This Research Bulletin has been published in Journal of Economic Geography, 4 (2), (2004), 157-179.
Please refer to the published version when quoting the paper.
Processes of economic globalization have continued to splinter the productive activities of transnational corporations (TNCs) (Allen, 1995; Dicken, 1998; Morgan et. al., 2001). Bartlett and Ghoshal (1998) have suggested that transnational firms configure their assets and capabilities in a dispersed, interdependent and specialised form, where overseas operations are functionally integrated into an organizational network. But, despite intensive research examining TNCs in contemporary globalization, geographers have been slow to address how such firms manage the complexity of knowledge management. This is a surprising deficit in economic geography (see Yeung, 2000) because the management of knowledge is one of the key organizational strategies of the firm (Bartlett and Ghoshal, 2000; Gupta and Govindarajan, 2000; O'Donnell, 2000). Solice, however, can be found in the recent works of: Morgan (2001) who investigates TNCs as 'transnational communities'; and those literatures focused on knowledge management in professional service firms (PSFs); adjunct to work on advance producer services (Bagchi-Sen and Sen, 1997; Daniels, 1993).
Morgan (2001, 118) acknowledges that as globalization has developed the organizational network of the TNC, its forces have created a "new form of social space within which 'transnational communities' can emerge." Morgan argues that as firms are social spaces, composed of actors and rules that are socially embedded, transnational communities are established in such social spaces as firms operate in new geographical locations. Morgan concludes that for the multinational mode of internationalisation, where "communication will be directed upwards to and downwards from the head office with very little lateral communication between subsidiaries in different countries . we would not expect therefore to find evidence of transnational social space or transnational communities emerging in this sort of firm" (2001, 119), because knowledge remains nationally bounded. But, in the TNC, "transnational communities seem most likely to arise" (2001, 120), because of the complex nature of inter-relationships and mixing that exists between each unit of the firm's integrated network, where information/communication is disseminated worldwide. Morgan (2001, 121) surmises that in the TNC there is a, "thick web of communication possibilities vertically and horizontally . [where] . [m]anagers' careers would be varied and involve movement across different subsidiaries as well as into head office. Senior management would reflect a wider group of nationalities and experiences than in the multinational enterprise. Learning would be dispersed, often disorganized but usually multi-directional in terms of its effect." Morgan's argument is persuasive because it acknowledges that the network complexity of the firm produces new forms of labour mobility between subsidiaries that are not necessarily reflective of traditional expatriation in the MNC (Brewster, 1991; Schell and Solomon, 1997; Tung, 1988).
The second body of work, the contribution of the knowledge management literature on PSFs, provides an essential discourse to understand cross-border knowledge flows between office networks. In PSFs, it is the embodied knowledge base of the employee that creates value for the firm and it has to be delivered through inter-personal relationships, socialization and task-related activities, at the point of demand (Bartlett and Ghoshal, 2002; Lowendahl et. al., 2001). Firms create value with highly-educated employees, having professional accreditation, and explicit, tacit and personalised knowledge bases (Lowendahl et. al., 2001). An important constituent of the professional service law firm is the knowledge, networks, skills and performance that is embodied and embedded in its partners and lawyers, where clients are purchasing idiosyncratic knowledge bases, skills and often the international experience of particular 'named' partners (Beaverstock et. al., 1999).
In this article, I wish to explore in more detail how expatriation is used as a vector for knowledge management across-borders within professional service legal firms. Such a study will add meaningful process to Bartlett and Ghoshal's (1998, 75) work on "knowledge development and diffusion" because it will focus on a group of firms that have been under-reported in their detailed study of nine companies. Equally, this analysis will add a rich empirical dimension to Morgan's (2001, 121) thoughts on 'transnational communities and business systems' because it contrasts firms in the same sector, "but with different business systems . [it] . would make an interesting contribution to our understanding of the different forms of transnational social space and transnational communities that are emerging."
