Using Proactive Law for Competitive Advantage

Abstract

In recent years, legal scholars in the United States and Europe have explored aspects of legal strategy relating to competitive advantage and the role of law as a positive force within companies. In the United States, the focus has been on law as a source of competitive advantage, while in Europe an approach known as Proactive Law has emerged. This article represents the first attempt to trace the history of these parallel developments and to merge their common themes. In applying concepts from these movements to the contracting process, the article demonstrates their potential to fundamentally change the way management perceives and uses the law. The contracting example also illustrates the opportunities that contracts and the law offer to create new value and innovate in areas often neglected by managers.

Part I of the article provides a holistic overview of research by U.S. legal scholars that ranges from an examination of theoretical links between law and competitive advantage to a specific action plan that encourages firms to make better use of their legal resources. Part II examines the Proactive Law Movement and the recognition that it has received in the public policy arena. Part III provides an analysis of the intersection between these developments in the U.S. and Europe, using contract law and the contracting process for illustrative purposes. The article concludes in Part IV by emphasizing how concepts relating to the use of law as a source of competitive advantage can lead to economic success in a manner that also promotes high ethical standards.

Keywords: law and strategy, preventive law, contracts, proactive contracting

JEL Classification: E61, F23, G18, G28, G38, K10, K12, K40, K41, L20, L21, L50, M14