Discussion 2

Journal of Management Information Systems / Summer 2013, Vol. 30, No. 1, pp. 15–55.

© 2013 M.E. Sharpe, Inc. All rights reserved. Permissions: www.copyright.com

ISSN 0742–1222 (print) / ISSN 1557–928X (online)

DOI: 10.2753/MIS0742-1222300101

The Effect of Social Capital of the Relationship Between the CIO and Top Management Team on Firm Performance

ElENA KArAhANNA AND DAVID S. PrEStON

ElEna Karahanna is the l. Edmund rast Professor of Business in the MIS Department at the terry College of Business, University of Georgia. She received her Ph.D. in information systems from the University of Minnesota. her research interests include information systems acceptance, health care It, IS leadership, and cross-cultural issues. her work has been published in several journals, including IEEE Transac- tions on Engineering Management, Information Systems Research, Management Science, MIS Quarterly, and Organization Science. She currently serves as associate editor for Management Science and has previously served as senior editor for the MIS Quarterly, Information Systems Research, and the Journal of the Association for Information Systems.

DaviD S. PrESton is an associate professor of information systems in the Department of Information Systems and Supply Chain Management in the M.J. Neeley School of Business at texas Christian University. he received his Ph.D. in MIS from the Uni- versity of Georgia and holds an MBA from the University of Georgia and a B.S. and M.S. in engineering from the University of Florida. his research interests include the role and impact of the CIO in the organization, IS strategic alignment, and the impact of IS on organizational performance. his work has been published or is forthcoming in a variety of journals, including Information Systems Research, Journal of Manage- ment Information Systems, MIS Quarterly, Decision Sciences, Journal of Operations Management, IEEE Transactions on Engineering Management, Journal of Strategic Information Systems, and MIS Quarterly Executive.

abStract: the paper empirically examines the effects of social capital of the relation- ship between the chief information officer (CIO) and top management team (tMt) on organizational value creation based on responses from CIOs and matched tMt respondents from 81 hospitals in the United States. Specifically, we theorize how the three dimensions of social capital—structural, cognitive, and relational social capital— facilitate knowledge exchange and combination between the CIO and tMt resulting in the alignment between the organization’s information systems (IS) strategy and business strategy. results show that IS alignment significantly influences the firm’s financial performance and mediates the relationship between CIO-tMt social capital and performance. the findings also indicate that cognitive and relational social capi- tal influence information systems strategic alignment but that structural social capital exerts its influence through its effects on cognitive social capital. recommendations are provided as to how organizations can develop CIO-tMt structural, cognitive, and relational social capital to positively influence firm performance via IS strategic alignment.

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KEy worDS anD PhraSES: chief information officer, cognitive social capital, financial performance, information systems, IS leadership, relational social capital, social capital, strategic alignment, structural social capital, top management team.

FirmS havE maDE SigniFicant invEStmEntS in inFormation SyStEmS (IS) recognizing the potential of IS as an important enabler of business strategy and contributor to the performance of the organization. however, investment in information technology (It) assets and capabilities alone does not lead to improved organizational outcomes. rather, organizational performance occurs when these It assets are combined with other complementary assets and capabilities in the organization (e.g., [99, 119]). We argue that a good working relationship between the chief information officer (CIO) and the top management team (tMt) is essential to facilitate the process of combining It assets and complementary capabilities to derive strategic value from IS (e.g., [59, 100]). review of the IS strategic alignment literature reveals that the nature of the working relationship between the CIO and tMt is key to facilitating IS strategic alignment [21, 62, 78, 79, 100]. the CIO is the top executive responsible for strategic technology decisions while the tMt is responsible for the business strategy. As such, these two bodies within the upper echelon of the firm collectively determine which strategic investments in technology can potentially have an impact on the firm’s bottom line. Notwithstanding its importance, this relationship has frequently been turbulent and has presumably contributed to ineffectual use of IS and to poor IS strategic align- ment [21, 79, 100].

thus, the goal of this study is to contribute to a better theoretical understanding of the link between the CIO-tMt relationship and organizational value creation. While the extant literature has highlighted the significance of the relationship between the CIO and tMt as an important driver of organizational outcomes, much of this research has been anecdotal and lacks strong theoretical foundations. Furthermore, little attention has been paid to the social mechanisms that nurture this relationship. Collectively these issues present a gap in our theoretical understanding of how this relationship influences organizational outcomes and the social context in which this relationship is developed. the current study is a step toward addressing this gap. Using social capital as a theoretical lens, we leverage its structural, cognitive, and relational dimensions to shed light on the relationship between the CIO and tMt and its effect on organizational value creation. Specifically, we examine how structural, cognitive, and relational social capital influence the alignment of the organization’s business and IS strategy. We then examine the influence of IS strategic alignment on the firm’s financial performance.