The rest of this paper is devoted to beginning such a task, and is divided into four major parts. After this introduction, part two discusses how knowledge is managed and transferred within PSFs. The argument suggests that in order to enhance our understanding of Bartlett and Ghoshal's (1998, 75) work on "knowledge development and diffusion" in the firm, it is imperative that 'knowledge' is discussed in the context of both management and transfer, and expatriation. The analysis of the expatriation provides the organizational rationale as to why firms manage cross-border. Part three examines the globalization of the legal sector and professional service legal firms to further embellish the knowledge management and expatriation discourses, and provides an organizational context for research findings. Part four reports an original empirical study of expatriation from London headquartered (H.Q.) professional service legal firms. Expatriation for these PSFs is argued as a crucial organizational strategy for cross-border knowledge management and transfer, which operates on a worldwide scale. The data collected from these firms were derived from interviews with International Human Resource Management (IHRM) partners who were responsible for the firm's global expatriation policy. Before the conclusions, part five re-evaluates "knowledge development and diffusion" within PSFs, taking into account the evidence reported in the study of expatriation in legal firms.
2. MANAGING ACROSS-BORDERS: KNOWLEDGE MANAGEMENT AND EXPATRIATION IN PROFESSIONAL SERVICE FIRMS
According to Bartlett and Ghoshal's (1998) seminal work Managing Across Borders: The Transnational Solution, the "development and diffusion of knowledge" is one of the key organizational characteristics of the firm (Table 1) (p.75). An evaluation of Bartlett and Ghoshal (1998) four typologies of the MNC - 'Multinational', 'Global', International' and 'Transnational', reveal that in each typology the firm develops and diffuses knowledge through different organizational pathways. In the 'Multinational' firm, knowledge is "developed and retained within each unit," given the decentralised and self-sufficiency capabilities of overseas operations to act locally in the market. In the 'Global' firm, however, knowledge is "developed and retained at the center," as the organizational capability is one of centralisation and global scale, where overseas operations have no local autonomy because they served the global market with global brands. In contrast, in the 'International' firm, knowledge development is "transferred to overseas units" from the centre because as competencies are both centralised and decentralised, overseas units are dependent on the centre for knowledge. Finally, in the 'Transnational' firm, knowledge is "developed and jointly shared on worldwide basis" because of the dispersed, functional integration of business systems, reproduced through inter-relationships, networks and linkages between all units of the organization.
Table 1. Organizational characteristics of the transnational.
Source: Bartlett and Ghoshal (1998, 75).
In order to develop a deeper understanding of knowledge development and diffusion as propounded by Bartlett and Ghoshal (1998) and others (Nohria and Ghoshal, 1997), but under conditions of contemporary globalization, it is important to discuss how firms manage the complexities of knowledge and labour. To address such a task, one can draw upon two very useful discourses: knowledge management and diffusion within PSFs; and, from the IHRM perspective, an analysis of why firms manage across borders using expatriation.
2.1 Knowledge Management in Professional Service Firms
The strategic resource of 'knowledge' at both the individual and collective level, is the cornerstone of value-added and capital accumulation within PSFs (Human Relations, 2001; Pritchard et. al., 2000; Skyrme, 1999). Knowledge, whether explicit and/or tacit, and/or embodied and/or embedded, is the key mechanism of value creation within professional services because of the inherent characteristics of the firms themselves and their employment functions (Aharoni, 1993; Morris and Epsom, 1998). According to Lowendahl (1997, 20) the principal characteristics of professional services are,
Lowendahl et. al. (2001, 920) provides some useful theoretical dimensions to understanding the mechanism of knowledge transfer within professional service firms,
Nonaka and Takeuchi (1995, 61-62) view tacit and explicit knowledge as being "mutually complimentary elements" because tacit knowledge can only be converted into explicit knowledge though interaction and socialization, where "socialization is a process of sharing experiences." Accordingly, without socialization (or interaction), knowledge cannot be successfully assimilated into the locale because without codification (through socialization) it cannot be embodied or embedded with the time-specific moment and spatial context (Hedlund and Nonaka, 1993; Nonaka and Konno, 1998; and Nonaka and Takeuchi, 1995).
Thus, the key mechanism for knowledge transfer within/between PSFs is through 'face-to-face' contact with work colleagues, clients, competitors and other actors in society, whether in the work place or other spaces. For service sector economic geographers, one of the key strategic issues regarding the intrinsic characteristics of professional services is how and in what form they deliver their knowledge to the client at that particular time-space point of demand. The latter has been discussed at great length in the producer services literature, i.e. delivery through the office network (Jones, 2002), but the question of how such knowledge is transferred and assimilated through socialization in/out of the workplace requires further analysis.
