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The Case of Enron a Dissertation Submitted To NETWORK STRUCTURES OF CORRUPT INNOVATIONS: THE CASE OF ENRON A DISSERTATION SUBMITTED TO THE DEPARTMENT OF SOCIOLOGY AND THE COMMITTEE ON GRADUATE STUDIES OF STANFORD UNIVERSITY IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY Brandy Aven May 2010 © 2010 by Brandy Lee Aven. All Rights Reserved. Re-distributed by Stanford University under license with the author. This work is licensed under a Creative Commons Attribution- Noncommercial 3.0 United States License. http://creativecommons.org/licenses/by-nc/3.0/us/ This dissertation is online at: http://purl.stanford.edu/mc724tx1889 ii I certify that I have read this dissertation and that, in my opinion, it is fully adequate in scope and quality as a dissertation for the degree of Doctor of Philosophy. Walter Powell, Primary Adviser I certify that I have read this dissertation and that, in my opinion, it is fully adequate in scope and quality as a dissertation for the degree of Doctor of Philosophy. Karen Cook I certify that I have read this dissertation and that, in my opinion, it is fully adequate in scope and quality as a dissertation for the degree of Doctor of Philosophy. Mark Granovetter Approved for the Stanford University Committee on Graduate Studies. Patricia J. Gumport, Vice Provost Graduate Education This signature page was generated electronically upon submission of this dissertation in electronic format. An original signed hard copy of the signature page is on file in University Archives. iii Abstract The focus of this dissertation is the interplay of information and social network structure. I investigate how different types of information influence how individuals choose to communicate, and the implications of these choices on the entire social system. In particular, I look at how both overt and covert information is shared across an organization’s communication network over a four-year period. The contrast between overt and covert activities affords the opportunity to examine whether different content types change the way individuals mobilize to accomplish goals within an organization. First, I analyze how different social network positions allow individuals to obtain different types of information within an organization’s network. I demonstrate that individuals are more likely to participate in an overt communication network when they have large but sparse networks of informal ties through which to acquire information. This finding is contrasted with covert network involvement, where greater closeness centrality or shorter distances to other organizational members predicts participation. Second, the examination of individuals who participated in both covert and overt information networks highlights the divergent behaviors associated with the two activities. When sharing overt information, individuals are more likely to encourage network cohesion, practice structural egalitarianism, and engage in reciprocal iv communication. In contrast, when actors share covert information, they attempt to reduce network cohesion and reciprocity and foster a power structure. Finally, I present results that show the aggregate network effects of individual strategies for sharing either overt or covert information. I find that communication within overt networks is far more reciprocal than communication in covert networks, where information flow is asymmetrical. This study uses longitudinal email data taken from Enron Corporation between 1998 and 2002; these data provide a unique opportunity to study the communication network of the firm's employees and analyze the messages shared between employees. In contrast to previous studies, which assume transmission of information along network ties, this dataset allows for actual observation of information transfer between organizational members. I couple social network analysis and qualitative coding to explore how the content of information affects both communication patterns and the spread of information. v Acknowledgements I would like to thank my committee for all their support of my research. It is to Walter W. Powell, my advisor, that I owe my greatest intellectual debt. I could not have completed my dissertation or degree without his unyielding support and excellent advice. Thanks to Karen S. Cook who was not only immensely influential in my work but also a wonderful role-model for a scholar. Mark Granovetter also provided the perfect balance of encouragement and criticism at every stage of my research. I am also grateful for the guidance and friendship of Henning Hillmann. I am so very thankful for all those who provided me with personal and academic support in both the Sociology Department and Graduate School of Business at Stanford. The faculty generously provided their time and insights, which played a critical role in my growth as a scholar. Special thanks to Shelley Correll, Paula England, Susan Olzak, Paolo Parigi, Cecilia Ridgeway, Nancy Tuma, and, of course, Morris Zelditch. I also have to thank the department staff who helped me undertake both the mundane and life-altering challenges of my career at Stanford. I am immensely appreciative of all my colleagues and friends for reading drafts, giving support, and providing astute comments and cheer: Anastazia Older Aguilar, Kristen Backor, Sara Bloch, Curtiss Cobb, Lynn Chin, Jonathan Haynes, Jung-eun Lee, Elizabeth McClintock, Amanda Sharkey, Alicia Simmons, and Kaisa Snellman. Thank you to all at the Social Science Resource Center, especially my boss, Patricia Box, who became a wonderful friend. I learned a great deal from my Social vi Science and Data Service colleagues and cannot imagine my time at Stanford without them. A big thank you to my dearest friends outside of academia for all your encouragement and grounding humor about this endeavor: Dylan Kendall and Larissa Weingart. I would like to thank my parents, Leo and Freny Berkenbile, for all of their understanding and uncompromising support. I am so grateful for my sister, Tiana Russell, who provided love and a willingness to listen to my sociological jargon. A big hug to my brothers, Bryan and Eric Berkenbile. My cousin, Jennifer Jiries, gave me her reliable sounding board and keen editing eye. I am very grateful for my lovely aunt, Dinaz Shroff, who along the way gave me so much love and too many care- packages. Finally, and most importantly, I would like to thank my husband, William Peter Aven. Pete, you never wavered in your dedication to my goals and dreams. I could not have done any of this without your strength and love. You have provided me with so much, and all of my accomplishments are also yours. It is to him and our amazing daughter, Parker Trevi Heera Aven, that I dedicate this dissertation. Trevi, you are an unending supply of inspiration. Stanford California, Summer 2010 Brandy Lee Aven vii Table of Contents Abstract.........................................................................................................................iv Acknowledgments........................................................................................................vi List of Tables................................................................................................................xi List of Figures..............................................................................................................xii Chapter 1 – Introduction ............................................................................................. 1 Organizational Setting ............................................................................................ 3 Objective of the Dissertation ................................................................................... 5 Social Networks and Organizations ........................................................................ 7 Social Networks and Information Content .............................................................. 8 Outline of the Dissertation .................................................................................... 12 Chapter 2- Theory and Hypotheses .......................................................................... 15 Information Typologies: Overt and Covert ........................................................... 18 Organizational Legitimacy .................................................................................... 22 Innovations& Diffusion ......................................................................................... 24 Information Attainment ......................................................................................... 27 Social Influence ..................................................................................................... 29 Strategic Interactions ............................................................................................ 32 Study 1: Diffusion and Recruitment ...................................................................... 34 Study 2: Strategic Interaction ............................................................................... 38 Study 3: Aggregate Network Structures ................................................................ 42 Overt Innovation Networks ................................................................................... 42 Covert Innovation Networks ................................................................................. 44 Conclusion ............................................................................................................. 45 Chapter 3 – Research Setting and
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