Getting them to think outside the circle- IT governance, CIOs’ external advice networks, and firm performance

May 8th – 9th 2012, Brunel University, University Kingdom

Ali Reza Montazemi and Jeffrey James Pittaway 1 Significance of IT governance in exploring CIOs’ external advice networks to improve the value of it

GETTING THEM TO THINK OUTSIDE THE CIRCLE: IT GOVERNANCE, CIOS’ EXTERNAL ADVICE NETWORKS, AND FIRM PERFORMANCE

Ali Reza Montazemi, DeGroote School of Business, McMaster University, Canada [email protected]

Jeffrey James Pittaway, DeGroote School of Business, McMaster University, Canada [email protected]

Abstract

Prior research has assumed that chief information officers (CIOs) participate in advice networks that enable the diffusion of particular strategic information technology (IT) initiative through on-going discourse in the inter-organisational field. By combining the insights of new advice from peer firms in CIOs’ advice networks with current knowledge of how to operate, firms can learn to tap the unexplored potential of current technology and/or find ways to exploit new technology in practice – that is, improve the value they derive from technology enactment. It is our contention in this paper, however, that not all peer firms are effective sources of more rewarding advice that can contribute to firms’ technology enactment. We advance a theoretical model to elucidate the factors that enable or conversely inhibit the exploration for rewarding advice in CIOs’ advice networks. In particular, our theory identifies the significant role that IT governance mechanisms play in exploration for advice regarding strategic IT initiatives that can contribute to better and more efficient organisational performance. Based on extant literature, we postulate three propositions. The theoretical foundation and propositions advanced in this paper are part of our on-going research agenda. We are presently in the process of collecting data from CIOs of municipalities across Canada to test the stated propositions.

Keywords: CIO, technology enactment, IT governance, advice networks, absorptive capacity

1 INTRODUCTION Research has shown how firms bring about their own downfall by becoming increasingly preoccupied and focused on internal operations while less and less in touch with the external environment (Cunha and Chia, 2007). In so doing, they develop “blindspots”: perceptual filtering routines by which they attend to and select information that confirms their assumptions, while ignoring information that disconfirms their assumptions. These filtering routines reinforce the existing mindset; they reduce ambiguity and provide a perception of orderliness that makes organisational life seem more predictable and, hence, more manageable. The key problem with these routines is that by producing a neatly ordered version of reality, they insulate firms from the messiness and complexities of the external environment. This leads to a lack of awareness regarding critical external happenings such as threats and opportunities in emerging technologies, changing customer demands, and intelligence failures that lead to poor decision-making (Choi and Wang, 2009). Mitigating this risk requires a heightening of sensitivity to external events, such as opportunities made possible by emerging technologies. To this end, corporate governance teams are confronted with paradoxical challenges of exploiting existing knowledge and exploring for new opportunities (He and Wong, 2004). Exploitation implies firm behaviours characterized by refinement, implementation, efficiency, production and selection. Exploration, in contrast, implies firm behaviours characterized by search, discovery, and innovation.

It is chief information officers (CIOs) that are expected to take up the challenge to balance exploitation and exploration: as part of corporate governance, chief executive officers (CEOs) today are asking

May 8th – 9th 2012, Brunel University, University Kingdom

Ali Reza Montazemi and Jeffrey James Pittaway 2 Significance of IT governance in exploring CIOs’ external advice networks to improve the value of it

their CIOs to play bigger roles in the growth agenda (1) by building an integrated platform of business processes, information systems and technology that can be enacted in support of business processes (i.e., exploitation), and (2) by exploring for external advice regarding innovations that can enable faster, more agile responses to emerging opportunities and threats (Cash et al., 2008; Lyytinen and Rose, 2006). External advice emanates from three sources: (1) peer firms; (2) market partners such as customers and suppliers; and, (3) resources in the local market such as educated workforces (Foss and Pedersen, 2002; Montazemi et al., 2012). Whereas the latter two sources are market-based, new insight that is derived from exploring for advice from peer firms in the same institutional field (e.g., same industry) and exploiting that advice in practice is the type of contextualized information that institutionalists contend has great potential to improve firm performance in that institutional field (McEvily and Zaheer, 1999).

