustained theoretical interest in countervailing processes (e.g., Bothner et al. 2010).

Zuckerman (1988: 155) writes, “Once individuals are beneficiaries of cumulative advantage,

how long must they continue to demonstrate their merits by high-level performance?” DiPrete

and Eirich (2006: 284) note that “A complete specification of a strict CA [Cumulative

Advantage] process would not just characterize the mechanism producing the effect, but would

also address the mechanism that turns the process off.” Following Zuckerman (1988), they

speculate that high status actors‟ “career mistakes” will raise doubts about the extent to which

received recognition was warranted and their abilities to properly utilize resources allocated to

them, resulting in reduced resources and recognition that diminishes or, in extreme cases,

eliminates one‟s accumulated advantage. 2

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Organizational failure, bargaining power, and downward career mobility.

The literature on cumulative career advantage acknowledges the role of employers in

enabling professionals to attract and utilize resources, but the literature on organizations and

stratification makes more explicit connections between employers and individuals‟ differential

opportunities for career attainment (Kanter 1977; Baron and Bielby 1980; Baron 1984; Reskin

1993; Barnett, Baron, and Stuart 2000; Phillips 2005; Beckman and Phillips 2005). This body of

work strongly suggests that one‟s ability to obtain and maintain a cumulative career advantage

over other professionals depends upon opportunities to secure employment in advantaged

positions. In other words, cumulative career advantage may be obtained, maintained, or

increased only so long as organizations provide advantaged individuals with opportunities to do

so. Therefore, organizational processes that restrict opportunities for individuals to maintain

high status positions would likely diminish, if not eliminate, their cumulative career advantages.

In a study of law firm promotions, Phillips (2001) advances a theoretical argument that

links individual career attainment to labor market negotiations between organizations and

individuals. He proposes that the stronger an employer‟s bargaining position the less likely the

employer will be to offer precious career resources and rewards to employees. His empirical

analyses reveal that rates of promotion from law firm associate to partner are highest in law firms

that are most likely to fail. In other words, the more favorable an organization‟s life chances the

greater the organization‟s labor market bargaining power. Conversely, the greater the likelihood

that an organization will fail the weaker its bargaining power and the greater the bargaining

power of prospective employees. So, failing firms must offer greater rewards to retain

employees than competitively strong firms must offer to recruit them. Similar findings are

obtained in study of television station managers (Phillips and Sørensen 2003). Although

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developed within the context of an ongoing employment relationship, this logic extends to

potential employment relationships between organizations and individual candidates. We,

therefore, apply this bargaining power argument to the labor market allocation of rewards such

as intraprofessional status.

A simple hypothetical example illustrates our logic regarding organizational failure, labor

market bargaining power, and cumulative career advantage. Consider an organization that is

unlikely to fail in the foreseeable future and an individual who is currently employed by one of

the organization‟s competitors. Assume that, at present, both the organization and the competitor

offer positions of equivalent intraprofessional status. In employment negotiations between

organization and individual, relative bargaining power is determined by the respective life

chances of the individual‟s current and potential employers. If, due to recent market conditions,

the individual‟s employer becomes likely to fail in the near future then the organization‟s

competitors can offer with positions of greater net present value to the individual than their

current employer can. But, potential employers need not offer such valuable positions if it is

well known that the individual‟s current employer is likely to fail soon. In this way, the

bargaining power of the individual is constrained by the relative difference in the survival

chances of their current and prospective employers. The greater the expected net present value

of employment with the potential employer than with the current employer, the lesser the

individual‟s bargaining power.

Now, consider the same negotiations between organization and individual after the

individual‟s employer fails. The net present value of the position with their employer is reduced

to zero; post-failure, displaced employees must seek employment in surviving organizations, exit

the labor market (Haveman and Cohen 1994), or transition to self-employment (Sørensen 2007).

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Prospective employers are now less inclined to offer resources and professional rewards like

status to induce displaced individuals to accept employment at their organization (Phillips and

Sørensen 2003) because their previous best alternative to doing so is no more. In this way, the

bargaining power of displaced employees is reduced by organizational failure. If organizational

failure reduces displaced employees‟ bargaining power and, consequently, decreases the

likelihood that they will negotiate a position of status similar to the position they previously held,

then individuals displaced by organizational failure will, on average, experience downward

mobility that diminishes their cumulative career advantages.

Hypothesis 1: Employees of organizations that fail will, on average, regain employment at

organizations of lesser status than their failed employer.

To extend the example above, consider another individual who is employed by the

organization that fails but who negotiates another position prior to failure. Assuming that both

individuals are equivalent in terms of status characteristics valued by potential employers, we

should expect the individual who negotiates prior to failure to obtain a subsequent position of

greater status than the position obtained by the individual who negotiates after the failure event.

The reason is that the first individual negotiates with greater bargaining power than the second

individual as long as the organization is failing but has not yet failed. Therefore, employees

who transition to subsequent employers prior to organizational failure will be less likely, on

average, to experience downward mobility than those who remain with their employer until the

organization fails. This argument is consistent with a study of Texas banking executives

(Semadeni et al. 2008): those who departed their banks prior to failure were less likely to obtain

a lower level position at their subsequent employer (e.g., a former President hired as a Vice-

President).

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Hypothesis 2a: Employees who depart prior to organizational failure will be less likely to

experience downward mobility than employees who remain with the organization until failure.

Now suppose that employees who depart an organization prior to failure do so at different

points in time (e.g., one week prior to failure, two months prior to failure). Again, assume that

employees are equivalent in terms of characteristics valued by potential employers and vary only

in the timing of their organizational departure. As more employees depart, the chances that the

organization will fail increase (Phillips 2002). Labor market actors are likely to observe such

departures and update their evaluations of positions offered by the organization accordingly.

Consequently, those employees who delay their inter-organizational transitions until just before

failure will likely negotiate with less bargaining power than those who negotiate subsequent

positions well in advance of failure. We propose, then, that employees negotiate with greater

bargaining power the further in advance of organization failure they depart their employer. We

consequently predict variation in the magnitude of downward mobility based on the timing of

individuals‟ organizational departures.

Hypothesis 2b: The further in advance of organizational failure that an individual transitions to

another employer, the less likely the individual experiences downward mobility.

Educational prestige and variance in post-failure downward career mobility.