The issue of 'face-to-face' contact in PSFs has been championed by Sassen (2001, 72) in the world city, who regards such a sharing of information and intelligence as being "actually a production process that requires multiple simultaneous inputs and feedbacks . [and] . having immediate and simultaneous access to the pertinent experts is still the most effective way to operate." In that intra- or inter-PSF 'face-to-face' relationship, it is not just being able to have the professional and social graces to socialise and interact coherently with others, but it is also important to possess those performance related skills which are professionally accepted and reproduced through an aura of trust and reciprocity (Nohria and Eccles, 1992; Thrift, 1999, 2000). In PSFs, individuals must embody trust and reciprocity to succeed both intra- and inter-firm, which can only be accumulated through successful physical interaction with peer groups (Goffman, 1967; Von Krooh et. al., 2000).
Accordingly, PSFs must deliver their generic and intrinsic services through interaction with clients. Where PSFs operate through international office networks, services are delivered by local and expatriate staff alike, as in many circumstances, clients required PSFs to stretch knowledge onto a global scale and cross-border (Allen, 2000). Thus, PSFs engage in transnational knowledge management through expatriation and local management systems.
2.2 Expatriation: An Organizational Response to Knowledge Transfer
PricewaterhouseCoopers (2000a) survey of 270 leading TNCs based in Europe yielded an estimated 65,000 expatriates worldwide. Whilst the IHRM specialists strive to collect accurate data on expatriation, however, understanding the organizational rationale for using them rather than host-country nationals (HCNs) (local managers) is still subject of debate (Brewster, 1991). Edstrom and Galbraith (1977a-b) suggested that international transfers were executed by MNCs for three reasons (Table 2),
Since the work of Edstrom and Galbraith (1977a-b), the IHRM specialists have made incremental insights into extending the rationale for expatriation as knowledge management within the firm as they retain the MNC model for investigating expatriation.
Table 2. Dimensions of transfer policies.
Source: Edstrom and Galbraith (1977a, 253).
For example, from a review of a recent IHRM guru on expatriate organizational strategy, Perkins's (1997) Internationalization. The People Dimension: Human Resources Strategies for Global Expansion, it becomes apparent that his rationale for employing expatriates instead of HCNs does not depart significantly from Edstrom and Galbraith's work on international transfers in the MNC. Perkins recognises that the firm requires expatriation to fulfil its organizational and operational strategy. He suggests that firms use expatriate staffing to: ensure that corporate business objectives are met; provide managerial and technical expertise aimed at long-term development; enhance the international careers of the firm's cadre staff; and allow time for the firm to identify and recruit local staff. Moreover, Perkins suggests that "organizations . need to develop a 'corporate memory', setting down in a structured and formal way 'best practice', so these can become common practices" (1997, 62). Perkins's major premise is that expatriates are used as an organizational tool to disseminate 'corporate memory', or as he terms it "valuable project knowledge and expertise", which without their role would "reside solely with a small number of individuals" at headquarters. Such 'corporate memory' is developed from the individual's tacit and practical knowledge, socialization, corporate experience (good and bad), leadership and project management. But, of great significance in the development of an individual's corporate memory is "ensuring that lessons learned on a specific exercise are distilled and captured, so that they may be transferred within the . organization, as a source of competitive advantage in approaching new or repeated business opportunities" (62). Thus, for Perkins (62-63), 'corporate memory' and the ability to successfully transfer it cross-border a particular time-space business context is the defining facet of the "International Cadre",
Perkins (1997) identifies two types of expatriate. First, the 'Parent/Headquartered Staff' who may be posted overseas at some point in their career for "skill transfer" reasons, but will certainly return to the headquarters subsequently. These are staff used by the firm principally for: business travel; short-term assignments; and full (long-term) assignments. The second type of expatriate are referred to as 'International Staff.' These staff may begin a career with a firm from anywhere in the world, and their skills can be transferred to any posting. These are generally referred to as Third-Country-Nationals (TCNs) (Tung, 1988). According to Perkins (1997), firms use expatriates for two main reasons. First, to 'Support Business Strategy', where the rationale for the posting may be to ensure that corporate business objectives are met, and provide managerial and technical support for the recruitment and development of HCNs. Second, in order to 'Manage Career Development' of an individual (the assignment represents a valuable element of the individual's personal development). Both of these organizational rationales for understanding expatriation builds upon Edstrom and Galbraith's (1977a-b) analysis of international transfers within MNCs, but does not adequately take into account the development of the 'networked' form of the TNC.
