Young or old CEOs: digital transformation level influences IT investment performance feedback of manufacturing firms

Abstract

PurposeSince IT investment constitutes a significant portion of a firm’s budget, evaluating IT investment performance is important for both research and firms’ operations. In the digital era, there are significant disparities in the effects of IT investment on firm performance.Design/methodology/approachDrawing on the resource-based view and upper echelons theory, we investigate the effect of IT investment on the business performance of manufacturing firms. We also explore the moderating role of digital transformation and dual moderating effect of digital transformation and CEO age in this relationship.FindingsAnalyzing a sample of Chinese manufacturing firms spanning 2016–2020, we find that IT investment by Chinese manufacturing firms has a negative effect on business performance. However, this negative effect is moderated by digital transformation. Furthermore, digital transformation has a more pronounced inverse moderating influence on this negative effect for firms with older CEOs.Originality/valueHence, we reveal that the key factors for reducing the negative effect of IT investment on China’s manufacturing firms are digital transformation and the appointment of older CEOs who actively lead firms’ digital transformation.