Managerial Incentives and Digital Strategic Posture: A Contingent View

As digitization plays an important role in business success, CEOs are increasingly responsible for the digital strategy of their firms. However, limited studies have explored the antecedents of the digital strategic posture of firms. In this study, we conceptualize digital strategic posture in terms of the abnormal IT investments firms make and posit that this is influenced by the interplay between managerial incentives and firm contingencies. Specifically, we argue that the performance and risk incentives of CEOs will lead to a more proactive digital strategic posture when firms face performance shortfall and when they have slack resources. We test our hypotheses using data for 602 U.S. firms from 2008 to 2015. Our results provide support to our hypotheses and indicate that firm slack positively moderates the relationship between CEO risk incentives and digital strategic posture, and a decrease in performance induces CEOs with performance incentives to adopt a more proactive digital strategic posture. We discuss the theoretical and practical implications of our findings and draw guidelines for future research.