By Nancy Moffitt
In the high-stakes game of legal strategy, says Wharton's Richard
Shell, businesses must use the law as a competitive tool.
Richard Shell had arranged for a cab driver
from his suburban neighborhood to pick him up at
Philadelphia International Airport when his flight
landed at midnight. He'd learned from hard experience
that some city cab drivers don't know their
way around the suburbs, a reality that had led to
some steep cab bills and long, winding rides home.
He had been taken to the airport by the owner of
a small, suburban fleet of cabs, who said he would
be waiting in the baggage claim area upon Shell's
return. "To my delight, there he was as I came down
the elevator," says Shell, a legal studies professor.
"But then things got complicated."
The driver took Shell outside and pointed to a spot
across a couple of roads and traffic islands. That, he
said, was where Shell was to wait. "But where's the
cab?" Shell asked. The driver explained that the city
cab companies had long ago negotiated an agreement
with the airport – an agreement designed to make it
very difficult for suburban cabbies to operate efficiently
there. "First, I have to meet you," the driver
told Shell. "Then you have to walk all the way over to
Zone 6. Then I have to go back to the limo waiting
area to get the cab. Then I can pick you up."
This anecdote, Shell explains in a new book, is a
telling example of the way businesses often encounter
the law – not as a lawsuit or regulatory proceeding but
as a part of someone else's competitive strategy.
"Incumbents can't ban the competition," Shell writes.
"But they can use laws and regulatory processes to add
cost and inconvenience to their competitors' products."
It's called competitive legal strategy – a high-stakes game
in which some businesses make the rules, while others
are forced to operate within those boundaries. "The one
thing I saw that was missing in the practitioner literature
was how business people should think of law as a
tool of corporate strategy – that is, what are the ways
that businesses can use legal tools, whether it's litigation,
lobbying, or regulations, to help them gain or protect
a competitive advantage," says Shell, the Thomas
Gerrity Professor of Legal Studies and Management
and former chair of the Legal Studies Department.
"There's a huge amount of this activity going on, but
there's almost nothing written about it other than in
specialized academic works."
How laws make winners of some firms and losers
of others, and how business leaders manage, defend
against, and gain a competitive foothold from the law,
is the subject of Shell's book, tentatively titled Make
the Rules or Your Competitors Will. Under contract
with Crown Publishing and scheduled for publication
in early 2004, the book is a fresh angle in a market
crowded with legal writings, from diatribes against
business regulation to treatises that suggest cozy, corrupt
partnerships between business and government.
"What was missing from these world views is the
way the political system actually works when it's
adjusting to the economic reality of business," says
Shell. "It's a forum in which businesses act as an interest
group but just as often are fighting each other."
Shell has also authored the award-winning
Bargaining for Advantage: Negotiation Strategies for
Reasonable People(1999, Viking Press/Penguin Books),
a book read in many Wharton School negotiation
classrooms and praised by both students and executives
for providing a new and useful view of a not-so-new
subject. In his latest book, his message is simple:
businesses need to understand enough about the law
to integrate it into daily strategic thinking.
The Disney Company, for example, has managed
to continually extend its copyright protection on its
storied cartoon characters, the source of much of the
firm's profits, by lobbying Congress each time an older
character's protection is set to expire. Pharmaceuticals
such as Pfizer and Merck, meanwhile, religiously scrutinize
patent laws and FDA processes with the goal of
tipping the balance away from generics and toward
brand-name products.
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