How Cio Position Influences Information Technology Investments and Firm Performance

Despite the important roles chief information officers (CIOs) play in developing information technology (IT) strategies and carrying out IT plans, prior research has not examined the impact of having a formal CIO position on IT investments and firm performance. Drawing on the upper echelons theory and using data from over 250 US firms over the 1999-2003 period, we address how a firm’s CIO position influences the level of the firm’s IT investments and the returns to IT investments. We find that CIO position in organizational hierarchy has a significant impact on IT investments: firms with a formal CIO position make higher levels of IT investments, compared to firms without a formal CIO position. We also find that returns to IT investments are greater for firms whose CIOs possess additional titles and/or expanded responsibilities, compared to firms without CIOs or CIOs in less senior management positions. In addition, examining the role of industry characteristics, we find that the impact of CIO’s position on IT investments is much greater in “transform” industries compared to “automate” and “informate” industries. In transform industries, alignment of strategic IT roles leads to improved financial performance. Further, we find that CIO position has significantly stronger impacts in IT intensive firms than in non-IT intensive firms, in terms of both its impact on IT investments and the moderating effect on returns to IT