3. THE GLOBALIZATION OF LEGAL SERVICES AND PROFESSIONAL SERVICE LEGAL FIRMS
Understanding the global organizational strategies of the firm has become an important surrogate for explaining the internationalisation of economic activity in the world system (Dicken, 1998). Following Hymer (1976), Dunning's (1988, 1993) 'eclectic' ownership-location-internalisation' (OLI) paradigm has been used as an explanatory device to explain why firms engage in international production. In the context of the globalization of service firms, Dunning (1993, 256) notes that, "service firms go abroad to service their clients who have preceded them abroad" and "to enter foreign markets to supply new foreign (or foreign and domestic) clients." But, Dunning argues that an engagement in such international production will only occur if the firm has a competitive advantage associated with ownership, location and internalisation in that particular market (Table 3) (Dunning and Norman, 1987). With respect to the globalization strategies of legal firms, Dunning (1993) notes that they will only engage in international activities abroad if they have specific advantages regarding: ownership (access to transnational clients and knowledge of their needs); location (need for face-to-face contact in situ); and internalisation (transactions are highly idiosyncratic and customer-tailored). Of significant interest in Dunning's (1993, 276) application of the OLI paradigm to legal firms is the suggested organizational form of entry into the foreign market: "some overseas partnerships, but often services are provided via movement of people."
Table 3. Illustrations of ownership, location and internalisation advantages relevant to the activities of transnational legal firms.
Source: adapted from Dunning (1993, 275).
Building upon Dunning's OLI paradigm, analysing the geography of legal services and professional service law firms has also become a fertile sector in which to understand processes of contemporary globalization in the service economy (Bromley and Clark, 1990; and Warf and Wije, 1991). As the legal profession is a client-focused environment which sells intricate expertise and skills, where trust, respect and reputation is of the utmost importance (Acscher, 1993), those firms which have gone global have done so through the international office (Cullen-Mandikos and MacPherson, 2002).
Law has mushroomed at a national and international scale, benefiting from both demand- (e.g. externalization - Coffey and Bailly, 1991) and supply-side expansion (Goe et. al., 2000). Two recent studies typify the globalization strategies of professional service law firms, Beaverstock et. al. (1999) and Warf (2001). Beaverstock et. al. (1999) have suggested six major 'globalization drivers' accounting for 'London law firms going global': (i) to follow clients into international markets and nation-states; (ii) to reduce risk and operate in more than one geographical regional market; (iii) to follow other international law firms abroad to reduce their competitive advantage (Porter, 1985); (iv) to expand through merger & acquisition activity (especially in Germany, e.g. Freshfields merged with Bruckhaus Westrick Heller Lober in 2000); (v) because of improved information technology; and (vi) in the European Union context, entry to the Eurozone, specifically in Frankfurt.
In a similar fashion, Warf (2001) has provided an in-depth analysis of the globalization of U.S. legal services, but unlike Beaverstock et. al. (1999), has made a more rigorous assessment of one of the prime factors accounting for globalization: the need for 'face-to-face' contact. As Warf (2001, 399-401) notes,
The prime assets of international law firms are their partners and lawyers who need to be in close proximity to the customer because they are the 'face' of the firm, who court clients', represent their business objectives and generate fee-income, whether that be in corporate or commercial law, corporate finance, international capital markets or tax resolution. As Cullen-Mandikos and MacPherson (2002, 492) suggest,
Accordingly, the most important variable in ranking the largest world law firms is the number of partners/lawyers they employ, rather than turnover or the size of the office network (Table 4). It is interesting to note the percentage of lawyers employed outside of their home country and the prominence of the London H.Q. firms. Clearly, law is an expatriate business, where many of the lawyers employed outside of their home country will be expatriate staff in the international office. London firms have a high percentage of lawyers employed abroad because these firms operate in a multitude of markets, jurisdictions and globalization fields/arenas (Beaverstock et. al., 1999; ISFL, 2001). In contrast, large U.S. firms tend to have less lawyers abroad because they focus on their relationship with U.S. investment banks and other U.S. investments, executing business in New York State Law, principally in London, Brussels and Hong Kong (Warf, 2001). What is not in dispute is that expatriation occurs within London's transnational law firms. But, what is of significant importance for this paper is to unpack expatriation as a critical globalization strategy for knowledge management and transfer within professional service legal firms' transnational office networks.
Table 4. The largest law firms in the world, 2000.
Note: N.A. data not known.
Source: ISFL (2001).
