Adopting IT to Manage Compliance and Risks: An Institutional Perspective

Addressing the complexity of the growing number of regulatory instruments emanating from global institutional environments has prompted firms in the IT sector to adopt innovative information technologies to help manage compliance and related organizational risks. This paper first employs institutional theory to help explain how a range of exogenous regulative, normative and cultural cognitive factors are influencing IT manufacturers’ adoption decisions on IT-based compliance solutions. The paper also draws on organizational theory to describe the endogenous institutional arrangements knowing organizations need to implement in order to address the challenges posed to them while operating in such environments. The findings of a case study on the adoption of what Napa Inc., a Fortune 500 IT manufacturer, considers to be the most innovative compliance management solution on the market, illustrates, that in order to be effective, such applications must support organizational sense making, decision taking and knowledge creation and management. Each of these activities are argued to be key characteristics of knowing organizations and collectively they underpin Loop III Learning, the absence of which results in suboptimal results for firms in dealing with compliance imperatives and addressing associated risks.