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Cultivating a Leadership Pipeline: Using a Real Options Lens to Understand Executives’ Strategic Staffing Decisions
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2023 | Organization Science | Citations: 0
Authors: Campion, Michael C.; Campion, Emily D.; Campion, Michael A.; Bauer, Talya N.

Abstract: This paper adapts real options theory to explain how executives create and maint ... Expand

Abstract: This paper adapts real options theory to explain how executives create and maintain real options portfolios within leadership pipelines. Hypotheses flowing from our theorizing predict that executives often make seemingly risky staffing decisions for leaders who occupy stepping-stone positions. Focusing on their option (future potential) rather than project (current productivity) value, executives laterally transfer leaders in stepping-stone positions frequently, despite it resulting in lower short-term job performance, but often promote these leaders at lower levels of performance and sooner. Once leaders are promoted to destination positions where they may stay indefinitely, executives tend to transfer high-performing leaders more often but not when they are still improving the effectiveness of their current unit. We present evidence suggesting that executives make these decisions to improve other units and maintain a flexible system, possibly recapturing previous investments in developing those leaders. We provide empirical support for our hypotheses using eight years of data in a large retail organization (n = 25,004) where executives overseeing thousands of units made internal mobility decisions. These findings refine real options theory, show that it explains these phenomena better than existing theories, and provide important and immediately usable practical implications for executives. Supplemental Material: The online appendix is available at https://doi.org/10.1287/orsc.2022.1608. Collapse

Semantic filters: real options theory

Topics: task productivity real option IT career productivity human resource management

Methods: statistical hypothesis test descriptive statistic theory development logistic regression focus group

Theories: real options theory options theory
Unravelling the Business Value of Artificial Intelligence

2023 | Americas Conference on Information Systems | Citations: 0
Authors: Du, Kui; Li, Gaoyong; Li, Liang; Zhang, Wei

Abstract: This study aims to investigate how firms can prepare for artificial intelligenc ... Expand

Abstract: This study aims to investigate how firms can prepare for artificial intelligence (AI) adoption and how AI creates business values for adopting firms. We propose that, first, leveraging AI for value creation depends on the presence of an enabling resource foundation, consisting of a stack of technological and managerial resources. According to the real options theory, the stronger such a resource foundation is, the more valuable the option it creates for a firm to adopt AI, and consequently the firm is more likely to exercise the option to adopt. Second, we propose that, after adoption, the depth of AI use can have negative impacts on employee productivity, while the breadth of AI use can have positive impacts. We empirically validate these hypotheses based on a sample of 6,854 manufacturing firms in a coastal province in China. Collapse

Semantic filters: real options theory

Topics: artificial intelligence individual productivity organizational value value creation productivity

Methods: survey experiment regression analysis method

Theories: real options theory resource based view of the firm options theory
A Qualitative Study on Acceptance Factors of Economic Approaches on IT Security Investment Decisions

2023 | Americas Conference on Information Systems | Citations: 0
Authors: Niedzela, Laura; Kuehnel, Stephan; Nastjuk, Ilja; Matschak, Tizian; Sackmann, Stefan; Trang, Simon

Abstract: Cyber-attacks can cause severe economic damages to businesses today. Therefore, ... Expand

Abstract: Cyber-attacks can cause severe economic damages to businesses today. Therefore, every company needs to protect its IT systems from such attacks by implementing effective IT security measures. When it comes to deciding on an IT security measure, there is a variety of decision approaches that can offer support on choosing an economically reasonable one. In practice, however, such approaches are rarely applied and a company's security investment decisions are often based on intuitive factors. We therefore want to explore which factors drive the acceptance and application of economic approaches on IT security investment decisions. For this, we used semi-structured interviews and a moderated focus group to generate insights from both science and practice. Not only did our research yield new scientific knowledge about IT security investment decisions, but the results can also be useful in increasing the application of economic decision approaches. Collapse

Semantic filters: real options theory

Topics: IT security IT security defense decision making real option computer virus protection

Methods: qualitative interview personal interview literature study focus group cluster analysis

Theories: real options theory
Artificial Intelligence in the Workplace: Implementation Challenges and Opportunities

2023 | Americas Conference on Information Systems | Citations: 0
Authors: Raftopoulos, Marigo; Hamari, Juho

Abstract: This study aims to investigate how firms can prepare for artificial intelligenc ... Expand

Abstract: This study aims to investigate how firms can prepare for artificial intelligence (AI) adoption and how AI creates business values for adopting firms. We propose that, first, leveraging AI for value creation depends on the presence of an enabling resource foundation, consisting of a stack of technological and managerial resources. According to the real options theory, the stronger such a resource foundation is, the more valuable the option it creates for a firm to adopt AI, and consequently the firm is more likely to exercise the option to adopt. Second, we propose that, after adoption, the depth of AI use can have negative impacts on employee productivity, while the breadth of AI use can have positive impacts. We empirically validate these hypotheses based on a sample of 6,854 manufacturing firms in a coastal province in China. Collapse