In the discussion above, we argue that organizational failure reduces bargaining power

solely by reducing the net present value of employees‟ positions. We also assume that

employees are equivalent in terms of status characteristics. We now relax these assumptions and

consider how status organizing processes and differences in employees‟ education credentials

condition variance in their chances of experiencing downward mobility.

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Individuals forced to find new jobs due to organizational failure may find their labor

market opportunities severely reduced by status organizing processes. First, mere association

with failure can cause labor market actors to refrain from hiring all former employees of failed

organizations. Implicit organizational associations are created by hiring events (Sørensen 1999;

Burton et al. 2002) and status-anxious organizations generally refrain from associating with

negative organizational events (Jensen 2006). If at least some potential employers are unwilling

to risk the stigma-by-association (Pontikes, Negro, and Rao 2010) that hiring former employees

of failed organizations foster, then bargaining power should be reduced beyond the mere job loss

effect discussed above.

Second, displaced employees can also experience reduced bargaining power if their

employer‟s failure causes them to be devalued or discredited by others (Goffman 1963). For

example, organizational failure can damage a displaced employee‟s identity by causing market

actors to doubt their ability (Sutton and Callahan 1987). But, some individuals will be in better

positions to assuage those doubts than others.

Consider that hiring is a task that involves processing both positive (e.g., prior

accomplishments) and negative (e.g., prior failures) information about a job candidate in order to

develop expectations of their further performance. Status characteristics theory informs us that

individuals engage in “status balancing” in evaluating social actors, combining perceived

negative and positive status characteristics to form aggregate evaluations of candidates (Berger,

et al., 1980; Humphreys and Berger, 1981; Gorman, 2006). We assume that prior occupation of

a high status position is a positive status characteristic and that association with organizational

failure is a negative status characteristic. Faced with conflicting information, hiring

organizations are likely to emphasize status characteristics that help resolve uncertainty about the

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candidate‟s quality. Because education is a valuable signal of labor market quality (Becker

1964; Spence 1973), the prestige of one‟s degree-granting higher education institution is one

such characteristic.

Prior work on labor market identities indicates that educational prestige will influence a

candidate‟s chances of resisting failure-related discredit and preserving his or her accumulated

career advantage. In the candidate-audience interface model of labor markets (Zuckerman et al.

2003), a candidate‟s perceived suitability for a position is based not only on his or her track

record but also on the identities of those that trained him or her. If multiple candidates

experience reduced bargaining power due to the same organizational failure, we expect

differences in candidates‟ prior education experiences to become especially pronounced post-

failure. Specifically, widespread beliefs about ability are likely to favor members of advantaged

categories (Ridgeway et al. 2009; Sauer, Thomas-Hunt, and Morris, 2010) like graduates of

prestigious schools.

When seeking consideration for a vacant position, candidates looking to deemphasize

their association with a failing or failed organization are likely to emphasize their education

credentials to demonstrate their suitability for employment. We, therefore, propose that

educational prestige lends robustness to an individual‟s labor market identity, enabling graduates

of the most prestigious institutions to assuage potential employer concerns more easily than

graduates of other institutions. In this way, educational prestige offsets reductions in labor

market bargaining power caused by failure. Therefore, the severity of advantage diminution

experienced by displaced employees should vary with their educational prestige.

Hypothesis 3: Employees displaced by organizational failure will be less likely to experience

downward mobility the more prestigious are their education credentials.

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In short, our argument is that organizational failure is one countervailing process that will

diminish cumulative career advantage by reducing displaced employee‟s labor market bargaining

power but less so for individuals with highly prestigious education credentials.

Analysis

The U.S. Legal Profession, 2003.

Corporate-oriented law firms are generally accorded greater prestige by lawyers than

firms that represent non-corporate clients (Sandefur 2001; Heinz et al. 2005). Typically

organized as partnerships, firm partners generate business for the firm, share profits (or losses),

and supervise junior lawyers. Typically, the greater a firm‟s profits-per-partner the greater the

compensation for lawyers employed by the firm and the greater the intraprofessional status of

firm members. Figure 1 depicts firm-level profits per equity partner and prestige scores obtained

from the 2003 Vault 100 (Vault 2003), an industry ranking of U.S. law firms based on annual

surveys of thousands of legal professionals.3 This graph indicates that partners who transition to

employed with higher numeric ranks in the Vault 100 are clearly accorded lesser prestige by

industry professionals, as evidenced by prestige scores (the right-hand vertical axis).

Interestingly, the relationship between rank and profits per equity partner is not as

straightforward (the left-hand vertical axis). Consequently, regaining employment at a firm of

greater numeric rank entails a loss of intraprofessional status for a corporate lawyer.

-----------------------------------------

Insert Figure 1 About Here

-----------------------------------------

Most lawyers join a firm as an associate attorney and do not become eligible for

partnership for seven to ten years. A partnership grows as associates are promoted from within

the firm or partners are hired laterally from other firms. Associate lawyers at the most

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prestigious firms enjoy many valuable opportunities: they receive mentorship from partners that

represent the largest and most prestigious corporate clients; they develop client relationships that

increase their chances of attaining partnership; and their legal abilities and efforts are recognized

by high status lawyers. Like academics and scientists (e.g., Merton 1968; Allison et al. 1982;

Zuckerman 1988), lawyers that visibly demonstrate ability early in their careers with Law School

Admission Test (LSAT) scores, law school course grades, and job interview performance

improve their chances of being recommended by respected law school professors, hired by the

most profitable firms, assigned to the most prestigious clients, and mentored by the most

successful partners.

Although we know of no study of advantage accumulating in legal careers, industry data

provide evidence consistent with the general principles of cumulative advantage. The first

principle pertains to the importance of initially small differences in ability. Consider the LSAT,

which is a requirement for admission to all law schools approved by the American Bar

Association. From 1991 to 2008, the mean LSAT score has remained between 149.6 and 150.9

(out of 180) with standard deviations ranging between 9.5 and 10.0 (Schnipke, Stilwell, and

Reese 1998: 6; Dalessandro, Suto, and Reese 2008: 6). According to the 2010 U.S. News &

World Report ranking of the top 100 law schools, a mere one-half standard deviation in LSAT

scores separates students at the top 25 law schools from the next 25.4 Yet, the graduates of more

prestigious law schools are substantially more likely to be employed by the most prestigious law

firms (Phillips and Zuckerman 2001).

