Review of “The Social Organization of Conspiracy”

In this review I summarize „The Social Organization of Conspiracy: Illegal Networks in the Heavy Electrical Equipment Industry“ by Wayne E. Baker and Robert R. Faulkner from 1993 [1].

The paper studied how the structure of „secret societies“ involved in price-fixing effected the convinctions of participants. For this, the researchers used the conspiracy in the Heavy Electrical Equipment Industry in the 1950s, called „the most carefully studied corporate offenses in the history of the United States“ (Geis and Meier 1977, p. 68). The case involved 40 manufacturers (i.e. General Electric, Westinghouse) with more than 20 product lines included. Three major conspiracies were analysed: Switchgear and transformer with low information-processing and turbine with high information-processing inside – each with the same need of secrecy and avoidance of judicial dangerous direct contact with other competitors.

To understand the structure and characteristics of „secret societies“, let us first take a look at the economic theory under efficency constraints: Organizations with high information-processing, like turbines, work best decentralized. Ones with low information-processing are more efficient when hierarchical, like switchgear and transformer production.

The result shows major differences between „secret societies“ and legal activities. The turbine conspiracy with high information-processing was the most centralized one with lower possibility of sentencing. More difficult, ambiguous and complex tasks and decisions needed more centralized communication. The switchgear and transformer conspiracies were organized in a more decentral, two-tier structure. Easy tasks and regular orders led to self-organizing systems with a buffer between the command levels. Changing the perspective from the whole network to the different protagonists, four characteristics emerged, which significantly increased the probability of a guilty verdict. In descending order, these are: „1) Being in the thick of a conspiracy 2) participating in a decentralized conspiracy; 3) occupying a top-executive position and participating in a centralized conspiracy (turbines); 4) occupying the oppressed position in the middle of an organization“ (Baker & Faulkner, p. 854).

The research revealed, „that the structure of intercorporate secret societies does not follow the same underlying efficency logic as the organization of legal business activities“ (Baker & Faulkner, p. 854). The data for analyses of criminal activities like this are rare and often not reliable; so this first quantitative analyses of an intercorporate conspiracy breathed new life into to the development of network theory, industrial economic theory and organizational crime theory.

References

[1] Baker, Wayne E. and Faulkner, Robert R.: The Social Organization of Conspiracy: Illegal Networks in the Heavy Electrical Equipment Industry, 1993. American Sociological Review, Vol. 58, No. 6 (Dec., 1993), p. 837-860.

Further Informations

The review is also in the GitHub Repository.

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