Semantic filters: real options theory

Topics: artificial intelligence individual productivity organizational value value creation productivity

Methods: survey experiment regression analysis method

Theories: real options theory resource based view of the firm options theory
How Property Rights Matter to Firm Resource Investment: Evidence from China’s Property Law Enactment
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2022 | Organization Science | Citations: 0
Authors: He, Wenlong; Tong, Tony W.; Xu, Mingtao

Abstract: Although property-rights theory has long been used to explain firms’ ownership o ... Expand

Abstract: Although property-rights theory has long been used to explain firms’ ownership of resources, research on the channels through which property rights affect heterogeneous firms’ investment in building resources remains scarce. Leveraging a property-law enactment in China, we find that strengthening property-rights protection leads private firms to make greater intangible and tangible asset investment compared with state-owned firms and that these effects are mediated by external equity and debt financing. Further, we unpack resource heterogeneity by explicating key differences between intangible and tangible assets, and we document an alignment between asset intangibility and financing approaches such that for intangible asset investment, equity plays a larger mediation role, whereas for tangible asset investment, debt’s mediating effect is greater. We contribute to the strategy literature by using property-rights theory to link together asset intangibility and financing approaches and by showing that the strength of property-rights protection affects firms’ resource investment and shapes firm heterogeneity. Collapse

Semantic filters: real options theory

Topics: database system asset specificity accounting organizational productivity innovation management

Methods: experimental group longitudinal research statistical hypothesis test robustness check theory development

Theories: property rights theory resource based view of the firm real options theory transaction cost economics
IOS drivers of manufacturer-supplier flexibility and manufacturer agility
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2020 | Journal of Strategic Information Systems | Citations: 0
Authors: Lee, Neil Chueh-An; Wang, Eric T. G.; Grover, Varun

Abstract: In today’s hypercompetitive environment, it is critical for manufacturing firms ... Expand

Abstract: In today’s hypercompetitive environment, it is critical for manufacturing firms to be agile in responding to ephemeral opportunities in the marketplace. This agility often requires the collaboration with supply chain partners. However, how a manufacturing firm collaborates with its suppliers to achieve agility remains an understudied issue. This study holds that manufacturing firms and their suppliers need to develop manufacturer-supplier flexibility accompanied with well-built integrated information systems and associated analytical systems (such as business intelligence) to enable manufacturer agility. To deepen our understanding of the roles of manufacturer-supplier flexibility and IOS technologies in facilitating manufacturer agility, we build and test a model based on the real options theory and bounded rationality. Based on 141 matched-pair samples of Taiwanese manufacturing firms, our findings demonstrate the importance of manufacturer-supplier flexibility in achieving higher manufacturer agility, wherein IOS integration enables better flexibility. We also show IOS-enabled analytical ability can strengthen the effect of such flexibility on manufacturer agility. Implications of the results for practices and academics are provided. Collapse

Semantic filters: real options theory

Topics: analytical information system real option supply chain management decision making database system

Methods: survey computational algorithm partial least squares regression consistent partial least squares path modeling PLS tool

Theories: theory of bounded rationality real options theory resource based view of the firm
Software Patents and Firm Value: A Real Options Perspective on the Role of Innovation Orientation and Environmental Uncertainty
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2019 | Information Systems Research | Citations: 49
Authors: Chung, Sunghun; Animesh, Animesh; Han, Kunsoo; Pinsonneault, Alain

Abstract: Although software patents have been growing steadily since 1996, when the restri ... Expand

Abstract: Although software patents have been growing steadily since 1996, when the restrictions on the patentability of software were eliminated, their value and impacts on the ﬁrm’s proﬁts remain unclear and ambiguous. Drawing on the real options theory and the literature on exploration and exploitation, we develop a novel theoretical framework to assess the value of software patents. Moreover, we examine the impact of contextual factors related to the nature of innovation underlying ﬁrms’ patent portfolios (exploitative versus explorative) and the environmental uncertainty (competitiveness and dynamism) on the value of software patents. Speciﬁcally, we examine the interaction effect of a ﬁrm’s software patent stock and its innovation orientation on ﬁrm value in markets exhibiting different levels of environmental uncertainty. Based on a large-panel data set consisting of 602 U.S. ﬁrms, our results indicate that a software patent portfolio having higher levels of explorative orientation is associated with a higher ﬁrm value (as measured by Tobin’s q) in environments exhibiting low dynamism and high competitiveness. By contrast, a software patent portfolio with higher levels of exploitative orientation is associated with a higher ﬁrm value in environments with high dynamism and low competitiveness. We discuss the implications for research and practice. Collapse

Semantic filters: real options theory

Topics: software patent innovation management environmental uncertainty real option organizational value

Methods: longitudinal research autocorrelation analysis theory development statistical hypothesis test robustness check

