Let the buyer beware: how network structure can enable (and prevent) supply chain fraud

PurposeSupply chain fraud is a significant global concern for firms, consumers and governments. Evidence of major fraud events suggests the role of supply chain structures in enabling and facilitating fraud, as they often involve several parties in complicated networks designed to obfuscate the fraud. This paper identifies how the structural characteristics of supply chains can play an important role in enabling, facilitating and preventing fraud.Design/methodology/approachThe research follows a theory elaboration approach. The authors build on structural holes theory in conjunction with a multiple case study research design to identify new concepts and develop propositions regarding the role of network structure on supply chain fraud.FindingsThis research shows how structural holes in a supply chain can create advantages for unscrupulous firms, a role we call tertius fraudans, or the cheating third. This situation is exacerbated by structural ignorance, which refers to the lack of knowledge about structural connections in the network. Both structural holes and structural ignorance can create information gaps that facilitate fraud, and the authors propose solutions to detect and prevent this kind of fraud.Originality/valueThis paper extends structural holes theory into the domain of fraud. Novel concepts including tertius fraudans, structural ignorance and bridge collapse are offered, alongside a series of propositions that can help understand and manage structural supply chain fraud.