this study makes three primary contributions. First, we contribute to both the IS leadership and IS strategic alignment literature by showing that social capital of the relationship between the CIO and tMt is a key determinant of IS strategic alignment, which is a manifestation of business and IS knowledge integration. this social capital

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facilitates exchange and combination of IS and business knowledge, both of which are necessary for knowledge integration and organizational value creation. thus, our work organizes prior research on this organizational relationship into a cohesive framework and frames the relationship in terms of knowledge exchange and combi- nation facilitated by social capital. Second, our results show that social capital of the relationship between the CIO and tMt contributes to organizational performance, but its effect is mediated by IS strategic alignment. We thus provide additional insight to the extant strategic IS research by positing IS strategic alignment as a mechanism via which the relationship between the CIO and tMt influences firm performance. third, we contextualize each of the three social capital dimensions (structural, cogni- tive, and relational) to the context of the organization’s upper echelon and examine how each of these dimensions are related to each other and to firm performance via IS strategic alignment. In the next section we present the theoretical framework of the study, which provides the overarching rationale for the relationships within our nomological network. We then present theoretical arguments supporting the hypoth- esized relationships delineated in the research model. We empirically test the research model in a study of 81 matched pairs of CIOs and corresponding tMt members in the health care industry. results of the study are presented, and practical and theoretical implications are offered.

theoretical Framework

literature review and hypotheses

Social caPital haS bEEn rESEarchED by SociologiStS, organizational theorists, and economists using a number of different perspectives, definitions, and operationaliza- tions (e.g., [1, 14, 27, 40, 67, 88]) depending on what aspect(s) of the construct the researchers wanted to emphasize (e.g., see Adler and Kwon [1] for a review and Kostova and Kendall [67] for a discussion). A common theme across these definitions is that there are benefits that social actors derive because of their social structures. Although there is lack of agreement in the extant literature about what comprises social capi- tal [1], it has commonly been conceptualized along some or all of the three dimensions proposed by Nahapiet and Ghoshal [88], which broadly encompass “many aspects of a social context, such as social ties, trusting relationships, and value systems that facilitate actions of individuals located within that context” [117, p. 465]. According to Nahapiet and Ghoshal, these three dimensions include (1) the structural dimension, referring to “the overall pattern of connections between actors—that is, who you reach and how you reach them” [88, p. 244]; (2) the cognitive dimension, representing “shared representations, interpretations, and systems of meaning among parties” [88, p. 243]; and (3) the relational dimension, referring to assets that are rooted in relationships within the social network such as trust. In the current study, we employ Nahapiet and Ghoshal’s definition of social capital as the “sum of the actual and potential resources embedded within, available through, and derived from the network of relationships possessed by an individual or social unit” [88, p. 243] and their three-dimensional

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social capital conceptualization, since this conceptualization comprehensively taps at the various aspects of social capital. Prior social capital research has emphasized the strategic importance of the relationships among organizational members and has argued that top executives operate in a social context within the organization which influences organizational strategy and its outcomes [6]. More specifically, Nahapiet and Ghoshal [88] argue that organizational advantage can be derived from the collec- tive ability of organizational actors (e.g., top executives) to exchange, combine, and integrate knowledge and that social capital enables and facilitates such knowledge exchange and combination (see also [28, 66]). the social capital literature further argues that differences in organizational performance may represent differences in the ability of organizations to create and exploit social capital [88, 117].

For knowledge exchange and combination to occur and subsequently lead to knowledge integration, individuals must be afforded the opportunity to interact in order to share their knowledge, they must be motivated to engage in the interaction, and they must have the cognitive ability to combine or integrate the information or experience [1, 50, 88]. these conditions correspond to the three dimensions of social capital which act as drivers of knowledge exchange and combination [1, 50, 88, 90] since (1) the structural dimension provides opportunities for interaction through net- work ties; (2) the cognitive dimension facilitates interaction, makes information held by others accessible, and aids in the assimilation of new knowledge through a com- mon vocabulary and cognitive frames; and (3) the relational dimension provides the motivation to engage in exchange and combination for knowledge creation. In turn, knowledge exchange and combination allow for knowledge integration and thus the creation of new intellectual capital, defined as the “knowledge and knowing capability of a social collectivity” [88, p. 245].

