Start Date

11-12-2016 12:00 AM

Description

With C-level executives increasingly involved in shaping digital strategies, it is important for firms to incentivize Chief Executive Officers (CEO) towards growth-oriented digital strategies. However, scant research examines how to incentivize CEOs in developing digital strategies. We propose that a key lever for incentivizing a growth-oriented digital strategy is CEO's long-term compensation. Analyzing longitudinal data of 192 U.S. firms from 2004 to 2011 collected from secondary sources, we find that CEO long-term compensation is positively related to growth-oriented IT portfolio. In contrast, CEO long-term compensation is negatively related to enterprise-oriented and functional-oriented IT portfolios. Further, CEO experience mitigates the relationship between CEO long-term compensation and growth-oriented IT portfolio. Exploratory analyses suggest that product volatility mitigates CEO long-term compensation's effect on enterprise-oriented IT portfolio. And demand volatility mitigates CEO long-term compensation's effect on enterprise-oriented IT portfolio. Theoretical and practical contributions include highlighting of role of CEO long-term compensation in digital strategy.

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Dec 11th, 12:00 AM

Growth Oriented Digital Strategy and Long-Term Compensation of Chief Executives

With C-level executives increasingly involved in shaping digital strategies, it is important for firms to incentivize Chief Executive Officers (CEO) towards growth-oriented digital strategies. However, scant research examines how to incentivize CEOs in developing digital strategies. We propose that a key lever for incentivizing a growth-oriented digital strategy is CEO's long-term compensation. Analyzing longitudinal data of 192 U.S. firms from 2004 to 2011 collected from secondary sources, we find that CEO long-term compensation is positively related to growth-oriented IT portfolio. In contrast, CEO long-term compensation is negatively related to enterprise-oriented and functional-oriented IT portfolios. Further, CEO experience mitigates the relationship between CEO long-term compensation and growth-oriented IT portfolio. Exploratory analyses suggest that product volatility mitigates CEO long-term compensation's effect on enterprise-oriented IT portfolio. And demand volatility mitigates CEO long-term compensation's effect on enterprise-oriented IT portfolio. Theoretical and practical contributions include highlighting of role of CEO long-term compensation in digital strategy.