The Value of a Legally Astute Top Management Team : A Dynamic Capabilities Approach

This article, from The Oxford Handbook of Dynamic Capabilities (David J. Teece & Sohvi Leih, eds. 2016), describes the construct of “legal astuteness” and explains why it is a valuable dynamic capability. It also examines the systems approach to law and strategy, which embeds the top management team within the firm's “ecosystem.” The discussion begins with an overview of the dynamic capabilities approach to competitive advantage and proceeds by identifying the requirements of legal astuteness: a set of value-laden attitudes about the importance of law and ethical behavior to firm success; a proactive approach to management, regulation, and risk; context-specific knowledge of the law and the appropriate use of legal tools; and strategically astute counsel. The article then explains how legally astute top management teams can augment contracts with relational governance; practice strategic compliance management; enhance, combine, protect, and reconfigure tangible and intangible assets; and manage human resources more effectively. Finally, it outlines degrees of legal astuteness