Effects of the environment on illegal cartel activity

Abstract

Purpose – Using resource dependency theory, the purpose of this paper is to examine what elements in the business environment may be associated with the formation and continuance of cartels. Design/methodology/approach – The authors employ a unique data set of 148 cartel data points from the 1970s to 2008 which have at least one American company involved to quantitatively test causal relationships. The authors also interview key class action anti-trust attorneys for their views and opinions on the impact of these environmental factors on cartel formation and continuance. Findings – The authors find statistically significant relationships between the pursuit and maintenance of industry profits and the dynamism in the industry, and illegal behavior as represented through price fixing by business cartels. The authors find that in the attorneys’ opinion, it is also the pursuit of individual corporate profits and munificence that are associated with these cartels. Practical implications – This research furthers the understanding of organizational deviance which is critical given its impact on organizations, individuals, regulators, law enforcement, and the general public. Originality/value – This research is a first step in considering cartel activity in a way that encompasses external influences in a new and innovative manner and as a tool to help researchers and practitioners better understand how organizational deviance, as manifested through illegal corporate activity, can be anticipated, identified, and prevented.