How the Locus of Uncertainty Shapes the Influence of CEO Long-Term Compensation on Information Technology Capital Investments
Authors: Saldanha, Terence J. V.; Andrade-Rojas, Mariana G.; Kathuria, Abhishek; Khuntia, Jiban; Krishnan, M.S.
Journal: MIS Quarterly (2024)
<jats:p>Firms must allocate resources effectively to cope with uncertainty, which can manifest as a disruption and an opportunity. Although information technology (IT) is a means to cope with uncertainty, chief executive officers (CEOs) may not always support IT investments due to the risky nature of IT, especially when facing uncertain conditions. While prior research suggests that CEO long-term compensation positively incentivizes IT investments, little is known about how different loci of uncertainty impact this relationship. To address this research gap, we study how firm-specific uncertainty and competitive uncertainty shape the influence of CEO long-term compensation on a firm’s IT capital investment. Drawing on agency theory and prospect theory, we develop two hypotheses. First, we hypothesize that firm-specific uncertainty and competitive uncertainty positively moderate the influence of CEO long-term compensation on firm IT capital investment. Second, we hypothesize that competitive uncertainty has a stronger positive moderating effect than firm-specific uncertainty on the influence of CEO long-term compensation on firm IT capital investment. Our analysis of secondary long…