By seeking advice from peers, CIOs can learn from peers’ successes and avoid their mistakes. They can reduce the risks of making a poor decision because estimates of the costs and potential returns can be made based on the experience of prior adopters (Greve, 1998). They can economize on costs of a broad market search for alternative solutions, and the costs associated with experimentation (e.g., implementing a novel technology), because these costs are borne by first-movers (Teo et al., 2003). They can also acquire legitimacy for their firm that is conferred on a technology or strategic initiative as a result of the large number of other firms that have adopted it (Haunschild and Miner, 1997; Tallon and Kraemar, 2007), and thereby avoid the risk of being perceived as laggards (Teo et al., 2003).

For these reasons, prior research has assumed that CIOs participate in advice networks that enable on-going “discourse in the interorganizational field” (Swanson and Ramiller, 2004) and the diffusion of particular technologies and strategies for enacting technologies (e.g., Fiol and O’Connor, 2003). Nonetheless, as elaborated in this paper, not all peer firms are effective sources of advice that lead to more rewarding strategic information technology (IT) initiatives. Thus the open question remains, do CIOs seek advice from peers that can inform more rewarding strategic IT initiatives and what are the factors that enable/inhibit CIOs’ external advice seeking?

In order to address the research question, we proceed to conduct a review of the literature to propose a theoretical model of organisational factors in CIO external advice seeking that can inform future research. To that end we first review extant theory regarding CIO advice seeking as an exploratory IT governance activity directed at improving IT contributions to firm performance. We then develop a theoretical model of factors that elucidate effective versus ineffective advice seeking behaviours, and IT governance mechanisms that can motivate CIOs to effortful search for potentially rewarding advice. The set of propositions comprising the theoretical model suggest promising avenues for future research into the role firms’ IT governance plays in enabling or inhibiting the search for more rewarding strategic IT initiatives.

2 THEORETICAL FOUNDATION – IT GOVERNANCE Prior literature states that IT investments and decision processes have a significant impact on firms’ performance outcomes (Xue et al., 2008), and “effective IT governance is the single most important predictor of the value an organization generates from IT” (Weill and Ross, 2004, pp. 3-4). IT governance is an integral part of corporate governance, not only because active board/executive involvement in IT-related decisions is associated with higher firm performance (Huang et al., 2010), but because corporate officers’ obligation to provide more and better oversight of their firms’ IT functions became a legislative requirement with the passage of the Sarbanes-Oxley Act of 2002 and various country-specific versions (Bart and Turel, 2010). IT governance consists of (1) organisational leadership structures and (2) business processes that ensure that the firm’s IT supports and extends its strategy and objectives (Gottschalk, 2007), which are elaborated in the e-government literature as (1) IT governance mechanisms and (2) technology enactment respectively (Cordella and Iannacci, 2011; Fountain, 2001; Gil-Garcia, 2006; Huang et al., 2010; Luna-Reyes et al., 2007; Tsai et al., 2009).

Firms design and orchestrate IT governance mechanisms as a means of rationalizing, directing and coordinating the firm’s IT-related decision making (Huang et al., 2010). Well-designed and

May 8th – 9th 2012, Brunel University, University Kingdom

Ali Reza Montazemi and Jeffrey James Pittaway 3 Significance of IT governance in exploring CIOs’ external advice networks to improve the value of it

orchestrated IT governance mechanisms are expected to produce IT-related decisions and enactments that are more tightly aligned with a firm’s strategic intentions. The IT governance team contributes to the value firms derive from IT by: (1) recognising pain points, trigger events and other symptoms of need for organisational change; (2) goal setting and measurement, in which the impacts of IT on firm performance are vigilantly monitored; and (3) promoting change by rewarding managers’ efforts in realising value from enacting technology (ITGI, 2008).