the strategic management literature has emphasized the importance of understanding the relationships among members of the tMt and the social context that influences these relationships [19]. Social capital theory provides an appropriate theoretical lens to study this phenomenon since it can provide insights both as to why this relationship is important as well as what factors contribute to its success. Yet there has been no research of which we are aware in the context of the tMt that has examined the three dimensions of social capital among members of the tMt (i.e., focusing on interactions among members of the tMt rather than on interactions with other internal or external entities), the relationships among these dimensions, or between these dimensions and organizational outcomes. therefore, our understanding of how social capital among members of the tMt influences organizational outcomes is limited. A review of other empirical studies that have examined social capital of top organizational executives (but not utilizing Nahapiet and Ghoshal’s [88] tridimensional conceptualization) suggests that the studies have generally focused on the structural dimension of social capital (see Appendix A, Panel A) and within that on external ties of tMt members (and most frequently of the chief executive officer [CEO]) (e.g., [6, 8, 38, 65, 126, 127]) rather than on internal ties across members of the tMt. In cases where internal ties were examined, it was either CEO internal ties with the organization’s founder [37] or internal ties among business units [7, 117] that were assessed. thus, there is a dearth of

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studies examining social capital among members of the tMt. Furthermore, there has been no investigation of how the social capital of the relationship between a specific executive (such as the CIO or chief financial officer [CFO]) and other members of the tMt influences organizational outcomes (e.g., via better alignment of the contribution of the executive’s functional area with organizational objectives).1 the current study attempts to contribute to the social capital literature by filling these gaps.

CIO-tMt Social Capital

As the highest ranking IS executive, the CIO is often the key figure responsible for strategic IS decisions within the organization. the CIO has unique leadership chal- lenges since, unlike other senior functional executives, this organizational executive is expected to combine IS technical skills with an in-depth understanding of most other functional areas of the organization to spot and jointly exploit opportunities that can lead to business value [16, 59, 101]. Furthermore, the CIO position is distinct from that of the traditional tMt members in the organizations whose top management positions have an established history within organizations. the CEO and other traditional tMt members such as the CFO have had a long standing within the tMt, and the status and role of these positions are not routinely brought into question. Often the CIO is still regarded as “the new kid on the block” by the traditional tMt members [34, p. 171] and may not always be viewed as equal to his or her business peers [35, 56]. As such, the cross-functional and tenuous nature of the CIO’s position may hinder the ability of this executive to align IS strategy with business strategy and deliver strategic value to the organization [123], making social capital an important facilitator.

the study examines the social capital of the relationship between the CIO and tMt by drawing upon Nahapiet and Ghoshal’s [88] three-dimensional conceptualization of social capital and upon tsai and Ghoshal’s [117] model of their interrelationships. the CIO and tMt are collectively responsible for determining how the IS strategy and business strategy are aligned (e.g., [21, 106]); therefore, the nature of the relationship between the CIO and tMt should be important in deriving IS strategic alignment and organizational value creation. the research model of the study is presented in Figure 1.

Specifically, we posit that each of the three dimensions of social capital facilitates knowledge exchange and combination between the CIO and tMt and thus the integra- tion of the multiple knowledge streams and perspectives of the CIO and top business executives. the integration of business and IS knowledge is manifest in the alignment of the IS and business strategies, which in turn influences the financial performance of the organization (e.g., [45, 61]). the argument that strategic goal alignment among key decision makers is an important mediating variable between the organizational context and firm performance is also made in both the management literature (e.g., [28, 42]) and the strategic IS literature (e.g., [22, 100]) since it is the organization’s top leaders who are responsible for deriving alignment across the organization’s disparate functional groups to exploit strategic value for the firm [76, 77]. While prior research has acknowledged the importance of knowledge exchange (e.g., [4, 113]) and the

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development of a shared understanding between the CIO and tMt (e.g., [100]), these studies primarily focused on this dimension of social capital (cognitive dimension), its antecedents, and its effects on IS strategic alignment. there has been little attempt to view this more holistically with regard to social capital and to extend its relationship to organizational value creation. We thus contribute to the IS leadership research by using the social capital theoretical lens to shed light on the mechanisms by which the relationship between the CIO and tMt influences organizational value creation and by contextualizing the three social capital dimensions to the CIO-tMt relationship.