The second principle of cumulative advantage pertains to temporally increasing

disparities in professional rewards and resources. Even within the 100 most prestigious U.S. law

firms that tend to employ graduates of the most prestigious law schools, initially small

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differences in income increase greatly over time. Table 1 compares typical compensation figures

for lawyers employed by the most prestigious U.S. law firms. These figures represent associate

base salaries reported in the 2009 Vault 100 and the three-year average profits per equity partner

reported in the 2007, 2008, and 2009 American Lawyer 200. Although associate salaries are

uniform among the top firms and only vary substantially as an associate reaches the year before

being considered for partnership, the profits per equity partner figures vary greatly. While the

average partner employed by a top 10 to 20 firm earns approximately $2 million per year, the

average partner at a firm ranked 80 to 90 earns approximately $750,000.

Together, these data illustrate how initially small differences in test scores lead to large

differences in professional rewards over the first decade or two of one‟s legal career. Those who

score well on the LSAT exam are most likely to attend a prestigious law school, obtain a position

at a high status law firm, attain partnership, and, over the course of their legal career, accumulate

substantial career advantages over those who initially scored only slightly lower on the LSAT.

-----------------------------------------

Insert Table 1 About Here

-----------------------------------------

As the above discussion of test scores, initial placement, and career rewards suggests,

initially small differences in demonstrated ability lead to initially small advantages in a lawyer‟s

legal education. But, these initially small advantages then attract recognition and resources that

bolster one‟s career in a cumulative process that increases disparities in intraprofessional status

among cohorts of lawyers over time. So, the U.S. legal industry is an excellent empirical setting

for studying cumulative career advantage and countervailing processes.

Sample Definition.

We analyze the post-dissolution employment transitions of former partners from all of

Brobeck‟s U.S. offices. Partners were identified in one of three ways. First, attorneys employed

20

by Brobeck as of November of 2002 (and again in January of 2003) were obtained from archived

copies of Brobeck‟s website from the Internet Archive, a non-profit organization that created “an

Internet library, with the purpose of offering permanent access for researchers, historians, and

scholars” (Internet Archive 2009). Second, partners sued by creditors in bankruptcy court were

identified in bankruptcy filings made publicly available by a former Brobeck administrator

(Brobeck Info 2009). Third, legal publications were searched to identify partner transitions from

Brobeck to other firms in 2002 and 2003. We excluded sixteen former partners employed in

Brobeck‟s London, Munich, and Oxford offices, three retired partners, and nine partners whose

whereabouts could not be determined. We test our hypotheses with this sample of 224 former

partners hired by 69 organizations after their employment spell at Brobeck ended.

Hypothesis testing.

We construct a within-lawyer counterfactual to gauge the negative consequences of

organizational failure. The American Lawyer reports that in 2003 there were approximately

35,000 partners employed by the top 200 U.S. law firms (by gross revenue) and approximately

2,230 lateral movements of partners into or out of those firms. This low turnover rate of

approximately 6.5% in 2003 informs our baseline expectation that absent a firm failure a partner

is highly likely to remain with their firm in any given year. If their firm had not failed, then the

vast majority of Brobeck partners would likely have maintained their intraprofessional status in

the focal year by remaining with Brobeck. We are, therefore, interested in the change in their

intraprofessional status following Brobeck‟s failure. Our identification approach is to attribute

changes in a partner‟s intraprofessional status to organizational failure.

We treat Brobeck‟s failure as a trigger event that could diminish the advantages

accumulated by Brobeck partners over their legal careers. Descriptive statistics corroborate this

21

interpretation; see Figure 2. Consistent with Hypothesis 1, 183 of the 224 Brobeck partners in

our sample regained employment at firms of lower status than Brobeck (82 percent).5 To put this

in perspective, consider that Brobeck was ranked twenty-sixth in the 2002 Vault 100 Top Law

Firm rankings but that the median former Brobeck partner regained employment at the firm

ranked forty-eighth in 2003. Assuming that partners‟ labor market bargaining power was greater

prior to Brobeck‟s dissolution than afterwards, we interpret these outcomes as empirical support

for Hypothesis 1; organizational failure weakens bargaining power enough to diminish

cumulative career advantages.

Additionally, Brobeck‟s 2002 Vault 100 prestige score was 7.3. The median partner that

remained with Brobeck until its dissolution regained employment at a firm with a prestige score

of 5.3. But, the timing of departure from Brobeck varied across partners; see Figure 3.

Consistent with Hypothesis 2a, the median partner that left Brobeck in the months preceding the

firm‟s dissolution regained employment at a firm ranked twenty-ninth in the 2003 Vault 100 with

a prestige score of 6.5. Although one might interpret these outcomes as preliminary support for

Hypothesis 2a the differences are not statistically significant.6 We, therefore, utilize logistic

regression to test our argument that bargaining power is greater for those who negotiate their

next position prior to organizational failure than for those who remain until their organization

fails.

We first recorded the status of each partners‟ first post-Brobeck employer in order to

characterize individual-level variance around the mean likelihood of downward status mobility.

Our measure of employer status is the rank of each lawyer‟s subsequent employer in the Vault

100. Our dependent variable is an indicator variable that is equal to “1” if the hiring firm was

22

ranked below Brobeck (e.g., #25 is below #15) in the Vault 100 in 2002 and “0” otherwise. This

variable identifies all downward transitions (i.e., regained employment at a less prestigious firm).

The key independent variables in this individual-level status mobility analysis are the

timing of each partner‟s Brobeck departure and the prestige of the law school attended by each

partner.7 To measure departure timing continuously we used the American Lawyer’s Lateral

Partner Moves Database and identified the month and year in which each partner gained

employment at their first post-Brobeck employer. To test Hypothesis 2a we coded an indicator

variable equal to “1” if the partner departed Brobeck prior to the firm‟s February 2003

dissolution and “0” otherwise. To test Hypothesis 2b, we coded a variable that is the number of

months prior to Brobeck‟s dissolution that each partner departed. For example, a partner that

transitioned to their first post-Brobeck employer in December of 2002 was coded as “2.”