4. EXPATRIATION AS KNOWLEDGE MANAGEMENT AND TRANSFER WITHIN PROFESSIONAL SERVICE LEGAL FIRMS
Following the well rehearsed case study approach adopted to unravel the organizational strategies of producer service firms in the world economy (Daniels, Thrift and Leyshon, 1989; Leslie, 1995; Warf, 1996), the data reported herein was derived from interviews with senior partners responsible for international human resources in ten London H.Q. transnational law firms. Semi-structured interviews were adopted as the principal research design for four main reasons. First, as the legal service industry is very concentrated once firms are ranked outside of the U.K. Top 20 (Chambers Law Directory), very few firms have international office networks to which to second expatriate staff. Thus, the Top 20 legal firms in the U.K. were approached for interview and ten accepted, representing a 50% response rate of the largest transnational firms in London (Appendix 1). Second, from previous experience of doing research in London's advance producer service sector (Beaverstock and Boardwell, 2000), undertaking a postal questionnaire in this location (the City of London) would have yielded extremely poor response rates. Third, the semi-structured interview allows the researcher to probe for depth in a subject group, where findings can then be interpreted as explanation of that group (Bryman, 2001). The nature of the semi-structured interview questions the respondent on the key themes, but provides flexibility to discuss specific responses where appropriate (Wengraf, 2001). Fourth, the corporate interview has long been a trusted method of analysing the firm and seeking data from elite-level respondents (Clark, 1998; 2002; Herod, 1999; McDowell, 1998; Schoenberger, 1991). Two major knowledge management themes were discussed at interview: the organizational rationale of using expatriates as a mechanism to diffuse knowledge within the firm; and, the locational dynamics of expatriation linked to occupations and relationships with HCMs.
4.2 The Corporate Rationale for Using Expatriate Lawyers
An analysis of firm Annual Reports and World Wide Web sites demonstrated the constant rhetoric of partners and lawyers being the 'key assets' of the organization in the global legal market. For example, L1's statement is representative of those interviewed, "L1 is committed to the well-being of its people as after all, our people are our most effective asset in ensuring we satisfy our clients' demand for transnational business" (official publicity). The key point here is that in order to deliver legal services cross-border, firms require a combination of expatriate and locally qualified staff, where often expatriates deal in English Common Law (ECL) and local staff in the local jurisdiction. Expatriate lawyers do not engage in local jurisdiction legal matters, unless they have multi-jurisdictional qualifications.
The organizational strategy accounting for expatriation within London H.Q. multi-locational professional service law firms were threefold. First, in order to staff international offices with professionals who could practice ECL. Law firms have offices that operate in a range of different jurisdictions (host, ECL, New York State). Local partners or assistants are employed to service clients in the host country's jurisdiction, but as ECL is common to all jurisdictions, as it can only be practiced by qualified expatriate legal staff. As this dialogue with L6 illustrates,
All legal firms practiced ECL with their global clients in most international locations; hence the need for expatriates. However, local staff were used solely for local business, in international deals that needed local jurisdiction input. As L7 comments,
ECL was transferred to each firm's international offices through two types of expatriate strategies, the use of: trainees; and post-qualified lawyers. Trainees (law graduates undertaking their Articles for eventual qualification in ECL) are sent to international offices on rotation to specialist 'seats' to experience using ECL in an international setting. L4's comments is representative of other interviewees,
Equally, as L9 suggests,
Post-qualified staff are posted to international offices to practice ECL because they have the experience, and as L4 suggests are, "extremely useful lawyers, who know their way around." As L2 suggests,
The second organization rationale for expatriation is for managerial control and practice creation. Partners are posted to international offices at their inception, or to replace partners returning to the UK, in order to manage and sustain the practice or a specific department. All firms interviewed posted partners abroad to fulfil these functions. L2 encapsulates their role,
Equally, expatriation is used as a policy to fix skill shortages as offices are established or expanded. Post-qualified lawyers can be drafted in to provide experience and expertise in particular offices. As L4 discovered,
The third organizational rationale of expatriation is for organizational development. For trainees and post-qualified staff, international assignments fulfil two major organizational building blocks: (i) it provides ECL outside of London, which is transferable to most international offices; and (ii) it allows individuals to develop and strengthen transnational contacts with clients, for partnership potential. As trainees and assistants undertake ECL in international offices, they are widening their own practice base, via contacts, clients and networks. In conjunction with practicing ECL, and/or alleviating skill shortages, all firms assessed their lawyers in international offices for partner potential. In terms of an individual's career path, a two to three year stint in Singapore, Hong Kong or New York is a "key window" (L9) to assess the partnership potential. For some firms, international assignments were essential in order to become a partner on return to London. As L2 pointed out, "you get . Heathrow partners, they are told that to become a partner they must go to Hong Kong for 5 years, so they get on the plane and go to Hong Kong, and that still happens as they use that enticement."