The concept of technology enactment (Cordella and Iannaci, 2011; Fountain, 2001; Gil-Garcia, 2006; Luna-Reyes et al., 2007; Tsai et al., 2009) recognizes that, whereas management may dictate what technology is acquired, the agency of users means that they will not always use IT in ways envisioned by IT designers or intended by management (Orlikowski and Robey, 1991). Users can ignore certain features of IT, work around them, or modify them to support old practices. For example, users’ agency is observed in CPS, a government organisation in the UK. Despite a statutory mandate to implement a single enterprise system ("CJE") in support of seamless handling of case files, "pre-existing institutional practices are in fact very recalcitrant to change...The reality is that we work within our own systems and e-mail or give prints of pages that the other needs when requested, with all the delays that this causes" (Cordella and Iannaci, 2011, p. 60). In short, IT users enact certain features of technology in support of business processes in ways that can support or deviate from the intensions of management (Orlikowski and Robey, 1991).

The IT governance team can effectuate needed change in technology enactment to the extent that users combine the insights of new information with their existing knowledge of how to operate, thereby learning to tap the unexplored potential of current technology and/or find ways to exploit new technology in practice (Kogut and Zander, 1992). In the context of technology enactment, it is the CIO that is responsible for identifying strategic objectives to change some aspect of their firm, seek available technologies or strategies which may fit their objectives, and then provide the "go ahead" for actors within the firm to acquire and implement the IT in support of achieving the strategic objectives (Liang et al., 2007). It is also the CIO that possesses both the general lexicon of business and management and the specialized language and knowledge of IS practitioners that facilitates discourse on strategic IT initiatives with colleagues at peer firms (Swanson and Ramiller, 1997). Therefore, it is the CIO that is expected to be the foremost boundary spanner that facilitates inflows of fresh information with new insights from peer firms that can help to improve technology enactment. A boundary spanner can be defined as an individual employed at a firm who currently has, or previously had, direct contact(s) with peers at other firms’ through professional associations, meetings, conferences, task forces, and so forth (Zaheer et al., 1998). Through these personal encounters, boundary spanners form relationships with contacts in other firms (Rempel et al., 1985). It is these relationships that constitute the CIO’s advice network (Nebus, 2006) and provide the conduit or medium for the inflow of advice from peer firms (Montazemi et al., 2012; Szulanski, 1996).

Access to CIO’s advice network contacts and the perspectives they formed through the experience of implementing a strategic IT initiative in their own context can help CIOs to make sound judgments about the likely costs and payoffs, when committing to the strategic IT initiative is best to take place, and how implementation can best be pursued (Swanson and Ramiller, 2004). In turn, CIOs strongly influence employee perceptions of strategic IT initiatives by shaping procedures, rules, regulations, and routines, which serve as powerful templates that guide individual perceptions and behaviour (Du and Flynn, 2010; Liang et al., 2007). Consequently, advice transfer in CIOs’ advice networks is thought to heavily influence the strategic IT initiatives that firms adopt (Swanson and Ramiller, 2004).

However, firms find transfer of advice regarding new ways to enact technology to be challenging. For instance, Galbraith (1990) reports that many firms find transfer of new advice more difficult than expected and Gupta and Govindarajan (2000) describe how expectations for the transfer of new advice from firm to firm are often unmet. The reason is that advice is closely tied to its originating context (Dennis and Vessey, 2005). To use it in a different context, the advice must be “contextualized” to fit the new environment. This entails deconstructing the advice, articulating or otherwise encoding it in explicit form, and then reconstructing it in a new context. Deconstruction and reconstruction across firms are difficult because actors must understand how to modify the advice to act on it their own context. The transfer of advice is not considered successful until that advice can be understood and

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Ali Reza Montazemi and Jeffrey James Pittaway 4 Significance of IT governance in exploring CIOs’ external advice networks to improve the value of it

acted upon by the seeker (Alavi and Leidner, 2001; Inkpen and Tsang, 2005; Lin et al., 2005; Montazemi et al., 2012). It is our contention in this paper that firms’ success or failure to acquire advice that can be understood and acted upon can be explained by firms’ absorptive capacity and IT governance, as depicted in Figure 1 and elaborated next.

