Think (not so) straight, talk (not so) straight: Andersen’s failure to navigate its institutional environment

This paper aims to provide an analysis of the choices Arthur Andersen faced in dealing with the crisis that ultimately let to its downfall in 2001-2002.

The paper is built around institutional theory. Specifically, it applies the propositions provided by Oliver (1990, 1991) to the historical record.

The failure to develop a coherent response, combined with a failure to anticipate the specific role of the state led to Andersen’s inability to navigate the institutional field.

The usual limitations of institutional theory are acknowledged. These pertain to the lack of a micro-level analysis, the additional impact of pure economic rationality and the chance that every crisis of faith is unique.

The article adds to our appreciation of what not to do in the face of crisis by the government and those in charge of large accounting organizations.

The article adds to the recently in the news “too big to fail” problem with successful economic agents.

The article adds to institutional theory by providing a different story than the usual, where everything is cleverly managed and the crisis is overcome.