Nahapiet and Ghoshal define the structural dimension of social capital as “the overall pattern of connections between actors—that is, who you reach and how you reach them” [88, p. 244]—and suggest that this pattern is contingent upon how the connections are made. In the case of CIO-tMt social capital, the structural dimen- sion can be conceptualized in terms of the pattern and extent of interaction between the CIO and tMt. Although these interactions can be conceptualized along various dimensions, in the CIO literature two fundamental types of interaction are considered important to the CIO-tMt relationship: structural position and informal interac- tion [4, 55, 100, 113].

Cognitive social capital represents “shared representations, interpretations, and systems of meaning among parties” [88, p. 243]. It denotes shared cognition among members of the network as well as a shared language that facilitate a common under- standing of collective goals and can influence organizational outcomes [28, 52, 82, 88, 116, 117].

Figure 1. research Model

Note: h3 posits that IS alignment mediates the effects of the social capital dimensions on firm performance.

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the relational dimension of social capital refers to assets that are rooted in relation- ships within the social network such as trust [117]. Although relational capital has been conceptualized along several subdimensions such as identification, obligations, norms, and trust, our study focuses on trust as this is particularly important to the relationship between the CIO and tMt [4, 21, 32, 109, 113] and vital to business relationships in general (e.g., [29, 40, 46, 69, 87]).

relationships Among the CIO-tMt Social Capital Dimensions

Knowledge combination and exchange are complex social processes, and much knowledge is socially embedded in coactivity and relationships [88, 117]. While combination involves the blending of previously unconnected knowledge and expe- riences of different parties, it is dependent on social exchanges between the parties as knowledge transfer is facilitated by intensive social interactions of organizational actors [52, 70, 126, 128].

the structural dimension of social capital reflects the formal and informal network ties that exist between the CIO and the tMt based on the CIO’s formal position within the structure of the tMt and informal network with tMt members. these network ties thus reflect the nature and amount of interaction across the parties. this interaction facilitates knowledge exchange and consequently the development of shared cognitions and of a common vocabulary. the CIO and tMt bring diverse knowledge, perspectives, and experiences to the discussion of how and where IS can be used to support and enable organizational processes. Formal and informal network ties between the CIO and tMt also afford greater opportunities to engage in rich levels of interaction and knowledge exchange. Increased interaction and discussion of both business and IS issues allow the CIO to develop a business vocabulary and learn how to articulate points in a business language that is understandable by the tMt [4, 100]. It also allows for the exchange and combination of different perspectives, resulting in a shared understanding of organizational goals, a shared vision for the business, and development of shared organizational motivations and priorities [3, 4, 24, 32, 72, 80] as well as development of a shared view of how IS should support the business strategy of the organization [32, 73, 109]. thus, we posit:

Hypothesis 1a: Structural CIO-TMT social capital will positively influence cogni- tive CIO-TMT social capital.

In addition to enabling knowledge exchange and facilitating the development of shared cognitions, network ties also influence the level of mutual trust between the CIO and tMt. As two actors interact over time and learn more about each other, they are more likely to trust one another as they have more concrete information on each other’s ability, benevolence, honesty, and reliability [83, 117]. tMts generally have unequal power distributions, and executives often have hidden agendas [103]. As the CIO and members of the tMt engage in formal and informal interactions, they are able to assess one another’s motives and develop trust. Furthermore, empirical evidence suggests that informal interactions between executives are essential to building positive and lasting

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relationships between executives [104] and therefore trust. As such, both formal and informal network ties facilitate trust creation. In addition, structural arrangements such as the CIO’s hierarchical standing and formal membership in the tMt also build trust since, according to social identity theory, group membership and interdependence are key determinants of trust between organizational members [125]. thus,

Hypothesis 1b: Structural CIO-TMT social capital will positively influence rela- tional CIO-TMT social capital.

As discussed previously, the cognitive dimension of social capital consists of shared language and shared cognition. Shared language among organizational members allows for a sense of familiarity, which can foster trust among these members [51]. the ability of the CIO to communicate IS issues with the tMt in business terms (i.e., using a shared language) increases transparency and reduces perceptions that the CIO has a hidden agenda behind technical language that tMt members do not necessarily understand and are not able to assess. thus, shared language fosters trust between the CIO and tMt. Furthermore, organizational or group members are inclined to trust other members in the presence of shared goals since there is an expectation that there is a unified effort to work toward collective goals rather than individual or self-serving goals [117, 125]. In fact, Atuahene-Gima and Murray [6] contend that the key benefit of cognitive social capital is solidarity, which is the degree to which parties in a relationship subordinate their personal needs to the goals or the objectives of the relationship. Shared cognitions reduce an individual’s perception that other group members will act opportunistically, for example, that the CIO is pushing certain It initiatives for the sake of technology and not toward the achievement of common organizational objectives. Collectively, these arguments suggest that the cognitive dimension of social capital encourages the development of trust among members of the group [117]. In an examination of partners across strategic alliances, robson et al. [108] argue that rival ideologies and rival strategies between members will hinder productive exchanges, impede resource flows, and undermine the trust between these partners. As such, we would not expect a CIO and tMt to derive mutual trust if they have different strategic agendas. however, a shared cognition between the CIO and tMt on the strategic role of IS in the organization should increase the level of trust between these two partners. thus,