(1) Identified need for organisational change in technology enactment

(3) Reward systems that provide financial incentives for individual contributions to firm performance

CIOs seeking advice from peer firms at higher stages of technology enactment than the seeker firm

(2) Vigilant monitoring of impacts of strategic IT initiatives

+

+

P1

P3

P2 +

IT governance mechanisms Capacity to change technology enactment

Figure 1. Theoretical model

3 THEORY DEVELOPMENT

3.1 Need for organisational change

As part of vigilant IT governance, firms come to recognize pain points, trigger events and other symptoms of need for organisational change (ITGI, 2008). Pain points include internal problems in delivering technical capabilities, poor understanding of IT expenditures, unilateral decision-making regarding IT investments, and communication gaps between the IT function and the business, any of which lead to questions regarding the value of IT. Trigger events include internal budget cuts, business expansion, and external events such as shifts in the economy, new strategies adopted by competitors or peers, emergence of new business models (e.g., e-government) and regulatory changes. Common to each of these symptoms is the need to change to survive. These are clear imperatives for change in technology enactment in support of better and more efficient organisational performance. Our focus in this paper is on firms that have a need for organisational change.

Organisational change proceeds by combining the insights of new information with existing knowledge of how to operate, thereby learning to tap the unexplored potential of current technology and/or find ways to exploit new technology in practice (Kogut and Zander, 1992). The potential for firms to understand and act on new information (e.g., new ideas of how to enact technology in support of better and more efficient organisational performance) is constrained by firms’ absorptive capacities. The premise of absorptive capacity states that the potential for a firm to understand fresh insights (e.g., regarding the potential of technology) and exploit it in practice in a future period (t+1) is a function of the accumulated knowledge they are capable of exploiting in the current period (t) (Cohen and Levinthal, 1990). Exploitation is a dynamic capability based on routines that allow the firm to refine, extend, and leverage existing competencies or to create new ones by incorporating new knowledge into its operations; that is, the firm's realized absorptive capacity (Zahra and George, 2004). In turn, intensity of effort to exploit knowledge in the current period is critical to enhancing firms' potential to understand and act on new knowledge in a future period (Cohen and Levinthal, 1990; Montazemi et al., 2012). It is insufficient to merely expose users briefly to the requisite knowledge. For example, cognitive scientists finds that important aspects of learning how to solve problems are built up over many practice trials on related problems (e.g., Hodgkinson and Healey, 2008). If practice with a particular type of problem is discontinued (or skipped) before it is reliably learned, then little or no

May 8th – 9th 2012, Brunel University, University Kingdom

Ali Reza Montazemi and Jeffrey James Pittaway 5 Significance of IT governance in exploring CIOs’ external advice networks to improve the value of it

transfer will occur to the next series of decision problems (e.g., enactment of a new IT). Hence, considerable time and effort should be spent on early decision problems before moving on to more complex decision problems.

This cumulative path dependent learning process is reflected in the literature as characteristically distinct stages of technology enactment (e.g., Andersen and Henriksen, 2006; APSA, 2002; Heeks and Bailur, 2007; Layne and Lee, 2001; Siau and Long, 2005; UN, 2001; Weerakkody and Dhillon, 2008), where more advanced stages are thought to contribute to better and more efficient organisational performance (Cordella and Iannaci, 2011). Technology enactment can be assessed in terms of five stages (ITGI, 2008; Jaklič and Štemberger, 2009).