Theories: real options theory
Do Strategy and Timing in IT Security Investments Matter? An Empirical Investigation of the Alignment Effect
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2019 | Information Systems Frontiers | Citations: 5
Authors: Xu, Feng; Luo, Xin (Robert); Zhang, Hongyun; Liu, Shan; Huang, Wei (Wayne)

Abstract: Firms have increasingly invested in information technology (IT) security to prot ... Expand

Abstract: Firms have increasingly invested in information technology (IT) security to protect their information resources. Nevertheless, deciding when to invest in IT security is rather difficult for executives because of the irreversibility of spending and uncertainty of IT security investments performance. A review of the literature on IT security investments reveals that previous studies largely neglected the strategy and timing of investments. Basing on real options theory, this research examines IT security investments for the commercial exploitation strategy versus the IT security improvement strategy in terms of proactive and reactive investments. An event methodology is used to estimate the effect of IT security investment timing on the stock performance of the investments. Our results show that reactive investments for IT security improvement and proactive investments for commercial exploitation earn positive abnormal returns. Moreover, the market reacts more positively to aligned than misaligned IT security investments. The implications of the research findings are presented and discussed. Collapse

Semantic filters: real options theory

Topics: IT security real option organizational productivity database system website

Methods: parametric test Student's t-test Z-test regression analysis method statistical hypothesis test

Theories: real options theory
The Impact of Information Sharing Legislation on Cybersecurity Industry

2018 | International Conference on Information Systems | Citations: 0
Authors: Yang, Sun-Kyung; Kwon, Young-Jin; Lee, Sang-Yong Tom

Abstract: The overall impact of information sharing on firms’ cybersecurity investment dec ... Expand

Abstract: The overall impact of information sharing on firms’ cybersecurity investment decision has long been unexplored area, especially, due to nonexistence of epoch-making event. Here, we employ the legislation of Cybersecurity Information Sharing Act of 2015 (CISA) as a milestone, by which we are able to observe firms’ attitudinal changes toward investing in cybersecurity. We design a quasi-experiment where we set U.S. cybersecurity firms as experimental group (i.e., proxy for total investment in cybersecurity) and nonsecurity firms as control group. At full sample, our empirical findings suggest U.S. security firms’ overall Tobin’s Q increase after the legislation. Also, the results from propensity score matched samples verify the robustness of our findings. Our research has a contribution in that it finds the missing link between theoretically-explored prior literatues and the real-world example, allowing people to apprehend, at least, the impact of CISA itself, and even further, cybersecurity information sharing. Collapse

Semantic filters: real options theory

Topics: IT security information exchange organizational productivity legal context database system

Methods: experimental group propensity score matching quasi experiment longitudinal research Compustat

Theories: real options theory game theory
Information Technology Investments and Firm Risk Across Industries: Evidence from the Bond Market

2017 | Management Information Systems Quarterly | Citations: 22
Authors: Kim, Keongtae; Mithas, Sunil; Kimbrough, Michael

Abstract: This study documents variation across industries in creditors’ perceptions of th ... Expand

Abstract: This study documents variation across industries in creditors’ perceptions of the risk of information technology (IT) investments. The associations we document between IT investments and both initial bond ratings and yield spreads suggest that credit-rating agencies and bond investors consider IT investments in automate and informate industries less risky than those in transform industries. We document that IT investments are associated with more volatile future cash flows in transform industries than in automate or informate industries. The findings indicate that bond investors prefer IT investments in automate industries, where the cash flow payoffs to IT investment are smaller but more stable than in transform industries. Overall, these findings provide the important insight that bondholders’ perceptions of IT investments vary across industries based on bondholders’ aversion to the riskiness and the lack of collateralizability of IT investments. Senior managers should recognize that IT investments have implications for both operational performance and financing costs (e.g., costs of debt) of the firm, and they should consider the potential financial benefits of increased IT capabilities, such as the willingness of corporate bond investors to accept lower financing costs. Collapse

Semantic filters: real options theory

Topics: IT investment research and development IS impact real option database system

Methods: Compustat ordered probit regression instrumental variables estimation descriptive statistic robustness check

Theories: real options theory options theory

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Found 47 articles

Cultivating a Leadership Pipeline: Using a Real Options Lens to Understand Executives’ Strategic Staffing Decisions

Unravelling the Business Value of Artificial Intelligence

A Qualitative Study on Acceptance Factors of Economic Approaches on IT Security Investment Decisions

Artificial Intelligence in the Workplace: Implementation Challenges and Opportunities

How Property Rights Matter to Firm Resource Investment: Evidence from China’s Property Law Enactment

IOS drivers of manufacturer-supplier flexibility and manufacturer agility

Software Patents and Firm Value: A Real Options Perspective on the Role of Innovation Orientation and Environmental Uncertainty

Do Strategy and Timing in IT Security Investments Matter? An Empirical Investigation of the Alignment Effect

The Impact of Information Sharing Legislation on Cybersecurity Industry

Information Technology Investments and Firm Risk Across Industries: Evidence from the Bond Market