Partners that transitioned to subsequent employers in February of 2003 were coded as “0” and

partners that regained employment after February of 2003 were also coded as “0.”8

We constructed two measures of educational prestige, one continuous and one

categorical. We identified the law school attended by each lawyer using website biographies

obtained from either the Brobeck website or the hiring firm website. Ranks for each of these 61

law schools were obtained from the 2003 U.S. News & World Report “Best Law School” (U.S.

News and World Report 2003; “USN&WR”) rankings.9 In 2003, the USN&WR rankings

included 196 law schools and ranked 113 of those schools between one and 100; an additional 83

law schools were classified as “Tier 2” schools.10

An additional eight law schools attended by

former Brobeck partners were neither ranked nor classified as “Tier 2” by USN&WR. For our

continuous measure of educational prestige, we assigned actual USN&WR ranks for schools

ranked between one and 100 and a rank of 152 to all “Tier 2” and unranked law schools.11

23

Categorically, we followed Phillips and Zuckerman (2001) and coded a binary indicator “elite

law school graduate” variable that equals “1” if the lawyer graduated from Berkeley, Columbia,

Chicago, Georgetown, Harvard, Michigan, NYU, Stanford, Virginia, or Yale law schools and

“0” otherwise.

Additional control variables were obtained from Brobeck‟s bankruptcy filings: an

indicator variable equal to “1” if the partner was hired laterally into the Brobeck partnership (i.e.,

hired from another firm as a partner) and “0” if the partner was promoted from within the firm

(i.e., associate to partner); an indicator variable that equals “1” for female lawyers and “0” for

male lawyers; and a leadership position indicator variable that equals “1” if a partner was a Chair

of a practice group, a Managing Partner of one of Brobeck‟s offices, or a member of the firm‟s

Managing Committee prior to the firm‟s dissolution and “0” otherwise. We include a

“California office” indicator variable that equals “1” for Brobeck partners based in the Irvine,

Los Angeles, Palo Alto, San Diego, and San Francisco offices and “0” otherwise. We also

include a variable that equals “1” for Brobeck partners that worked in the firm‟s “Business &

Technology” practice and “0” otherwise.

We include a variable that is the number of years as a Brobeck partner, as of 2003, to

account for the extent to which a partner‟s labor market identity is intertwined with their

Brobeck affiliation (as opposed to other employers). To account for individual partner

productivity differences, we include a variable that is each Brobeck partner‟s operating income

(in thousands of U. S. dollars) in 2001, based on internal compensation documents made publicly

available by a former Brobeck administrator (Brobeck Info 2009). Lawyers are typically

compensated for projects originated for the firm and for billable hours. Because Brobeck

partners were all equity partners (National Law Journal 2003), operating income is an excellent

24

measure of a Brobeck lawyer‟s productivity. The top 90% of the income distribution of our

sample (excluding primarily part-time and recently-elected partners), were paid between

$300,000 and $1.4 million in 2001.12

In supplementary analyses, we included indicator variables for office location and

practice area to account for geographic and practice-specific variance in partners‟ labor market

opportunities following Brobeck‟s dissolution. For example, there are more potential legal

employers in New York City than in Denver and some areas of the law (e.g., securities,

intellectual property) are accorded greater intraprofessional status than others (Sandefur, 2001).

We account for the primary office location for each former Brobeck partner based on their

Brobeck website biography by including binary indicator variables for Brobeck‟s Los Angeles,

New York, Palo Alto, San Diego, San Francisco, Texas (Austin and Dallas), and the Washington

D.C. metro area (Washington and Reston, VA); the omitted category includes Brobeck lawyers

in the Irvine, California and Denver, Colorado offices.13

We also include indicator variables for

the following areas of law practiced by each partner to account for practice-specific differences

in labor market opportunities: Business and Technology; Commerce and Finance; Complex,

Consumer, and Commercial Litigation (“Litigation”); Intellectual Property; and Securities

Litigation. Approximately 83 percent of the 224 lawyers in our sample were members of these

practice area. The omitted category includes Antitrust; Insurance; Labor and Employment; Life

Sciences; Product Liability; Real Estate; and Tax practices.14

Figure 2 demonstrates that approximately 82 percent of the 224 partners in our sample

regained employment at an employer of lower status than Brobeck. Note that because Brobeck

was ranked 26th

in the 2002 Vault 100 we consider any firm ranked 27th

or worse as “downward

mobility” and any firm ranked 25th

or better as “upward mobility.” Descriptive statistics from

25

our data also indicate that former Brobeck partners who graduated from more prestigious law

schools (i.e., the top 25 in the USN&WR rankings) were less likely to regain employment at

firms of lower status than graduates of less prestigious law schools (i.e., outside the top 25).

Following Brobeck‟s failure, 77% of the partners that graduated from top 25 law schools

experienced downward mobility versus 88% of the partners that did not graduate from a top 25

law school. Put differently, the mean law school rank of the 42 partners that maintained or

gained intraprofessional status after Brobeck‟s departure was 21.0 while the mean law school

rank of the 182 partners that lost intraprofessional status after Brobeck‟s departure was 32.9. We

tested Hypotheses 2a, 2b, and 3 with logit models to estimate the effects of departure timing and

educational prestige on a lawyer‟s likelihood of downward mobility net of other individual

characteristics.

-----------------------------------------

Insert Figure 2 About Here

-----------------------------------------

Results

Table 2 presents summary statistics and correlations for variables included in the status

mobility analyses. Tables 3 and 4 present results from our logit models of the likelihood of

regaining employment at a lower status employer.

-----------------------------------------

Insert Tables 2 and 3About Here

-----------------------------------------

Model 1 of Table 3 indicates that the more productive a Brobeck partner was (i.e., the

greater their operating income) the less likely they were to regain employment at a lower status

employer following Brobeck‟s failure. This indicates that our income variable is a good measure

of individual-level productivity differences; a lawyer‟s ability to generate business for an

26

employer reduces their chances of downward mobility. The coefficient on the constant term

indicates that male partners based outside of California who were not part of the Business &

Technology practice, did not hold a Brobeck leadership position, and were recently promoted to

partner from within Brobeck were highly likely to experience downward mobility after

Brobeck‟s dissolution (p < 0.01).