Whilst no firms employed TCNs, firms L1 and 6 to 9 executed formal secondment programmes for career development. But, in all cases, such programmes were focused on trainees who worked one of their training 'seats' in the firm's international office network. Career development for lawyers, obviously was an important by-product of the expatriation process, but was not itself a driver of expatriation. In most cases, the term 'programme' was used to distinguish the cost of living adjusted remuneration package from locally hired staff rates.
4.3 The Geography of Expatriation, Occupation and Relationships with Local Staff
All firms expatriated staff to international offices as partners, lawyers or trainees to fulfil specific occupational vacancies. All 793 expatriates were British and 697 were qualified fee-earning staff (Table 5). For L1, L3 and L7, expatriates accounted for half or more of the total number of fee earners outside of the UK (excluding trainees), but in the case of L2 this ratio was 80 percent. Those firms with extensive office networks (L1, L3, L9, L10) employed many more 'local' partners and assistants than the smaller firms (L2).
Table 5. Expatriation from London to the international office networks of transnational law firms, 1999.
Turning to the destinations and occupations of expatriates, New York, Singapore, Hong Kong, Frankfurt, Paris, Tokyo were the most significant locations. These were the international financial centres and housed the firm's largest offices (ranked by lawyers) and most important arenas to service their financial/banking and auxiliary financial clientele. In these offices, expatriates were specialists in three major core activities: corporate finance (joint ventures, mergers and acquisitions; management buyouts); banking and project finance (lending; debt recovery/rescheduling; securitization); and capital markets (equity issues; privatisation) (Table 6). In Frankfurt, which was a relatively new market for the firms, corporate finance was raised as an important occupation for expatriates, as such firms were actively pursuing joint ventures, and mergers and acquisition business for their U.S. and European clients (L1, l3, L7). For one specialist firm, L5, all expatriates specialised in corporate and commercial law, especially shipping (except Paris, which was aviation). Other destinations were centres of specialist legal services (Piraeus - Shipping; Brussels - EU-related activities) and these offices required fewer staff, both expatriate and 'local'.
Table 6. The range of specialist functions (occupations) undertaken by expatriate lawyers in host locations.
Note: L2, L6, L8 and L10 data not available because of confidentiality.
One of the most intriguing patterns to emerge from this data was the high volume of expatriates posted to east Asian offices and the low flows to Europe. For example, in L2's Singaporean office, L3's Hong Kong office, L5's Singaporean office and L10's Singaporean and Tokyo office, all partners were expatriates (i.e. there were no 'local partners), and all 'local' law was either done in house by 'locally' qualified staff, or through alliances with local firms to overcome regulation. The explanation for this pattern was twofold. First, it was the product of the firm's deep historical roots in east Asia via organic growth, where all managing partners were British, and in most cases would remain so. Second, the legal systems of east Asia, ensured that only locally qualified staff could practice in the domestic market and, accordingly, British partners and qualified staff represented London's interests in the region's corporate finance, banking/project finance and capital markets. The low concentration of flows to Paris, Madrid, Frankfurt and other destinations (Rome) were explained by: (i) the employment of locally qualified partners, qualified staff and trainees because growth was through merger and acquisition activity with local firms; (ii) a higher mix of expatriates of other nationalities in the office who were multi-jurisdiction qualified (e.g. L1); and, (iii) the frequent use of business travel between London and European destinations.
The research highlighted quite a distinctive division of labour between expatriates in the receiving office and the function of locally qualified lawyers. For offices that had recently been opened by organic means, all the line-management would be expatriate (L1's new venture in Warsaw). Equally, in most cases, for offices in Singapore, Hong Kong and Tokyo, the demarcation was very clear: expatriates managed and headed departments, practicing ECL and locally qualified staff, worked alongside their expatriate colleagues, and practicing local jurisdiction. In Europe and North America, the demarcation between expatriates and locals was less clear. In most cases, legal teams were composed of multi-jurisdiction qualified staff, assistants and trainees, headed by either expatriate or locally recruited 'specialist' partners, and composed of lawyers of many nationalities (as with L1, L3, L7, L9, L10).
