Do CIOs Matter in the Face of Exogenous Shocks? An Examination Through Upper Echelon Theory

Abstract

Information Technology has taken a prominent role in firm investments, yet there is considerable variation in returns in technology-based expenditures. We posit that the technology leader such as the CIO or CTO is a valuable resource and plays a critical role when the position is endowed with power. Our analysis shows how a technology leader’s influential presence affects firm performance, particularly in the presence of an IT-related exogenous shock. Using cross-industry data, we find that firms with powerful technology leaders generate higher sales growth, and furthermore, in the presence of exogenous shocks, markets reward firms having powerful technology leaders.