Doing Well by Doing Bad: Toward an Organizational and Strategic Perspective on the Rational Choice Model of Corporate Misconduct

Corporate misconduct carries significant social and economic costs, and therefore regulators and other stakeholders seek to deter it. Despite the significant costs and deterrence efforts, corporate misconduct is widespread and our understanding of it is limited. As argued in this article, one key reason for this is the lack of understanding of the benefits and penalties of misconduct for the companies and individuals involved, as well as the detection of such behavior. Corporate misconduct carries significant social and economic costs, and therefore regulators and other stakeholders seek to deter it. Despite the significant costs and deterrence efforts, corporate misconduct is widespread and our understanding of it is limited. As argued in this article, one key reason for this is the lack of understanding of the benefits and penalties of misconduct for the companies and individuals involved, as well as the detection of such behavior. This article seeks to advance our understanding of corporate misconduct and builds on the rational choice model (RCM) – where the decision to engage in misconduct hinges on a calculation of the expected costs and benefit – and links it to research in organization theory and strategy. Specifically, it sets a research agenda at the intersection of organizational and strategic perspectives, to deepen our understanding of corporate misconduct and shed light on opportunities for empirical and theoretical research which can potentially aid in developing effective deterrence strategies.