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The Illicit Business of Terrorism The Illicit Business of Terrorism Julia Semmelbeck Inaugural dissertation submitted in partial fulfillment of the requirements for the degree Doctor of Social Sciences in the Graduate School of Economic and Social Sciences at the University of Mannheim Date of the Oral Defense: July 27, 2020 Dean of the School of Social Sciences, University of Mannheim: Prof. Dr. Michael Diehl First Examiner: Prof. Sabine C. Carey PhD, University of Mannheim Second Examiner: Prof. Laura Dugan PhD, University of Maryland Third Examiner: Prof. Dr. Thomas Brauninger,¨ University of Mannheim iii SUMMARY OF THE DISSERTATION This dissertation addresses a key variable determining the threat posed by terrorist groups. It relates the threat posed by terrorist attacks to how capable a terrorist group is to carry out attacks. As such, it links the threat not to the willingness of a terrorist group to conduct attacks but to its ability to do so. I maintain that for any active terrorist group the willingness to commit attacks is a necessary requirement. A terrorist group’s capability, in contrast, depends on a variety of internal and external factors. Study- ing how differences in those endowments or constraints induce varying capabilities offers a tangible approach to understand the threat posed by a specific terrorist group. I argue that in order to conduct attacks, a terrorist group needs resources. This dissertation discusses different aspects of how terrorist groups generate resources. Access to resources and a terrorist group’s ability to manage resources helps to explain variation in the behavior of terrorist groups. To develop my argument I focus on the economic activities of a terrorist group, claiming that a terrorist group, just like a firm, needs to efficiently exploit its opportunities. With this argument I turn the attention to the economic activities of a terrorist group in preparation of the attack and away from the attack itself. I argue that terrorist groups acquire resources from interacting with their environment. The resource allocation is affected by the organizational structure as it determines whether a terrorist group can manage its resources efficiently. Thus, I highlight two steps of the resourcing process. One step focuses on the environment of terrorist groups and another highlights group-internal processes. I argue that both steps act independently from each other and interdependently. I put my argument to three empirical tests analyzing the behavior of terrorist groups as a result of external environmental conditions and group-internal factors. First, I investigate why terrorist groups adopt either a centralized or a decentralized structure depending on environemental and group-internal conditions. Second, I assess to what degree external and internal factors can accurately predict a terrorist group’s involvement in organized crime. Finally, I analyze the effect of a terrorist group’s social capital and managerial capacity on its operational capability individually and jointly. The clandestine nature of terrorist groups introduces non-trivial challenges in terms of data collec- tion. In order to carry out large-n cross-sectional analyses on a global scale, I utilize a variety of existing data sourced from published data by other terrorism researchers. I enrich this collection of data by cod- ing original data. The organizational structure and a terrorist group’s involvement in organized crime are manually coded using publicly accessible information. The type of weapon a terrorist group uses in its attack approximates the operational capability of a terrorist group. The social capital of terrorist groups is operationalized with the position of a terrorist group within the cooperation network of 205 terrorist groups. To that end, I create a network of cooperating terrorist groups and calculate network measures to assess a terrorist group’s access to social capital. Chapter 1 motivates the research question addressed in this dissertation and discusses central theor- etical and empirical contributions. Chapter 2 reflects the relevant literature as a foundation to understand terrorist groups as economic entities that can be affected by market conditions and managerial capacit- ies. In chapter 3, I develop the theoretical argument. Chapter 4 is the first empirical chapter. In line with my argument, I find that the environment affects the likelihood of a terrorist group to adopt a cent- ralized organizational structure. Additionally, I find ideology to have an effect as well, illustrating that both external and internal factors affect which organizational design a terrorist group adopts. In chapter 5, I utilize an inductive machine learning approach using a random forest classifier to test previously discussed environmental and organizational determinants of a terrorist group’s involvement in organ- ized crime. I find that organizational variables out-perform environmental ones in terms of predictive capacity. Group size and ideology are the most influential variables for leveraging