Re:Winners and Losers of Globalization (2012)
by SamReidHughes on Monday December 07, 2015 @04:28AM
(#10688520)
I think I'll skip forward and answer the question for you, because the meaning of "better for California" is besides the point.
What happens if California tech companies are restricted to using only California law firms to take their company public?
CA tech companies currently choose New York law firms sometimes. Now they'll have to choose CA law firms. In the short run, this means they'll have to pay more, or sacrifice timeliness or quality of legal work, or not IPO at all. In the long run, more law firms will be created to meet demand -- if it's still around.
The short-term result is: CA tech companies IPO later or not at all, or they pay more to do it. Existing CA law firms, ready to do IPO work, make more money -- given the time-sensitivity of the demand, they make a lot more money. More CA law students decide to specialize in stuff that would push them towards IPO work. The quality of the legal work done is, overall, not as good as what you could get in New York. More effort is spent resolving disputes that arise from legal mistakes, and IPO prices aren't as high as companies could get them because law firms entering the IPO business take longer as they learn how to do IPOs. Companies' product stagnates because they have to put off investments. Employees with options are unable to sell their stock as soon.
The long-term result is: You now have IPO legal expertise in CA and New York. Because their respective markets are smaller, there is less specialization and the quality of the legal work is lower than it would otherwise be. Gluts and shortages as the demand for IPO legal work are experienced more severely, with more time spent idle and more people in the business of being a lawyer, instead of doing other things that are useful. The technology industry is smaller, because its companies raised less in IPOs, and because some of its companies couldn't keep up with out-of-state competitors by growing in a timely manner. Some lawyers are wealthier.
So, as a lowly Californian, for me:
1. The price and quality of available IPO legal expertise is worsened.
2. More people will be doing legal work instead of other productive activities, which means the price of other goods and services is higher
3. The rate of technological improvement (in areas related to the CA tech industry) will be lower, and greater proportion of the world's technology industry will be out-of-state.
Who benefits: Partners at some law firms, at a certain point in time.
What happens if California tech companies are restricted to using only California law firms to take their company public?
CA tech companies currently choose New York law firms sometimes. Now they'll have to choose CA law firms. In the short run, this means they'll have to pay more, or sacrifice timeliness or quality of legal work, or not IPO at all. In the long run, more law firms will be created to meet demand -- if it's still around.
The short-term result is: CA tech companies IPO later or not at all, or they pay more to do it. Existing CA law firms, ready to do IPO work, make more money -- given the time-sensitivity of the demand, they make a lot more money. More CA law students decide to specialize in stuff that would push them towards IPO work. The quality of the legal work done is, overall, not as good as what you could get in New York. More effort is spent resolving disputes that arise from legal mistakes, and IPO prices aren't as high as companies could get them because law firms entering the IPO business take longer as they learn how to do IPOs. Companies' product stagnates because they have to put off investments. Employees with options are unable to sell their stock as soon.
The long-term result is: You now have IPO legal expertise in CA and New York. Because their respective markets are smaller, there is less specialization and the quality of the legal work is lower than it would otherwise be. Gluts and shortages as the demand for IPO legal work are experienced more severely, with more time spent idle and more people in the business of being a lawyer, instead of doing other things that are useful. The technology industry is smaller, because its companies raised less in IPOs, and because some of its companies couldn't keep up with out-of-state competitors by growing in a timely manner. Some lawyers are wealthier.
So, as a lowly Californian, for me:
1. The price and quality of available IPO legal expertise is worsened.
2. More people will be doing legal work instead of other productive activities, which means the price of other goods and services is higher
3. The rate of technological improvement (in areas related to the CA tech industry) will be lower, and greater proportion of the world's technology industry will be out-of-state.
Who benefits: Partners at some law firms, at a certain point in time.