Model 2 of Table 3 demonstrates that partners that exited Brobeck prior to the February

2003 dissolution were less likely to experience downward mobility than those who remained

until dissolution. Though consistent with Hypothesis 2a, the coefficient on the pre-failure exit

variable is only marginally significant (p < 0.10). In Model 3, we instead use a continuous

measure of exit to test our argument that bargaining power was stronger the further in advance of

dissolution a partner departed. Consistent with Hypothesis 2b, the further in advance of

Brobeck‟s dissolution that a partner departed the less likely they were to experience downward

mobility (p < 0.05). These results suggest that partners‟ bargaining power decreased

continuously until the firm‟s dissolution.

In Model 4, we include the elite law school graduate indicator variable. All else equal,

graduates of the ten most prestigious law schools were significantly less likely to experience

status mobility than graduates of other law schools (p < 0.01). Marginal effects calculations

reveal that holding a law degree from one of the 10 elite law schools we identified reduces the

predicted likelihood of experiencing downward status mobility by 13.2 percent (p < 0.05). To

further account for variance in educational prestige, in Model 5 we include the numeric

USN&WR rank of each partner‟s law school and find a significant negative relationship between

law school prestige and the likelihood of regaining employment at a lower status employer.15

The less prestigious (i.e., the greater the numeric rank) a lawyer‟s law school (e.g., #100 vs.

27

#15), the more likely the lawyer experienced downward mobility following Brobeck‟s failure (p

< 0.01).

In Model 6, we test our hypotheses simultaneously with a model that includes both our

continuous measures of exit timing and of educational prestige; we find simultaneous support for

Hypotheses 2a (p < 0.05) and 2b (p < 0.01). The further in advance of dissolution a Brobeck

partner transitioned to another employer the less likely they were to experience downward

mobility, ostensibly due to retained bargaining power in legal labor markets. Furthermore, the

greater the prestige of a partner‟s law school the less likely they were to experience downward

mobility following Brobeck‟s failure.

It is possible that our measures of bargaining power (i.e., exit timing) and educational

prestige merely proxy for other aspects of a lawyer‟s labor market candidacy, namely geographic

location and area of legal practice. In other words, our California office and Business &

Technology indicator variables are rather crude differentiators of specific labor market demand

for lawyers‟ legal skills. For example, the observed variance in labor market outcomes might be

primarily attributable to regional labor market conditions and/or prestige accorded to different

areas of legal practice (Sandefur, 2001). To check the robustness of our key results, we

conducted fixed effect analyses that used more extensive office and practice area variables;

Table 4 details these analyses.

In Model 7, we include the office fixed effects and find weak support for Hypothesis 2b

(p < 0.10) but stronger support for Hypothesis 3 (p < 0.05). The results in Model 8 strongly

support Hypothesis 2b (p < 0.05) and Hypothesis 3 (p < 0.05); these results are robust to

accounting for legal practice areas. In Model 9 we simultaneously account for both variance in

labor market opportunities across geography and across practice areas; these results provide

28

additional support for Hypotheses 2b (p < 0.05) and 3 (p < 0.05).16

These fixed effects analyses

indicate that our key results are fairly robust to a wide variety of individual labor market

characteristics: prior experience, productivity, geographic location, and legal practice area.

-----------------------------------------

Insert Table 4 About Here

-----------------------------------------

If timing of exit is a good proxy for labor market bargaining power, then these results

broadly support Hypotheses 1, 2a, and 2b. Organizational failure reduces employees‟ labor

market bargaining power and often results in downward intraprofessional mobility. But,

displaced employees do not suffer these adverse consequences in equal proportion. Support for

Hypothesis 3 is unequivocal; the greater the prestige of one‟s degree-granting law school, the

less likely organizational failure is to cause one to regain employment at an employer of lesser

intraprofessional status.

We calculated changes in the likelihood that a former Brobeck partner regained

employment at an employer of lower status than Brobeck based on the coefficients in Model 9.17

The effects of departure timing on individual status mobility are depicted in Figure 4. The

effects of law school prestige on individual status mobility are depicted in Figure 5. These

graphs represent changes in the likelihood that a former Brobeck partner regains employment at

an employer of lower status than Brobeck as a function of bargaining power and educational

prestige, respectively.18

The predicted likelihood of regaining employment at a lower status employer is

approximately 10 percent lower for a partner that departed Brobeck in December of 2002 than

for a partner that regained employment after Brobeck‟s dissolution in February of 2003.

Departing Brobeck in August of 2002 instead of December of 2002 reduced the probability of

downward mobility by approximately 31 percent (this represents a one standard deviation

29

increase in the number of months prior to dissolution that a partner departed from 2.0 to 5.7).

We infer that the closer an organization is to failure the weaker is employee‟s labor market

bargaining power and the greater is the risk that their cumulative advantage will be diminished.

Our results also indicate that the predicted likelihood of regaining employment at a lower status

employer is approximately 4.6 percent lower for a graduate of New York University‟s School of

Law (#4 in the 2003 Vault 100) than for a graduate of Fordham University‟s School of Law

(#23) and 10.6 percent lower for a graduate of New York University‟s School of Law than for a

graduate of Brooklyn Law School (#58). We infer that educational prestige buffers professionals

against failure-related downward mobility attributable to reduced labor market bargaining power.

-----------------------------------------

Insert Figures 4 and 5 About Here

-----------------------------------------

Discussion

Studies of cumulative career advantage document how initially small advantages of

individuals and groups produce increasing disparities over time. By demonstrating excellence

early in their careers, some professionals gain access to resources, visibility, and recognition that

enables them to exceed role performance standards and to then attract greater resources,

visibility, and recognition (Merton 1968). Although this process is often invoked to explain

increasing intraprofessional inequality, consideration of countervailing processes that might stop,

slow, or reverse accumulation has been restricted largely to theoretical speculation. By drawing

upon labor market accounts that emphasize individual versus organizational bargaining power as

well as status organizing processes, we demonstrated empirically that organizational failure is

one negative trigger event that can diminish one‟ cumulative career advantage.

Facing competition for scarce job opportunities, Brobeck‟s failure displaced partners into

labor markets where preservation of intraprofessional status depended upon organizational

30

employment opportunities (Baron 1984; Haveman and Cohen 1994; Sørensen and Sorenson

2007). We argued that due to bargaining power and status mechanisms, the hiring decisions of

high status law firms favored graduates of prestigious law schools. Such graduates were,

therefore, least likely to have their cumulative career advantages diminished by organizational

failure. We found that the greater one‟s educational prestige, the less likely one was to regain

employment at a lower status employer.