• In stage one firms, disparate technologies are enacted on an ad-hoc basis in support of business processes that are unstructured, localized and isolated from other functional departments (i.e., islands of automation).

• Stage two firms, having experienced the pain points in stage one of escalating costs in maintaining and supporting disparate islands of automation, learn to rationalize the technology infrastructure by implementing a standardized technology infrastructure that is enforced by policy. However, whereas the technology artefact has changed substantially, users continue to enact technology in a localized fashion; patterns of technology enactment have not substantially changed.

• Stage three firms build on the standardized technology infrastructure developed in stage two in order to begin enacting technology in support of coordinating business processes that are standardized and integrated across functional departments.

• Stage four firms build on the coordination and integration capabilities learned in stage three, and the standardized technology infrastructure from stage two, to optimize the core enterprise business processes and to embed these core processes into modules of enterprise technology. Technology enactment becomes flexible and agile as users choose sets (modules) of optimized business processes that they can rapidly combine in new ways in order to exploit new opportunities (e.g., deliver new services) without compromising the integrity of core business processes.

• Stage five firms extend the modularity and agility developed in stage four to rapidly connect to partner firms in order to quickly respond to emerging opportunities (e.g., coordinate new cooperative services), and quickly disconnect when the opportunity has passed, without compromising the integrity of core business processes (ITGI, 2008; Irani et al., 2007; Jaklič and Štemberger, 2009; Ross et al., 2006).

An important implication of the foregoing arguments is that to satisfy the firm’s need for organisational change in technology enactment, firms need to acquire knowledge of how to enact technology at a higher stage; knowledge that the firm does not currently possess. Peer firms who have learned to enact technology at a higher stage than the seeker firm are ideal sources of advice because they have successfully navigated the path to higher stages of technology enactment in the context of their own firms. In contrast, sources in which technology enactment is at the same or lower level relative to the seeker are unlikely to possess knowledge that satisfies seekers’ need for organisational change in technology enactment. Taken together, the tenets of the foregoing literature can be stated as follows.

Proposition 1 (P1). The firm’s need for organisational change in technology enactment positively influences CIOs to seek advice from peer firms at higher stages of technology enactment than the seeker firm.

Notwithstanding the rewarding advice that can be acquired from CIOs’ advice networks, firms’ dependency on CIOs as the primary boundary spanner for advice informing strategic IT decisions exposes the firm to potential agency costs, as follows. An agency theory perspective suggests that, for a number of reasons, the shareholders of modern corporations ultimately cede control of the day-to-day management of firm operations to executives (McDonald et al., 2008). Agency theory further indicates that executives’ personal goals and objectives routinely diverge from those of shareholders and that, under these conditions, self-interested executives, including CIOs (Li, 2009) frequently

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exploit their control over company operations to advance their own material interests at the expense of shareholders’ principal interests (McDonald et al., 2008). For example, IS researchers observe that CIOs can secure their jobs and reap significant personal benefits by strategically influencing their firms’ IT acquisitions toward legacy systems in which the CIO has specialized knowledge (Li, 2009).

To ameliorate this anomaly, firms can implement governance mechanisms to reduce the agency costs associated with executives' self-interested actions. Specifically, corporate governance researchers taking an agency perspective advocate for governance mechanisms that increase the alignment of executives' personal interests with the core interests of the firm, key among which is strong firm financial performance (Daily et al., 2003; Eisenhardt, 1989; Jensen and Murphy, 1990). IS researchers make a similar observation, suggesting that an effective system of IT Governance must be directed toward influencing the formal and informal behaviours of CIOs (Chan, 2000; Huang et al., 2010; Li, 2009). Such alignment essentially increases the personal consequences to CIOs of meeting, or failing to meet, firm performance targets.

