The Hired Gun as Facilitator: Lawyers and the Suppression of Business Disputes in Silicon Valley

Abstract

This article draws on interview data from California's Silicon Valley to explore the role of local business attorneys in shaping the market for high-technology start-up financing. Far from exerting a disruptive or disputatious influence on business relations, Silicon Valley lawyers actively facilitate the functioning of the region's venture capital sector. In particular, attorneys intervene in the start-up process to absorb, suppress, and avert crucial uncertainties that might otherwise elevate transaction costs, imperil economic activity, and foster interorganizational discord. Local law firms moderate the hazards of new-company financing in at least three distinct ways: (1) by directly absorbing economic uncertainties in individual transactions; (2) by constructing, preserving, and reproducing normative and cognitive understandings within the community as a whole; and (3) by incorporating these local practices into the external legal regime.