PSFs in the legal sector use expatriation as a strategy to manage the complexity of knowledge development and management across border. Three relevant issues can be distilled from these findings which, when folded back into the relevant literatures, provides supportive evidence to enhance Bartlett and Ghoshal's (1998) thoughts on 'managing across borders'; Morgan's (2001) analysis of 'transnational communities and business systems' and; the PSF and expatriation discourses on knowledge transfer and organizational form.
5.1 Expatriation as Knowledge Management and Transfer
For these legal PSFs, expatriation is a business system used for transnational knowledge development and diffusion. As the legal sector is a client-interface economy, where all of the theoretical traits of the PSF are relevant (Lowendahl et. al., 2001), a vital aspect of their globalization strategy is to put professional staff in offices where they are in close proximity to the client and other suppliers (Taylor et. al., 2003) because knowledge and practice can only be created and supplied through the professional staff. Evidence from the firms supports the evidence of the IHRM specialists on the organizational rationale for expatriation. First, all firms posted staff to transfer skills across national boundaries, for particular managerial and job-related purposes. Expatriation was the mechanism by which firms transplanted ECL specialists into their international office networks and embedded the firm into the local business environment of the city. Second, whilst firms acknowledged that expatriation enhanced the international development of post-qualified staff, no firms had specific expatriate programmes for career development, it was dictated by client business. Third, all firms expatriated staff for organisational development in international locations. Expatriation was used to head offices or departments, providing inputs into teams and for professional development. In almost all offices outside Europe and North America, the managing partner would be an expatriate. Expatriates were also used to fill skill shortages in particular fee-earning functions, especially when new offices opened or departments expanded. In short, this group of PSFs actively used expatriates in conjunction with local staff to create value by servicing clients in international markets from the host international office. Expatriation in the legal sector is an invaluable globalization strategy because capital can only be accumulated through the embodied knowledge, professional skills, trust and reputation of its fee earning staff in any locational environment, especially one where the client expects co-location and proximity.
5.2 Expatriation, Geography and the Firm
Morgan (2001) suggested that one mechanism to unlock the specificities of 'transnational communities in business systems' was to investigate the complexity of knowledge development and diffusion in more than one firm in the same sector. This survey has provided much evidence to suggest that knowledge management is not uniform and homogenous within PSFs, and that different business systems operate between both firms and regions. In the firms, the historical expansion of their offices and inherent business systems associated with such locations has influenced the use and pattern of expatriates. In east Asia, where most of these firms had organic office start-ups, the firm adopted a more one-way flow of knowledge from London to the subsidiary, reflecting a 'Multinational' model (Bartlett and Ghoshal, 1998). In these firms strong lines of demarcation existed: expatriates manage departments, teams or offices and local lawyers practice local law. A very small group of firms recruited local partners, but not necessarily to deal in multi-jurisdiction work. This model of globalization also characterised very recent expansion into the former Soviet Union of eastern European states. Thus, in this region, the existence of 'transnational communities' in these business systems was very weak (Morgan, 2001).
In contrast, in western Europe and North America, where the physical expansion of office networks came later and mainly through mergers and acquisition activities, the firms' adopted a more networked approach to their knowledge management and diffusion. British expatriates would manage offices or departments, but they would work in environments where local partners would also manage departments or offices, and where expatriates of other nationalities would be based (New York, Paris and German offices [Frankfurt, Berlin, Hamburg]). Here, locals would obviously specialise in local jurisdiction, but given the high incidences of locals being multi-jurisdictional (L1, L3, L7, L10), their roles would be far different than in the 'Multinational' regional mode of the firm. Here, the firms' organizational characteristics were one of 'Transnational' (Bartlett and Ghoshal, 1998), where knowledge developed and flowed up, down and sideways within the internal dynamics of the firm. In these business systems, Morgan's (2001) idea of 'transnational communities' was strong, where expatriation was a key driver in its reproduction, as these communities were composed of international staff of different nationalities, where knowledge and communication circulated within a network of relationships.
5.3 The 'Nomadic' Expatriate
The research illustrated the high frequency of expatriation between two and three years. Gone are the days of the traditional processes of expatriation where staff would spend entire careers working from one or a multitude of international offices, never returning to H.Q.. No firms employed TCNs. All of the firms were committed to sending staff to international offices for time-specific work related activities. Short-term expatriation was viewed as the norm. These findings corroborate with PricewaterhouseCoopers (2000b) survey of 24,400 assignments in 82 TNCs, which concluded that 57% were for one year for strategic business tasks. Moreover, the relatively short-term and higher frequency of moves corresponds to the 'Transnational' form of the firm. Under conditions of the 'Transnational', the firm manages the complexity of knowledge management and diffusion through the rotation of professional employees within its office network for job-related activities in order to meet its clients' idiosyncratic expectations.
