Legal Chameleons: Political Ideology, Institutional Histories, and Firms’ Management of Identity Cues

This study examines how foreign firms strategically manage the salience of foreignness when facing unfavorable domestic evaluators. Foreign firms do so by altering the ethnic composition of the agents representing them before the evaluators. We examine this question in the context of Asian firms’ selection of legal counsel in U.S. federal courts. Prior research suggests that foreign firms may anticipate less favorable evaluations in courts that have historically favored domestic over foreign firms and in those with conservative judges. We argue that, in such evaluative settings, Asian firms adjust the ethnic composition of their external legal teams to manage the salience of foreignness, and that such adjustments are especially likely in courts that combine judge conservatism with pro-domestic ruling histories. We test these arguments using data on U.S. patent litigation from 2000 to 2016 and validated measures of courts’ political ideology and pro-domestic ruling histories. We find that Asian firms reduce the proportion of Asian-origin lawyers and increase the proportion of White lawyers when litigating in conservative courts, particularly when these courts also have pro-domestic ruling histories. By contrast, the ethnic composition of lawyers representing domestic firms remains stable across courts. Evidence of implicit bias against Asians among legal professionals provides additional support consistent with the theorized mechanism. Post-hoc analyses reveal that adjusting the ethnic composition of external legal teams attenuates the likelihood of unfavorable outcomes in conservative courts. These findings contribute to research on liability of foreignness by identifying agent selection as a specific mitigation mechanism in evaluative arenas.