Executives, managers, and employees use legal knowledge with varying levels of sophistication which I term "pathways of legal strategy." There are five discrete pathways of legal strategy that firms use in their legal environment of business. The avoidance pathway focuses on circumvention of legal rules. Firms practicing conformance seek minimum compliance with legal obligations. Prevention firms apply business knowledge to avert legal wrongdoing. Value firms leverage legal knowledge to create and capture value. Firms pursuing a transformation strategy use legal knowledge to redefine the organization or an industry. Each of these pathways is analyzed for its distinct traits regarding the manager’s perception of the law, the level of legal knowledge in the organization, and the role of legal experts, and the pathway’s reinforcement of organizational goals. The pathways can help organizations identify strategic uses of legal knowledge, highlight any mismatches, and develop a clear trajectory in order to shift from one pathway to another. The first three pathways (avoidance, conformance, and prevention) will be addressed in this chapter.

The previous chapter summarized the first three pathways: avoidance, conformance, and prevention. These pathways represent conventional and widely used applications of legal knowledge. This chapter continues the presentation of the five pathways of legal strategy by introducing the remaining two pathways: value and transformation. The value pathway focuses on using legal knowledge as a source of value creation and capture. The transformation pathway perceives legal knowledge as a strategic asset, and uses that knowledge to reshape the market or the organization. These remaining two pathways are distinct because they enable acquisition of a competitive advantage, and in some cases a sustainable competitive advantage, in a fashion that most firms do not generally pursue.