Dark open innovation in a criminal organizational context: the case of Madoff’s Ponzi fraud

Manning, Paul, Stokes, Peter, Visser, Max, Rowland, Caroline and Yedidia, T. Shlomo (2018) Dark open innovation in a criminal organizational context: the case of Madoff’s Ponzi fraud. Management Decision, 56 (6). pp. 1445-1462. ISSN 0025-1747

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Official URL: https://doi.org/10.1108/MD-05-2017-0535


The purpose of this paper is to investigate the processes of open innovation in the context of a fraudulent organization and, using the infamous Bernie L. Madoff Investment Securities fraud case, introduces and elaborates upon the concept of dark open innovation. The paper’s conceptual framework is drawn from social capital theory, which is grounded on the socio-economics of Bourdieu, Coleman and Putnam and is employed in order to make sense of the processes that occur within dark open innovation.

Given the self-evident access issues, this paper is necessarily based on archival and secondary sources taken from the court records of Madoff v. New York – including victim impact statements, the defendant’s Plea Allocution, and academic and journalistic commentaries – which enable the identification of the processes involved in dark open innovation. Significantly, this paper also represents an important inter-disciplinary collaboration between academic scholars variously informed by business and history subject domains.

Although almost invariably cast as a positive process, innovation can also be evidenced as a negative or dark force. This is particularly relevant in open innovation contexts, which often call for the creation of extended trust and close relationships. This paper outlines a case of dark open innovation.

Research limitations/implications
A key implication of this study is that organizational innovation is not automatically synonymous with human flourishing or progress. This paper challenges the automatic assumption of innovation being positive and introduces the notion of dark open innovation. Although this is accomplished by means of an in-depth single case, the findings have the potential to resonate in a wide spectrum of situations.

Practical implications
Innovation is a concept that applies across a range of organization and management domains. Criminals also innovate; thus, the paper provides valuable insights into the organizational innovation processes especially involved in relation to dark open innovation contexts.

Social implications
It is important to develop and fully understand the possible wider meanings of innovation and also to recognize that innovation – particularly dark open innovation – does not always create progress. The Caveat Emptor warning is still relevant.

The paper introduces the novel notion of dark open innovation.

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