Digital Institutions and Occupational Fraud
Abstract
How do a country’s digital institutions influence the magnitude of occupational fraud within firms? Leveraging and extending the institution-based view, we address this understudied question by conceptualizing digital institutions as a new genre of institutions that condition the deterrence calculus within firms. We define digital institutions as the foundational structures and resources that shape a country’s digital environment along three key dimensions: (1) digital infrastructure, (2) digital governance, and (3) digital innovation. While strengthening digital institutions has become a priority for policymakers worldwide, the unintended consequences of doing so, such as the potential to facilitate occupational fraud within firms, remain insufficiently understood. Using a unique dataset of 3,974 cases from 41 countries, we find that digital infrastructure is linked to higher fraud magnitude in firms, whereas digital governance is associated with lower occupational fraud magnitude. Our analysis further uncovers the nuanced ways in which digital institutions condition the effectiveness of firm-level internal controls. Overall, policymakers must recognize that digital institutions are a “double-edged sword,” as developing digital infrastructure without reinforcing digital governance can negate efforts to control occupational fraud at the firm level.
- DOI
- 10.1177/01492063261461518
- Language
- en
- Sources
- crossref openalex