Two general mechanisms for aligning CIOs’ interests with the firms’ interest in performance outcomes are (1) board monitoring of CIOs’ strategic decisions that more tightly couples the effectiveness of their strategic decision making with financial rewards, and (2) financial rewards contingent on achieving firm performance objectives (Huang et al., 2010; Li, 2009). In the discussion that follows, we develop theoretical arguments concerning how board monitoring and performance-contingent financial rewards will enhance executives’ willingness to seek advice from firms that are advanced by at least one stage of technology enactment.

3.2 Vigilant Monitoring

Firms can motivate executives to actively pursue performance improvements for the firm by vigilantly monitoring executives (Daily et al., 2003; Hillman and Dalziel, 2003; Westphal, 1999). Boards that vigilantly monitor executives do not simply defer to them or act as “rubber stamps” for their decisions (MacAvoy and Millstein, 1999). Instead, they demand justifications and explanations for proposed strategic initiatives and constructively criticize proposed initiatives when they believe those initiatives are ill advised (Baysinger and Hoskisson, 1990; McNulty and Pettigrew, 1999). Intense board monitoring is also reflected in close scrutiny of the effects of executives’ strategic decisions on firm performance and financially rewarding executives whose strategic choices have positive performance effects (Li, 2009).

The strategy literature examining the governance mechanism of monitoring indicates that intense scrutiny of executives’ decisions and their performance consequences enhances firms’ abilities to assess the impact of executives’ strategic decisions on firm performance (Tosi and Gomez-Mejia, 1994; Westphal, 1999). The evidence also indicates that board vigilance tends to strengthen the link between firm performance and elements of executive compensation, such as executives’ annual bonuses, that are determined primarily by board members’ assessments of executives’ effectiveness (Ittner et al., 2003; Tosi and Gomez-Mejia, 1989; Ryan and Wiggins, 2004). Thus, executives who are closely monitored by their boards are likely to expect tighter linkage between their compensation and firm performance, and will be especially concerned with making high-quality strategic decisions that lead to superior firm performance, and avoiding strategic decisions that lead to poor performance. Board monitoring as an effective governance mechanism that aligns executives’ interests and behaviours with firms’ interests (e.g., in improved performance) has been observed not only in management literature (McDonald et al., 2008), but also IS literature studies of CIOs (Huang et al., 2010; Li, 2009).

In view of the foregoing justification, we expect that vigilant board monitoring will motivate CIOs to seek advice from firms that are at least one stage higher in technology enactment than the seeker firm, with the objective of enhancing the quality of their strategic decisions and thereby improving IT contributions to firm performance. Based on the foregoing justifications, we can advance the following proposition:

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Ali Reza Montazemi and Jeffrey James Pittaway 7 Significance of IT governance in exploring CIOs’ external advice networks to improve the value of it

Proposition 2 (P2). The level of board monitoring positively influences CIOs to seek advice from peer firms at higher stages of technology enactment than the seeker firm.

3.3 Reward Systems

While executives in general seem to believe that seeking out alternative points of view on strategic issues is an effective way of enhancing the quality of their strategic decisions (McDonald et al., 2008), empirical evidence demonstrates that actors are more motivated to both search thoroughly for problem solutions (Petty and Cacioppo, 1979; 1990; Petty and Wegner, 1999) and to consider alternative points of view (Kruglanski and Webster, 1996; Petty and Wegner, 1999) when they are making decisions with significant personal consequences. In order to enhance the personal consequences of executives’ strategic decisions (and ultimately performance-enhancing advice seeking behaviours), corporate governance scholars in the agency perspective recommend linking executives’ financial rewards to firm performance as follows.

In the economic view in which agency theory is grounded, personal wealth is an especially important source of subjective utility (McDonald et al., 2008). Accordingly, agency theorists have argued that, to the extent that executives receive financial rewards when their firms are successful, they are more willing to engage in behaviours that enhance firm performance (Beatty and Zajac, 1994; Daily et al., 2003; Jensen and Murphy, 1990; Westphal and Zajac, 1994). This alignment of executive's financial interests with the interests of the firm can be achieved through performance-contingent compensation, which strengthens the link between firm performance and executive's personal wealth (e.g., Core et al., 2003; Daily et al., 2003; Guay, 1999; Morck et al., 1990; Rainey and Bozeman, 2000).