Even when accounting for productivity (i.e., pre-failure income), the greater the prestige

of one‟s law school the better one‟s post-failure labor market outcome.19

Given that each of

these lawyers won a “promotion-to-partner” tournament (Galanter and Palay 1991) after nearly a

decade of meeting the expectations incumbent of a partner at a high status law firm (e.g.,

generating business, managing client relationships, and producing profits), the effect of

educational prestige is somewhat surprising. Our argument suggests that educational prestige

buffers professionals against diminution of cumulative career advantage because the more

prestigious one‟s degree-granting education institution, the better positioned one is to assuage

organizational status concerns.

Status-based accounts of labor markets indicate that a job candidate‟s suitability for a

given position is partially dependent upon his or her prior experiences (Zuckerman et al. 2003).

When an individual‟s prior employment affiliation creates uncertainty about a candidate‟s

quality, educational prestige helps assuage market actors‟ concerns (Spence 1973). Although

lawyers can convincingly demonstrate their productivity by presenting their “book of business”

to potential employers, potential clients are likely to rely upon less specific indicators (e.g.,

prestige) to gauge quality. Educational prestige, then, is valuable to potential employers as much

for its symbolism in product and factor markets as it is as a signal of productivity.

31

Like recent quasi-experiments that enable researchers to investigate status mechanisms

(e.g., Simcoe and Waguespack 2011), we leveraged Brobeck‟s unexpected dissolution to

examine the effects of countervailing processes on lawyers‟ cumulative career advantages.

Other recent studies demonstrate how chance events might stop or reverse the accumulation of

career advantages. For example, Oyer (2006, 2008) leverages macroeconomic conditions to

account for random influences on initial placement for economists and MBA graduates,

respectively, and then estimates the importance of initial placement on career attainment.

Another study finds that actors who worked with artists later blacklisted as Communists

experienced higher risks of unemployment after Hollywood‟s “Red Scare,” ostensibly due to

“stigma-by-association” (Pontikes, Negro, and Rao 2010). More work that leverages such natural

quasi-experiments would contribute valuable insights to the cumulative advantage literature and,

more generally, to our understanding of status attainment (Podolny and Phillips 1996; Bothner et

al. 2010).

Despite the inferential advantages of our research design, the setting has important

limitations. While we can isolate the cause of inter-organizational mobility, we can only do so

for one organization that employs high status professionals of various cohorts. Future research

that examines the effects of countervailing processes on individuals who are employed by

multiple organizations and/or more members of the same cohort would further enhance our

understanding of cumulative advantage mechanisms. Last, although it is difficult to

unequivocally isolate causal mechanisms in our study, we can confidently state that

countervailing processes initiated by organizational failure can diminish one‟s accumulated

advantage but also that educational prestige serves as a buffer against diminution. More fine-

grained data on organizational hiring decisions would reveal the demand side of labor markets‟

32

candidate-employer interface and probably shed further light on the two-sided matching process

governing labor market outcomes.

33

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43

Sources: The 2003 American Lawyer 200 and the 2003 Vault 100.

0

2

4

6

8

10

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

0 10 20 30 40 50 60 70 80 90 100

P

r

e

s

t

i

g

e

P

P

E

P

2003 Vault 100 Rank

Figure 1: Indicators of intraprofessional status.

Profits per Equity Partner ($M) Prestige Score

44

Note: 42 former Brobeck partners retained or gained intraprofessional status and 182 partners lost status.

18%

10%

10%

34%

5%

2%

20%

Higher status

Down ≤ 10 ranks

Down 11-20

Down 21-40

Down 40-60

Down > 60 ranks

Unranked

Figure 2: Change in employer Vault 100 rank of all former Brobeck partners (n=224)

Upward status mobility

Downward status mobility

45

Month Partner

transitions

Cumulative % of

total

Pre Sep. '02 38 17%

Sep '02 16 24%

Oct '02 2 25%

Nov '02 1 25%

Dec '02 1 26%

Jan '03 5 28%

Feb '03 142 92%

Mar '03 11 96%

Apr '03 2 97%

May '03 3 99%

Post May '03 3 100%

Total 224 100%

0%

20%

40%

60%

80%

100%

Pre Sep. '02 Oct '02 Dec '02 Feb '03 Apr '03 Post May '03

Figure 3: Cumulative distribution of post-Brobeck transitions

dissolution occurs in February of 2003

46

Note: This curve depicts changes in the relative risk of downward mobility for former Brobeck

partners based on the timing of their transition to a post-Brobeck employer. For example, the

relative risk of regaining employment at a less prestigious employer (i.e., lower Vault 100 rank)

is approximately 10% lower for a partner that departed Brobeck in December of 2002 (i.e., two

months prior to dissolution) than for a partner that transitioned to a subsequent employer after

Brobeck‟s dissolution in February of 2003. A partner that departed Brobeck six months prior to

dissolution (approximately a one standard deviation increase from the mean of 2.0) was 33% less

likely to experience downward mobility than a partner who remained with Brobeck until

dissolution. The estimated probabilities depicted above were obtained using Clarify for Stata

11.1 to simulate 1,000 coefficient estimates based on the results of Model 9 of Table 4.

0.0

0.2

0.4

0.6

0.8

1.0

0 1 2 3 4 5 6

Months prior to dissolution

Figure 4: Likelihood of downward status mobility as a function of departure timing.

47

Note: This curve depicts changes in the relative risk of downward mobility for former Brobeck

partners based on the prestige of their degree-granting law school; prestige decreases with

numeric rank. For example, the relative risk of regaining employment at a less prestigious

employer (i.e., lower Vault 100 rank) is approximately 7% lower for a graduate of the fifth-

ranked law school than for a graduate of the thirty-fifth ranked law school and approximately 2%

higher for a graduate of the fiftieth-ranked law school than for a graduate of the forty-fifth

ranked law school. The estimated probabilities depicted above were obtained using Clarify for

Stata 11.1 to simulate 1,000 coefficient estimates based on the results of Model 9 of Table 4.

