Professors research companies involved in illegal activity during '90s

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For Yuri Mishina, finding companies engaged in illegal activities doesn’t mean turning to the news.

Mishina, an assistant professor in the Department of Management, spent the past several years researching companies that engaged in illegal activities during the 1990s. Mishina worked with three professors from various universities to look at about 194 manufacturing firms and determine patterns in their activities.

Through their research, the professors found that more successful companies were more likely to commit illegal activity.

“We figured they would have the greatest opportunity to engage in illegal behaviors,” Mishina said. “They are supposed to represent the American industry in general. There’s likely to be (a) fair amount of scrutiny about them.”

The group’s research will be published in an upcoming issue of the Academy of Management Journal.

The research shed light on the difference between what previous statistics said in comparison to what was happening in reality relating to companies like Enron, said Emily Block, an assistant professor management at the University of Notre Dame.

“Prevailing evidence suggested those companies that had less to lose would engage in risky behavior,” Block said.

The group used Corporate Crime Reporter, a newsletter that reports corrupt company activities, to sort through reports of companies engaging in illegal activity — which the group defined as activity that would benefit the company such as tax violations, Block said.

“There’s a lot of research that talks about criminal behavior to occur for a firm to have less to lose and has a low status. Low-performance firms are more likely to take risk,” Block said. “It’s interesting to resolve recent news that it’s not always these unknown companies. We have seen a lot of high reputable companies engage in that behavior.”

Mishina said some of the challenges of the research was being able to only report the crimes that were caught and not those that were able to go unnoticed.

“You always run the chance of not finding out what happened,” Mishina said. “You only know about the ones that were caught. Some might have committed (illegal activities) but weren’t caught. There are things you can’t control.”

The group found that companies committed the crimes because of the pressure faced by market and analyst expectations, Mishina said.

“The findings show firms that were highly reputable and high performing in the past were facing pressure to encourage them to engage in this behavior,” Mishina said. “They were likely to engage in corporate crime to not fail to meet the expectations.”

Timothy Pollock, a professor in the Department of Management and Organization at Penn State University, said the results have the potential to be an influential source of why highly successful companies take risks.

“I hope it’s widely recognized by the popular and business press as well as why they engage in illegal activities,” Pollock said.

Although the research supports the team’s original hypothesis, Mishina said the findings posed another topic to discuss.

“We are very happy the results were so strong,” Mishina said. “But it raises questions about if high-performing firms engage in illegal behavior, how can we trust if firms are good. Even though we are happy (about our results), we are a little bit concerned about these questions raised and the way we treat performance.”

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