Hypothesis 1c: Cognitive CIO-TMT social capital will positively influence rela- tional CIO-TMT social capital.

Social Capital and IS Strategic Alignment

We define IS strategic alignment as the congruence of the firm’s IS strategy with its business strategy, which is consistent with reich and Benbasat’s [105, 106] definition of the intellectual dimension of strategic alignment. IS strategic alignment can be viewed as a “knowledge integration outcome” resulting from the integration of the business and IS strategies [61].2 As such, we posit that the social capital of the relationship between the CIO and tMt is a key determinant of IS strategic alignment.

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Social capital facilitates knowledge exchange and combination by affording the opportunity to interact, the motivation to engage in the interaction, and the cognitive ability to combine knowledge and experiences [1, 11, 88, 107, 117, 121]. Combination and exchange are two key mechanisms that allow for social knowledge integration, which, in this context, reflects collective learning on how to coordinate diverse pro- duction skills across IS and business [88]. thus, social capital facilitates knowledge integration by reducing the perception of organizational actors that other group mem- bers would potentially act opportunistically and helps to develop shared goals among different stakeholders [27, 49]. As such, we expect that social capital of the relationship between the CIO and tMt will increase the exchange of strategic knowledge, facilitate the development of shared cognitions and trust, and thus influence the integration of business and IS strategies manifesting in IS strategic alignment. Below we elaborate on how the three dimensions of social capital facilitate the exchange and combination of the CIO and tMt knowledge, and thus influence knowledge integration manifested in IS strategic alignment.

Structural Social Capital and IS Strategic Alignment

the structural dimension of social capital influences knowledge integration by enabling access to parties for exchanging knowledge and participating in knowing activities [88, 96]. In essence, Nahapiet and Ghoshal argue “who you know affects what you know” [88, p. 252]. According to information processing theory, organiza- tions are information processing systems in which top executives are required to both send information to and acquire information from other top executives during the formulation and implementation of organizational strategies [93]. the CIO and tMt are collectively responsible for integrating the organization’s IS strategy and business strategy. however, the CIO and other members of the tMt may have unique levels of knowledge and expertise. Formal and informal network ties between the CIO and tMt facilitate knowledge exchange between these key members of this social unit allowing for the alignment of the IS and business strategies. thus,

Hypothesis 2a: CIO-TMT structural social capital will positively influence align- ment between the IS strategy and business strategy of the firm.

Cognitive Social Capital and IS Strategic Alignment

Shared language is essential in communicating meaning, enabling access to informa- tion, convergence of meanings and opinions about situations, and the exchange and integration of knowledge [55, 80, 88, 89]. A shared vocabulary provides common conceptual framework for evaluating the likely benefits of exchange and combination and enhances combination capability. Shared cognitions embody the collective goals and aspirations of the members of an organization and allow them to see the potential value of their resource exchange and combination thereby encouraging partnerships among these members [117]. In addition, shared cognitions affect the capability to assimilate knowledge. Individuals cannot recognize, understand, and exchange unique

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knowledge without some shared frame of reference or mental model [18, 86, 107]. Since the CIO and tMt generally have different levels of IS and business knowledge, shared cognitions with respect to the role of IS and a common language to communi- cate help in the integration of knowledge between these key organizational decision makers. Given the potential difference in viewpoints and knowledge between the CIO and tMt, shared vocabulary and cognitions allow the CIO and tMt to both agree on business objectives and IS capabilities, reach a consensus regarding strategic goals (a key benefit of cognitive tMt social capital according to Atuahene-Gima and Murray [6]), and thereby influence business and IS strategy. through cognitive social capital, the CIO and tMt can better envision how IS can support and enable business strategy and are able to align the organization’s IS and business strategies to achieve desired organizational objectives [4, 21, 55, 60, 89, 100]. thus,

