Digitalization and law: innovating around the boundaries

Recent developments in digital technologies have challenged the ways in which service firms create, deliver, and capture value. Although research and practice suggest business model innovation as an effective response to digitalization, many firms are not willing to make radical changes in the architecture of the firm's activities. In this study, we take an in-depth look at which factors influence the firm's capability for technology-driven business model innovation in the legal industry context. As our empirical context, we have chosen the legal industry, notorious for its risk aversion and for practices that inhibit innovation, but where the focus on digitalization is increasing due to external pressures. We interviewed nine law firms in Norway, representing together the largest share of the country's legal services market, four of them being traditional law firms and the rest being newly established yet large digital New Law organizations. We find that profitability acts both as an inhibitor of business model innovation for established firms and as a driver for New Law firms. However, the relatively high job satisfaction of Norwegian lawyers in comparison to their US-based counterparts dampens the pull of technological opportunities on business model innovation by making human capital more difficult to acquire by new entrants. Barring an unexpected profitability crisis, digitalization of the Norwegian law sector will not disrupt traditional law firms' business models. However, New Law firms are accumulating the competences required to compete with the incumbents.