The proposed doctoral dissertation research will investigate the question of why professional service organizations of all varieties are currently going through a period of transformation. The traditional model of the professional service firm is one of an "up-or-out" system centering around internal promotion from a probationary junior level to a senior level characterized by greater job security and higher rewards. Many firms have begun to depart from this model by recruiting senior professionals from the external labor market, creating permanent positions for employees who are not promoted to the partnership or senior rank, and making use of performance-based monetary compensation. This study investigates why some firms are moving rapidly in these new directions and others are not. It proposes that these practices represent alternatives to internal promotion that can serve the same purposes--allocation of workers to tasks, retention of valued employees, and motivation of performance--and that may be preferable for professional firms under certain circumstances. In particular, it explores the influence of firms' technological, institutional, and market contexts on their external recruitment of partners, their use of permanent professional employees, and their reliance on performance-based compensation. The study focuses on a sample of law firms, chosen because they represent a prototypical form of professional service organization; They are numerous enough to permit the identification of a sizeable sample, and a great deal of information concerning them is publicly available. The empirical findings should also be relevant to a broad array of service organizations across professions.