Performance-contingent compensation typically provides financial incentives designed to motivate executives to make superior decisions in order to improve firm financial performance (Jensen and Murphy, 1990; Rajagopalan, 1997). In their efforts to make superior decisions, executives who are motivated by potential financial rewards for achieving superior firm performance will seek out a wider range of opinion on strategic issues than executives who are not motivated by potential financial rewards (McDonald et al., 2008). Empirical evidence supports the notion that long-term performance-contingent compensation increases executive's willingness to seek and accept advice from other firms that has potential to improve firm performance (Fey and Furu, 2008). As we have argued previously, it is firms at higher stages of technology enactment than the seeker firm that possess knowledge the seeker needs, but does not currently possess. Based on the foregoing justifications, we can advance the following proposition:

Proposition 3 (P3). The level of a CIO’s performance-contingent compensation positively influences CIOs to seek advice from peer firms at higher stages of technology enactment than the seeker firm.

4 DISCUSSION Prior research has assumed that CIOs participate in advice networks that enable on-going discourse in the inter-organisational field and the diffusion of particular technologies and strategies for enacting technologies (e.g., Fiol and O’Connor, 2003; Swanson and Ramiller, 2004). Seeking advice from peer firms in CIOs’ advice networks can be a highly rational exploratory approach to satisfying firms’ need for organisational change in technology enactment. However, not all peer firms are effective sources of advice that can satisfy a firm’s need for organisational change in technology enactment. The theory we advance to explain the constraints on external advice seeking that helps a firm to enact technology at a higher level can be stated as follows.

Firms identify a need for organisational change in technology enactment when they realize poor contributions from IT to firm performance. Change in technology enactment proceeds as actors within the firm combine the insights of new advice with their existing knowledge of how to operate, thereby learning to tap the unexplored potential of current technology and/or find ways to exploit new technology in practice. However, firms’ stage of technology enactment constrains what new advice they have the requisite absorptive capacity to understand and act upon. Therefore, if the firm is to

May 8th – 9th 2012, Brunel University, University Kingdom

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effectuate organisational change in technology enactment, they require advice pertaining to how to enact technology at the next stage in sequence; knowledge they do not currently possess. Whereas peer firms at higher stages of technology enactment are likely sources of advice on how to enact technology at the next stage, having accumulated the essential knowledge through path dependent learning in their own firm, peer firms at the same or lower stage of technology enactment are unlikely sources of such rewarding advice. To that end, firms depend on CIOs’ effortful exploration for more rewarding advice. However, CIOs may not be motivated to effortful exploration for advice that satisfies the need for organisational change in technology enactment, which exposes the firm to agency costs in the form of poor decision processes and poor contributions from technology enactment. In order to mitigate agency costs and motivate CIOs to seek more rewarding advice, firms should implement IT governance mechanisms that continually identify needs for organisational change in technology enactment, monitor the impacts of CIOs’ strategic IT initiatives, and provide financial incentives that reward managers’ efforts in realising value from enacting technology.

5 FUTURE DIRECTIONS The CIO position increasingly assumes many influential roles in addition to overseeing the IT function, such as managing the firm’s information resources, offering vision for the role of IT in the firm, promoting IT as an agent of business change, redesigning firm strategy, and ultimately creating business value (Banker et al., 2011). Nonetheless, the literature is silent about the organizational environment that entices CIOs to seek advice from peers towards enactment of IT innovations in their respective firms. The foregoing theoretical underpinning is a step toward ameliorating this gap in the IS literature. We are presently in the process of collecting data, from CIO’s of municipalities across Canada, to assess the three stated propositions.

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