0.0

0.2

0.4

0.6

0.8

1.0

0 10 20 30 40 50 60 70 80 90 100

Law School USN&WR Rank

Figure 5: Likelihood of downward status mobility as a function of educational prestige.

48

Table 1: Typical associate and partner compensation for Vault 100 firms.

1st year 4th year Last year PPEP

90th percentile 160,000$ 210,000$ 280,000$ 2,350,333$

50th percentile 160,000 210,000 280,000 1,235,000

10th percentile 160,000 210,000 265,000 760,667

Note : Figures represent base salaries for associates in their first, fourth, or last year

and profits per equity partner (PPEP).

Sources: 2009 Vault 100 and the 2007-09 American Lawyer 200 .

Table 2: Summary statistics and correlations of variables in the status mobility analyses (n=224).

Mean St. Dev. (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)

(1) Lower status than Brobeck (0/1) 0.81 0.39 1.00

(2) Hiring firm unranked, Vault 100 0.20 0.40 0.24 1.00

(3) Lateral hire (0/1) 0.35 0.48 0.00 0.00 1.00

(4) Female (0/1) 0.17 0.38 -0.02 0.00 -0.09 1.00

(5) Years as Brobeck partner 8.21 7.37 0.03 -0.16 -0.18 -0.10 1.00

(6) Leadership position (0/1) 0.14 0.35 0.00 -0.08 0.10 0.01 0.14 1.00

(7) Brobeck income, 2001 ($000s) 547.7 270.9 -0.17 -0.10 0.12 -0.14 0.45 0.30 1.00

(8) California office (0/1) 0.73 0.45 -0.09 -0.22 -0.24 0.10 0.36 -0.01 0.13 1.00

(9) Business & Technology practice (0/1) 0.31 0.46 -0.05 0.14 0.01 -0.13 -0.27 0.08 -0.08 -0.24 1.00

(10) Pre-dissolution exit (0/1) 0.28 0.45 -0.26 0.06 0.08 -0.05 -0.19 0.00 0.03 -0.18 0.01 1.00

(11) Exit prior to dissolution (months) 2.0 3.7 -0.31 0.08 0.08 -0.06 -0.14 0.01 0.04 -0.16 -0.03 0.86 1.00

(12) Elite law school graduate (0/1) 0.43 0.50 -0.14 -0.10 0.02 0.03 0.13 -0.07 0.06 0.04 0.08 -0.04 -0.09 1.00

(13) Rank of law school attended 30.7 38.3 0.12 0.10 0.01 -0.03 0.00 0.00 0.01 0.05 -0.15 -0.01 -0.02 -0.59 1.00

Table 3

Logit models of the likelihood of regaining employment at a lower status employer (Yi = 1 if "Yes"; 0 if "No").

Lateral hire (0/1) 0.151 0.091 0.123 0.201 0.175 0.111

(0.392) (0.408) (0.415) (0.386) (0.384) (0.412)

Female (0/1) -0.270 -0.385 -0.455 -0.198 -0.194 -0.377

(0.333) (0.386) (0.384) (0.364) (0.349) (0.401)

Years as Brobeck partner 0.065 0.039 0.043 0.079 0.076 0.056

(0.049) (0.046) (0.047) (0.050) (0.050) (0.046)

Leadership position (0/1) 0.456 0.529 0.646 0.359 0.443 0.640

(0.582) (0.548) (0.564) (0.608) (0.606) (0.549)

Brobeck income, 2001 ($000s) -0.002 * -0.002 * -0.002 ** -0.002 * -0.003 ** -0.002 **

(0.001) (0.001) (0.001) (0.001) (0.001) (0.001)

California office (0/1) -0.784 -0.925 -1.04 -0.802 -0.868 -1.13

(0.726) (0.702) (0.693) (0.744) (0.764) (0.714)

Business & Technology practice (0/1) -0.375 -0.500 -0.630 -0.235 -0.231 -0.498

(0.577) (0.573) (0.569) (0.581) (0.555) (0.555)

Pre-failure exit (0/1) -1.38 †

(0.997)

Exit prior to dissolution (months) -0.197 * -0.203 *

(0.102) (0.106)

Elite law school graduate (0/1) -0.783 **

(0.296)

Rank of law school attended 0.012 ** 0.014 **

(0.004) (0.005)

Constant 3.02 ** 3.71 ** 3.88 ** 3.28 ** 2.71 ** 3.58 **

(0.855) (1.11) (1.04) (0.886) (0.837) (1.04)

Log pseudolikelihood

Wald Chi2 (d.f.) 12.55 (7) 10.63 (8) 12.96 (8) 19.91 (8) 27.51 (8) 22.66 (9)

Robust standard errors in parentheses; observations clustered by hiring firm.

** p < 0.01; * p < 0.05; † p < 0.10; two-tailed tests for control variables and one-tailed hypothesis tests.

(2)

-94.33

(6)

-88.52

(1) (3) (5)

-100.75 -91.08 -98.42

(4)

-98.48

51

Table 4: Office and practice area fixed effects analyses.

Logit models of the likelihood of regaining employment at a lower status employer (Yi = 1 if "Yes"; 0 if "No").

Lateral hire (0/1) 0.288 0.306 0.031

(0.403) (0.583) (0.548)

Female (0/1) -0.212 -0.763 -0.875

(0.446) (0.521) (0.610)

Years as Brobeck partner 0.082 † 0.031 0.063

(0.048) (0.047) (0.053)

Leadership position (0/1) 0.598 0.797 1.15

(0.535) (0.780) (0.882)

Brobeck income, 2001 ($000s) -0.003 ** -0.002 ** -0.003 **

(0.001) (0.001) (0.001)

Los Angeles office (0/1) -1.68 † -2.35 †

(0.98) (1.14)

New York office (0/1) -0.773 -1.04

(0.948) (1.17)

Palo Alto office (0/1) -1.89 * -2.92 **

(0.836) (0.893)

San Diego office (0/1) -1.90 † -2.51 *

(1.11) (0.970)

San Francisco office (0/1) -1.80 * -2.25 **

(0.891) (0.687)

Texas office (0/1) 0.485 -0.463

(1.24) (1.16)

Washington office (0/1) -2.49 ** -2.49 -3.56 **

(0.935) (0.935) (1.16)

Business & Technology practice (0/1) -2.30 * -2.60 **

(0.951) (0.897)

Commerce & Finance practice (0/1) -4.26 ** -4.41 **

(1.22) (1.45)

Intellectual Property practice (0/1) -1.02 -0.312

(0.854) (0.745)

Litigation practice (0/1) -0.795 -0.978

(1.16) (1.30)

Real Estate practice (0/1)

Securities practice (0/1) -3.24 ** -3.36 **

(0.762) (0.871)

Exit prior to dissolution (months) -0.177 † -0.197 ** -0.202 **

(0.114) (0.081) (0.082)

Rank of law school attended 0.015 * 0.011 ** 0.012 *

(0.007) (0.005) (0.005)

Constant 4.05 ** 4.84 ** 7.23 **

(0.858) (0.800) (1.09)

DV coding

Log pseudolikelihood

Wald Chi2 (d.f.) 45.13 (14) 115.43 (12) 212.34 (19)

Robust standard errors in parentheses; observations clustered by hiring firm.

