Managerial Risk Incentives and Strategic Risk-Taking in IT

Posted: 1 Sep 2013 Last revised: 1 Oct 2013

See all articles by Ling Xue

Ling Xue

Georgia State University

Gautamn Ray

University of Minnesota - Twin Cities - Department of Operations and Management Science

Xia Zhao

University of North Carolina at Greensboro - Information Systems & Supply Chain Management

Date Written: 2013

Abstract

This study examines how the risk-taking motives of top managers drives risk-taking in IT implementations. We use the risk incentives provided in managerial compensation to capture top managers’ risk-taking motives, and develop measures of aggressive IT implementation to capture strategic risk-taking in IT. Our analysis provides empirical evidence that managerial risk incentives drive aggressive IT implementations. We also consider how firm diversification may influence the relationship between managerial risk incentives and aggressive IT implementations. Our findings suggest that the relationship between managerial risk incentives and aggressive IT implementations is stronger in focal firms’ secondary business areas than in their primary business areas. The implication is that diversification provides risk-seeking managers more opportunities for IT risk-taking and allows them to reallocate their risk-taking initiatives in the business areas that are less familiar to them.

Keywords: Executive compensation, Managerial incentives, Risk-taking, Information technology, Diversification, IT strategy

Suggested Citation

Xue, Ling and Ray, Gautamn and Zhao, Xia, Managerial Risk Incentives and Strategic Risk-Taking in IT (2013). Available at SSRN: https://ssrn.com/abstract=2318683

Ling Xue (Contact Author)

Georgia State University ( email )

35 Broad Street
Atlanta, GA 30303-3083
United States

Gautamn Ray

University of Minnesota - Twin Cities - Department of Operations and Management Science ( email )

Minneapolis, MN 55455
United States

Xia Zhao

University of North Carolina at Greensboro - Information Systems & Supply Chain Management ( email )

401 Bryan Building
Greensboro, NC 27402-6179
United States

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