The Paradox of Corrupt Networks: An Analysis of Organizational Crime at Enron

Abstract

Despite the prevalence of organizational crime and renewed academic interest in corruption, the coordination of corrupt activities remains undertheorized. This study uses longitudinal data based on the email communication from Enron Corporation prior to its demise and couples qualitative coding techniques with social network analysis to understand the effects of corruption on communication behavior. By contrasting the evolution of corrupt and noncorrupt projects at Enron, I examine how corruption influences the way individuals attempt to remain undetected while sharing information. Although transitive communications were not different at the projects’ onsets, the members of corrupt projects communicate less and have fewer reciprocal relations than the noncorrupt project members. But as the corrupt project members’ tenure on a project increases, their behavior tends to become more similar to the behavior of the noncorrupt project members. Potential mechanisms are explored to explain this finding. This study provides insight into how corruption is coordinated within firms over time and highlights the role of information in understanding the emergent properties of social networks.