IT Investment, CEO Overconfidence, and Firm Performance

Abstract

Abstract:

Prior researches have focused on CEO overconfidence' negative effects on corporation investments, but CEO overconfidence' positive effects on corporate investments have been largely neglected in the literature to date. Drawing on resource-based view and Upper Echelon Theory, a mediated moderation model which explains how CEO overconfidence moderates the relationship between IT investments and firm performance is constructed and moderated path analysis is used to test this prediction by using Chinese listed firms from 2007 to 2013. The empirical results show that IT investment has a positive impact on firm performance; CEO overconfidence has significant positive moderating effects on that relationship between IT investments and firm performance; R&D expenditure mediates the moderating effect of CEO overconfidence on the effect of IT investments in firm performance. This study reveals CEO overconfidence is an important IT complementary resource. CEO overconfidence not only has significant positive moderating effects on that relationship between IT investments and firm performance, but also leads to larger investment in R&D and a stronger capacity to absorb IT investment, thus giving full play to the potential of IT investment and its effect on firm performance. These findings expand related IT performance research, overconfidence research, Upper Echelon Theory and provide important practical implications for corporate IT investment.

Key words: IT investment, CEO overconfidence, R&D expenditure, firm performance

Wang Tienan, Wang Yu. IT Investment, CEO Overconfidence, and Firm Performance[J]. , 2017, 29(1): 70-81.

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