Strategic Information Technology Entrenchment

ABSTRACT Many economic and informational problems associated with corporate IT spending can be attributed to managerial rent-seeking. IT managers with misaligned incentives and budgetary discretion often entrench themselves through their non-value-maximizing investment decisions. In order to boost their bargaining power in future contract renegotiation, they invest excessively in IT projects they manage more effectively than their potential rivals. In addition, they tend to adopt technologies that can create large information asymmetries giving them significant informational advantages over their potential rivals. We explore the implications and impacts of their rent-seeking behavior within the context of corporate IT adoption and management. Knowledge management is suggested as a potentially successful tool in overcoming IT entrenchment and discouraging managerial rent-seeking. However, we also caution our readers of the potential managerial incentive problems that might emerge as companies deploy information systems to facilitate effective knowledge management. ______________________________________________________________________