Senior Executives, IT Reputation Building & Implications for Market Valuation

Abstract

The objective of this study is to identify factors that help build an IT reputation, and to evaluate whether markets value a firm’s ability to develop and sustain its IT reputation. Building on IT strategic leadership and IT business value literature, we argue that a similarity in the background and hierarchical proximity between CEO and senior IT executive increases the likelihood that the firm will develop an IT reputation, and this similarity/proximity is more important for product differentiating companies. Building on signaling theory, we argue that IT reputation matters to investors because it reduces information asymmetry. Investors interpret a firm’s sustainable IT reputation as a signal of its superior past IT strategy and future IT investment prospects thus raising its market value. The predicted relationships are validated by results from over 1300 US firms that have appeared in the Information Week 500 lists in the period from 1997 to 2009.