The Social Organization of Conspiracy: Illegal Networks in the Heavy Electrical Equipment Industry

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact [email protected]. American Sociological Association is collaborating with JSTOR to digitize, preserve and extend access to American Sociological Review. We analyze the social organization of three well-known price-fixing conspiracies in the heavy electrical equipment industry. Although aspects of collusion have been studied by industrial organization economists and organizational criminologists, the organization of conspiracies has remained virtually unexplored. Using archival data, we reconstruct the actual communication networks involved in conspiracies in switchgear transformers , and turbines. We find that the structure of illegal networks is driven primarily by the need to maximize concealment, rather than the need to maximize efficiency. However, network structure is also contingent on information-processing requirements imposed by product and market characteristics. Our individual-level model predicts verdict (guilt or innocence), sentence, and fine as functions of personal centrality in the illegal network, network structure, management level, and company size. "The fact that secrets do not remain guarded forever is the weakness of the secret society. "-Georg Simmel, The Secret Society ree enterprise," "open markets," and similar expressions are standard business rhetoric, but in practice economic organizations strive to limit, curtail, and restrict the operation of competitive markets. direct manipulation of market ties (Baker 1990), and embeddeding business decisions in social relationships (Granovetter 1985). These market-restricting tactics are legal , but business organizations also indulge in practices proscribed by law that flagrantly sub-vert the market mechanism. We analyze the social organization of a prevalent illegal corporate practice-price-fixing. Aspects of price-fixing conspiracies have been studied extensively by industrial organization economists and organizational criminologists, but the constituent features of the conspiracies are virtually unexplored. For example, the conspiracies in the heavy electrical equipment industry have been called "the most carefully studied corporate offenses in the history of the United States" (Geis and Meier 1977, p. 68), yet insights into the social structure of these conspiracies are limited to anecdotes and journalis-cago. We benefited from the insightful and thorough reviews provided by anonymous ASR reviewers. We are grateful for comments received during presentations at the 1992 annual meeting of the In-837 838 AMERICAN SOCIOLOGICAL REVIEW tic descriptions. Even researchers who had access to confidential data …