The more, the better: The influence of overconfident CEOs on their firms’ digital orientation

Abstract

Adopting a digital orientation (DO) is an essential organizing theme for firms seeking to lay the basis for a digital transformation by defining how to nurture digitalization strategies. Existing literature reveals that CEOs determine resource allocations for digital investments, with few insights into how CEO characteristics influence DO. We address this gap and propose that CEO overconfidence positively relates to a firm’s DO, particularly in industries with low market turbulence and technological dynamism. This study adds to the literature at the intersection of strategic management and information systems by investigating CEO overconfidence as an antecedent of DO and by showing the positive outcomes resulting from the cognitive bias of overconfidence. Our results indicate that environments with low market turbulence and low technological dynamism strengthen the relation between CEO overconfidence and DO. We contribute to the upper echelons perspective by extending the so-far ambiguous findings on the influence of dynamic environments.

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