Finding Partners in Crime? How Internal Transparency Affects Employee Collusion

Abstract

Using a lab experiment, we investigate how internal transparency affects the tendency of employees to initiate collusive efforts with colleagues from other departments in an organization. Building on behavioral economics theory, we argue that employees who are treated unkindly by their managers are more willing to collude. We hypothesize that internal transparency affects collusion in two ways. First, by revealing how employees are treated by their managers, transparency affects the probability that specific individuals are approached by colleagues as potential “partners in crime.” Second, increasing transparency incentivizes managers to treat employees better, which in turn reduces employees’ motivation to initiate collusive agreements. The results of the experiment generally support the theory and have several implications for research and practice.

Keywords: Anticipation of reciprocity; Collusion; Internal transparency; Reciprocity

JEL Classification: C91, D83, M40, M50