In this paper, the main thrust of the argument has been to illustrate that expatriation is a major globalization strategy of PSFs, in this case in the legal profession. Expatriation is an organizational strategy that PSF firms execute to develop, manage and diffuse idiosyncratic knowledge from the centre to subsidiaries, and between all units in the network, with the major objectives being to service the client and increase profitability, and market share. For legal firms, knowledge systems are embodied and in many circumstances can only be enhanced and diffused through personal interaction with clients and/or embedded socialization with peer groups. Accordingly, when management scientists or economic geographers talk of 'knowledge networking' (Skyrme, 1999), 'transnational knowledge management' or 'managing across borders' (Bartlett and Ghoshal, 1998, 2000), 'colonizing knowledge' (Suddaby and Greenwood, 2001), 'soft capitalism' (Thrift, 1997), 'performance' (Thrift, 2000) or the 'spatialization of knowledge' (Henry and Pinch, 2000) for example, the role of both expatriate and local labour cannot be underestimated in the accumulation of capital in these geographies of concentration and intensification. Second, as the core of managing knowledge in PSFs is interaction with clients, competitors and suppliers alike, such 'face-to-face' processes are undertaken in specific spaces or 'meeting places' (Amin and Thrift, 1992) involving professionals of a plethora of nationalities. Accordingly, the intensity and proximity of such interactions and socialization makes a significant contribution to critiquing O'Brien's (1992)'end of geography' debate because it demonstrates that location and proximity does matter in business. Expatriates, like local managers and specialists, service their PSFs in the complex of the world city, often wrapped together in the tightly bound spaces of the international financial centre. In professional services, where functions cannot be easily traded cross-border because of the intrinsic nature of the service and working practices and performances that are expected by the client, expatriation is an important strategy for firms to service clients' business requirements on a global scale, despite increased business travel and improvements in information technology (video conferencing). Third, expatriation is now firmly part of an organizational- or client-led strategy for PSFs. Expatriation is no longer executed by firms as a perk of the job (PricewaterhouseCoopers, 2000a-b). Instead, expatriation is a strategic organisational policy to develop and diffuse knowledge in the evolving network of the firm. Professional staff who are employed by PSFs are expected to be internationally mobile and the expatriation process is the key to that mobility. Irrespective of the organizational evolution of the firm, which we have seen in this research to be multi-faceted in different locations ('multinational' in one region and/or 'transnational' in another), expatriation is an efficient process to service the firm's organizational and client network.
Finally, expatriates will remain an important organisational strategy for the PSF. It is becoming increasingly argued however, that their function will become more strategically orientated towards short-term trouble-shooting and project work, rather than managerial activities (as managing will be achieved through local staffing). Indeed, in the realm of legal services, many expatriates now work in teams, for specific partners and find themselves undertaking more regional business travel from their receiving office. Equally, business systems are evolving (albeit very slowly with some firms in Asia) to develop a network of offices managed by local staff, who can draw upon expatriates of all nationalities to provide specialist knowledge at the point of demand for any time-specific location. Consequently, one could argue that expatriate assignments will become much shorter in duration, but much more frequent in a career lifespan. Professionals will be required to undertake many more short-term tasks, rotations and cross-national boundary commuting as firms aspire to offer clients a truly transnational and functionally integrated network of business systems. Clients will demand the most qualified employee, irrespective of location, because they require their idiosyncratic knowledge, skills, trust and confidence, and the employee will extend their knowledge portfolio from the experience and reflexivity, and socialization involved in the intensity of contacts with the client, and all those specialist suppliers that are required to close the deal in any international office location.
This research has been funded by the Economic and Social Research Council's Transnational Communities Programme project 'Embeddedness, Knowledge and Networks: British Expatriates in Global Financial Centres' (Award No. L214252001). The research assistantship of James T. Boardwell is very much appreciated.
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Appendix 1: London headquartered leading professional service law firms, 1999.
Source: Chambers and Partners (1999)
Edited and posted on the web on 2nd May 2003; last update 10th July 2003
This Research Bulletin has been published in Journal of Economic Geography, 4 (2), (2004), 157-179