Megafirms

Abstract

This paper documents and explains the amazing growth of the largest firms in law, accounting, and investment banking. Scholars to date have used various supply-side theories to explain the growth, and have generally examined only one industry at a time. We give the first demand-side explanation of firm growth, and show how the explanation is similar for firms in all "project" industries. We show that law plays an important role in determining industry structure. Among the areas we cover are the growth of Multi-Disciplinary Practice firms. We argue that the issues surrounding MDPs can best be understood by looking more broadly at the forces driving project industries. We also explain the driving forces behind the breakup of the Big Five accounting firms, the consolidation of the investment banking industry and the heretofore unexamined divergent growth patterns of the law firms in the plaintiffs' securities litigation field.