Abstract
We provide an analytically structured history of Enron's involvement in the California energy crisis, exploring its emergence as a corrupt organization and its use of an interorganizational network to manipulate California's energy supply markets. We use this history to introduce the concept of network-enabled corruption, showing how corruption, even if primarily enacted by a single dominant organization, is often highly dependent on the support of other organizations. Specifically, we show how Enron combined resources from partner firms with its own capabilities, manipulating the energy market and capitalizing on the crisis. From a methodological point of view, our study emphasizes the growing importance of digital sources for historical research, drawing particularly on telephone and email records from the period to develop a rich, fly-on-the-wall understanding of a phenomenon that is otherwise hard to observe.
Highlights
We provide an analytically structured history of Enron’s involvement in the California energy crisis, exploring its emergence as a corrupt organization and its use of an interorganizational network to manipulate California’s energy supply markets
When California deregulated its energy industry, it materially changed the environment of electricity generation and supply throughout the western states
Did it separate the previously integrated processes of generation, transmission, and distribution, but the experimental market structure encouraged the entry of new market participants, who offered their financial expertise to incumbents unused to operating within competitive markets
Summary
While corruption often represents an abuse of publicly mandated authority—necessitating the involvement of a legislative or executive office—the concept is relevant to a broad collection of social contexts.[22]. As Edwin Sutherland’s analysis of Associated Gas & Electric and fourteen other utilities shows, such cases were far from aberrations, with acts of Ashforth et al, “Re-Viewing Organizational Corruption,” 671. Incumbent perpetrators use rationalizations rhetorically to socialize newcomers into the group’s particularistic world view While these theories provide valuable interpretations of corruption as an organizational phenomenon, they generally focus on what engenders and maintains a willingness to act corruptly. Some industries— those involving network technologies like electricity—necessitate far greater levels of interdependence between market participants, which in turn affects how organizations navigate institutional arrangements.[43] Where such settings are conducive to corrupt means, they present a highly relevant context from which to understand structural boundaries of corruption as a collective operational practice.
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