Journal
JOURNAL OF MANAGEMENT INFORMATION SYSTEMS
Volume 38, Issue 1, Pages 29-58Publisher
ROUTLEDGE JOURNALS, TAYLOR & FRANCIS LTD
DOI: 10.1080/07421222.2021.1870382
Keywords
IT investment; technological choices; performance shortfalls; corporate governance; digital innovation; behavioral theory of the firm; agency theory; behavioral agency theory
Funding
- Hong Kong Research Grants Council (HKU) [17505018]
- Tsinghua SEM Research Center for Artificial Intelligence & Management (AIM)
- Hong Kong University of Science and Technology
- University of Groningen
- University of Hong Kong
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This study utilizes a behavioral agency theory to explore the performance drivers and outcomes of IT investment decisions, highlighting corporate governance and monitoring managers' tendencies as key factors influencing IT investment. The research suggests that IT investment facilitates innovation and improves firm performance.
While prior research has established that information technology (IT) investment has a significant impact on firm performance, relatively few studies have provided insights into the antecedents of IT investment decisions. By integrating the behavioral theory of the firm and agency theory, we propose a behavioral agency theory to explain performance shortfalls and corporate governance, which monitors and controls managers' tendency of overinvestment or underinvestment in IT, as key drivers that jointly determine IT investment. As such, IT investment facilitates a firm's problemistic search that generates innovation in response to performance gaps. We further examine the role of innovation outputs as a mediating mechanism linking IT investment to firm performance. Our econometric analysis of a large-scale panel dataset provides empirical evidence corroborating our theory. Overall, this study contributes a behavioral agency theory to deepen our understanding about performance drivers and outcomes of IT investment decisions.
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