** p < 0.01; * p < 0.05; † p < 0.10; two-tailed tests for control variables and one-tailed hypothesis tests.

(7) (8) (9)

lower status lower status lower status

-67.01-84.61 -75.06

52

Endnotes

1 Mergers are much more common than failures for law firms as large as Brobeck was in 2003.

2 Because “career mistakes” can only be labeled as “mistakes” ex-post we focus more generally on the negative

trigger event of organizational failure, which can be identified ex-ante.

3 Firm-level prestige and profits per equity partner are correlated 0.76 (Spearman‟s rho is 0.68).

4 For example, the mean of the 25th percentile score for top 25 schools is 165; for schools ranked 26 to 50 the mean

is 159 (75th percentile comparisons are 170 versus 165).

5 As Figure 1 indicates, the associated reduction in intraprofessional status was probably accompanied by a severe

decrease in income for many partners. However, given the variation of equity partner compensation around the

firm-level average we do not test the hypotheses based on changes in employer profits per equity partner.

6 Departure timing is, of course, not exogenously determined. Sub-sample comparisons of partners who transitioned

to subsequent employers prior to Brobeck‟s dissolution (n=63) and partners who transitioned after Brobeck‟s

dissolution (n=161) reveals only two statistically significant differences between the two groups. Those partners

who transitioned prior to dissolution had shorter tenures as Brobeck partners (5.9 years versus 9.1 years; p <0.01)

and were less likely to be employed in one of Brobeck‟s California offices (60 percent versus 78 percent; p < 0.01).

Importantly, the two group are statistically indistinguishable in terms of educational prestige; on average, partners

who departed prior to dissolution graduated from the law school ranked 30th and those who departed after dissolution

graduated from the 31st ranked law school (the difference is not statistically significant). And these partners in each

group are also statistically indistinguishable in terms of their income at Brobeck prior to dissolution (i.e., our

measure of partner productivity).

7 We estimated ordinary least squares regressions using mean-standardized prestige scores as a dependent variable

and found similar results. We report logit model results because we cannot assign prestige scores to unranked firms.

8 Approximately 64 percent of the partners in our sample transitioned to a new employer in February of 2003; 8.5

percent regained employment in March of 2003 or later and 28 percent exited Brobeck prior to dissolution. The

earliest transition was in May of 2001 and the latest transition was in October of 2002. Approximately 84 percent of

the sample regained employment within plus or minus 6 months of Brobeck‟s February 2003 dissolution; in

53

supplementary analyses restricted to this sub-sample of 188 partners we obtain results similar in magnitude and

statistical significance to those reported here.

9 This data is discussed extensively in Espeland and Sauder (2007), Sauder (2008), and Sauder and Espeland (2009).

10 U.S. News and World Report listed 113 law schools as members of the top 100.

11 The rank of 152 was calculated as the midpoint between 100 and 204, the sum of the 196 law schools in the U.S.

News and World Report rankings plus the eight unranked or uncategorized law schools. Assigning ranks of either

101 or 125 to all schools ranked beyond the top 100 produced results very similar in magnitude and statistical

significance to those reported here.

12 The results reported here are robust to either including a “part-time” partner indicator variable in the models or

analyzing only the “full-time” partner sub-sample.

13 Due to small numbers and insufficient within-office and within-practice-area variation on our dependent variables,

we combined Austin and Dallas into a single Texas indicator variable and Reston, VA and Washington, DC into a

single Washington indicator variable. For similar reasons, the omitted category includes lawyers in either the Irvine

or Denver office.

14 Although other law firms define practice areas more specifically, Brobeck organized its business according to

these broad practice areas. Given that we are limited in the number of fixed effects that may be included in the

regressions and given that these practice area definitions represent meaningful internal boundaries, we estimate

models with these practice area indicator variables.

15 Note that law school prestige is reverse coded so that more prestigious schools are assigned lower numeric ranks.

16 In models not reported here, we also examined the likelihood of extreme downward mobility by estimating

models in which the dependent variable equaled 1 if a lawyer regained employment at an employer not ranked in the

Vault 100 and 0 otherwise. The results did not support Hypothesis 2b but did support Hypothesis 3 (p < 0.05).

Partners that exited Brobeck prior to dissolution were no less likely to regain employment at firms outside of the

Vault 100 than those who remained until dissolution. Because only 15 of the 63 partners who exited prior to

Brobeck‟s dissolution regained employment at firms outside of the Vault 100, we probably lack adequate variation

on exit timing to test Hypothesis 2b. But, the likelihood of regaining employment at firms outside of the Vault 100

was lesser the greater the prestige of one‟s law school. Results of this analysis are available upon request.

54

17 This graphs represent the predicted likelihood for a former Brobeck partner who was male, was located in the San

Francisco office, worked in the Business and Technology practice, was promoted to partner from within Brobeck

and spent 8.2 years as a Brobeck partner, graduated from the 30th ranked law school, and regained employment in

February of 2003, and made $549,000 in 2001.

18 These graphs represent the predicted likelihood for a former Brobeck partner that was male, was located in the

San Francisco office, worked in the Business and Technology practice, was promoted to partner from within

Brobeck and spent 8.2 years as a Brobeck partner, remained with the firm until dissolution, and regained

employment in February of 2003, and made $549,000 in 2001.

19 The empirical correlation between law school prestige and compensation at Brobeck is 0.008.