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.
Recommended Citation
Andrade Rojas, Mariana Giovanna; Khuntia, Jiban; Saldanha, Terence Joseph Vinay; Kathuria, Abhishek; and Krishnan, Mayuram S., "Growth Oriented Digital Strategy and Long-Term Compensation of Chief Executives" (2016). ICIS 2016 Proceedings. 10.
https://aisel.aisnet.org/icis2016/GeneralIS/Presentations/10
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.