Organizational integrity as a common pool resource: implications for fraud risk

This paper applies Elinor Ostrom’s common-pool resource (CPR) framework to the study of occupational fraud. It argues that organizational integrity, encompassing trust relationships, reputational capital, and the normative infrastructure that supports cooperation, can be conceptualized as a shared institutional resource. While fraudulent actors misappropriate organizational resources, misconduct also generates institutional costs by eroding trust, weakening organizational norms, and undermining confidence in governance arrangements. In this sense, fraud indirectly depletes a collectively maintained resource upon which cooperation depends. Drawing on Ostrom’s design principles for sustainable commons governance, the paper develops an institutional perspective on occupational fraud and derives propositions linking governance structures, employee participation in rule formation, and monitoring mechanisms to lower fraud risk. The framework complements principal-agent approaches by emphasizing the collective processes through which governance institutions and social norms shape organizational misconduct.