Firms increasingly invest in information technology (IT) for innovation. Two essays are developed to understand the antecedents and consequences of IT investment in firm innovation context. In the first essay, I draw on the Behavioral Theory of the Firm (BTOF) and propose that the key driver of managerial decision making for IT investment is the performance shortfalls relative to managers’ aspiration level. By integrating BTOF and Agency Theory, the moderating role of corporate governance mechanisms is further theorized in mitigating managers’ agency problems associated with underinvestment and overinvestment in IT. A large panel data set is constructed to test the theory and provides supportive evidence. In the second essay, I draw on the Evolutionary Theory to conceptualize IT...[ Read more ]

Firms increasingly invest in information technology (IT) for innovation. Two essays are developed to understand the antecedents and consequences of IT investment in firm innovation context. In the first essay, I draw on the Behavioral Theory of the Firm (BTOF) and propose that the key driver of managerial decision making for IT investment is the performance shortfalls relative to managers’ aspiration level. By integrating BTOF and Agency Theory, the moderating role of corporate governance mechanisms is further theorized in mitigating managers’ agency problems associated with underinvestment and overinvestment in IT. A large panel data set is constructed to test the theory and provides supportive evidence. In the second essay, I draw on the Evolutionary Theory to conceptualize IT investment as an evolutionary force inducing variation in firm search for innovation. Greater IT investment is likely to enable more search for knowledge recombination across technological, organizational, geographical and temporal boundaries, which in turn has an inverted U-shaped relationship with innovation outputs. Another panel data set is constructed by tracing firm search behavior for 40 years and shows that the empirical results corroborate the explanation. Overall, this thesis contributes to building a deeper understanding of IT investment and firm innovation.