accurate predictions. iv In chapter 6, I analyze the influence of a terrorist group’s social capital and managerial capacities to efficiently allocate resources by assessing the effect of a terrorist group’s network position and its organ- izational structure on the operational capability. I provide evidence for an independent impact and an effect of a terrorist groups network position moderated by its organizational structure. I find that terrorist groups benefit from cooperating with terrorist groups that are well connected themselves. My research shows that in order to analyze the economic activities of a terrorist group external and internal factors cannot be separated. Group-internal dynamics condition a terrorist group’s external activities. The ideology and size of a terrorist group predict its involvement in organized crime. The organizational structure influences the operational output of a terrorist group by mitigating the effect of social capital. The organizational structure itself is also affected by a terrorist group’s ideology, repressive conditions in the state it operates in, and societal conditions a terrorist group needs to address in order to mobilize sustained support. The findings of this dissertation have important policy implications. By turning the attention to the economic activities of a terrorist group, this dissertation offers crucial and actionable insights for counter-terrorism researchers and practitioners. By focusing on the resourcing of terrorist groups we learn more about what a group is actually able to do. This approach disentangles the willingness of a terrorist group to commit terrorist attacks from its actual prowess. As counter-terrorism strategies that focus on undermining and destroying the ideology of terrorist groups are failing, tailoring a strategy to cut the supply of resources might be more promising to manage the terrorist threat. v Contents List of Tables ix List of Figures xi 1 Introduction 1 1.1 Motivation and research question . .1 1.2 Main theoretical argument . .3 1.3 Empirical approach . .4 1.4 Plan of the dissertation . .5 1.5 Central contributions . .6 1.5.1 Theoretical and conceptual contributions . .6 1.5.2 Empirical and methodological contributions . .7 2 Terrorism in the broader context 9 2.1 Terrorism as a political strategy . .9 2.2 Rationality of terrorism . 12 2.3 Terrorism – a definitional debate . 14 2.3.1 A working definition of terrorism . 17 2.3.2 Terrorist groups as economic entities . 19 2.4 A market model of terrorism . 22 2.4.1 The economic market of terrorism: The behavior of terrorist groups as a function of resources . 25 2.4.2 The challenges to cooperation between terrorist groups . 29 2.5 Organizational structure in terrorism research . 32 3 The economic market of terrorism – a theory of resource acquisition and resource alloca- tion 37 3.1 Terrorist groups as organizations . 38 3.2 The performance of terrorist groups as a function of resources . 40 3.2.1 Conceptualizing the performance of terrorist groups . 41 3.2.2 Previous definitions of resources . 44 3.2.3 The tradability of resources – an original conceptualization . 47 3.3 The acquisition of resources . 55 3.3.1 Terrorist groups in their resource environment . 55 3.3.2 Relational rents . 57 3.4 The allocation of resources . 60 3.4.1 Previous conceptualizations of organizational structure . 60 3.4.2 Conceptualizing the organizational structure by the degree of centralization . 62 3.5 Summary . 70 vi 4 The environmental effect on the organizational structure of terrorist groups 73 4.1 Introduction . 73 4.2 Organizations as sticky institutions . 76 4.3 Which structure to adopt? . 77 4.3.1 Case examples . 79 4.4 Environmental explanation of organizational structure . 81 4.4.1 Alternative explanations . 85 4.5 Research design . 87 4.5.1 Data and operationalization . 87 4.5.2 Dependent variable: Organizational structure - centralization . 89 4.5.3 Independent variables . 90 4.5.4 Handling missing data problems . 92 4.5.5 Method . 93 4.6 Results . 93 4.7 Conclusion . 100 5 Exploring the determinants of terrorist involvement in organized crime1 103 5.1 Introduction . 103 5.2 Terrorism and organized crime . 105 5.2.1 Comparison of terrorist groups and organized crime . 106 5.2.2 Collaboration and appropriation . 107 5.3 Terrorist groups’ involvement in organized crime . 107 5.4 Predictors of terrorist group’s engagement in organized crime . 109 5.4.1 Organization-level characteristics . 110 5.4.2 Environment-level characteristics . 113 5.5 Research design . 116 5.5.1 Unit of analysis and scope conditions . 116 5.5.2 Variables and operationalization . 116 5.5.3 Statistical methodology . 119 5.6 Results . 120 5.7 Conclusion . 123 6 The network effect on the capability of terrorist groups2 127 6.1 Introduction . 127 6.2 The social capital of terrorist groups – a network perspective . 130 6.2.1 Direct connections to other terrorist groups . 132 6.2.2 Embeddedness within the network . 133 6.2.3 Access to structural holes . 134 6.3 Organizational structure and operational capability .
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