Hypothesis 2b: CIO-TMT cognitive social capital will positively influence align- ment between the IS strategy and business strategy of the firm.

relational Social Capital and IS Strategic Alignment

trust is a key mechanism by which the relational social capital effects are achieved. trust enables individuals to be more open to exchanges of intellectual capital and antici- pate more value through these exchanges [1, 88]. Furthermore, people are more willing to experiment and take risks in combining knowledge. In cases of high ambiguity and uncertainty, such as when tMt members evaluate IS investments, trust resides in the quality of the personal relationships rather than the plausibility of the message [13]. the potential value of relationships cannot be fully realized if relational members do not trust one another and are thereby not fully willing to share knowledge, even when these members readily have access to one another [57]. Organizational actors are more likely to exchange meaningful information, discuss and commit to organizational objectives, and form strategic partnerships with individuals that they trust [6, 112]. thus, trust facilitates the effective sharing of information; promotes discussions of its technical, organizational, and political implications; and encourages the firm to connect knowledge across its organizational competencies [128]. Prior studies have shown that trust among top organizational members has contributed to the success of strategic alliances [68], alignment between corporate and subsidiary strategies [64], and the alignment of individual and organizational goals [112].

As such, relational social capital is critical to IS and business knowledge integration and IS strategic alignment since it enables open and honest exchanges between the CIO and tMt, effective sharing of meaningful knowledge, and reliance on the CIO for honest and credible assessments of IS investments. this is particularly important since many tMt members are not technology savvy and are vulnerable because of their lack of knowledge with regard to IS. their openness to the CIO’s assessment of IS investments, and thus the ability to combine IS and business knowledge, will depend to some extent on the amount of trust they have in the CIO to provide them with an unbiased picture of IS capabilities that prioritizes organizational objectives. In the

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absence of such trust between the CIO and tMt, knowledge will likely be withheld between these parties, and if shared, it will likely be discounted, preventing effective knowledge exchange and combination and, subsequently, IS strategic alignment. Furthermore, in the practitioner press, Gomolski [44] contends that trust between the CIO and tMt is necessary for organizations to be able to sustain IS strategic align- ment and capitalize on IS capabilities. thus,

Hypothesis 2c: CIO-TMT relational social capital will positively influence align- ment between the IS strategy and business strategy of the firm.

IS Strategic Alignment as a Mediating Effect on Firm Performance

Prior IS research has argued that the alignment between business strategy and IS strategy leads to improved business performance [23, 74, 79, 105, 110]. the basic premise of strategic alignment is that IS investments yield the greatest benefits when they fit the firm’s goals [94]. the rationale is that when IS strategy supports and enables business strategy, the firm is better able to achieve its goals and objectives, resulting in improved organizational performance [22, 74]. In contrast, IS strategic misalignment can lead to undesirable organizational effects, including suboptimal performance of business units and the organization [21, 73].

the social capital literature argues that knowledge integration mediates the effect of social capital on value creation [117]. Social capital alone may not necessarily lead to higher levels of firm performance without intermediary process outcomes, even though it may be positively associated with firm performance. As such, we suggest that IS strategic alignment, which is a manifestation of the integration between the IS strategy and business strategy, mediates the effect of CIO-tMt social capital on firm performance.

Support for mediation is also provided by the upper echelons’ perspective, which centers on the cognitions, values, and perceptions of top executives and their influence on the process of strategic choice and resultant performance outcomes. the strategic management literature argues that the relational dynamics among top executives play an essential role in determining strategic choices, which in turn influence organizational outcomes [33, 97]. As such, top executives influence organizational outcomes through the formulation and implementation of strategies [36, 47]. the relationship among the organization’s top executives influences their ability to cooperate to formulate strate- gies that are consistent with the strategic thrusts of the firm as a whole [36, 41]. We would therefore expect IS strategic alignment to mediate the effect of relationships across top management (social capital) on organizational outcomes (firm performance). thus we posit:

Hypothesis 3a: IS strategic alignment mediates the effect of structural social capital on the relationship between the CIO and TMT and firm performance.

Hypothesis 3b: IS strategic alignment mediates the effect of cognitive social capital on the relationship between the CIO and TMT and firm performance.

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Hypothesis 3c: IS strategic alignment mediates the effect of relational social capital on the relationship between the CIO and TMT and firm performance.

research Methodology

a FiElD StuDy waS conDuctED to EmPirically tESt thE rESEarch hyPothESES. the tar- get sample consisted of hospitals in the United States. the choice to limit the current investigation to a single industry helps control for the potential effect of extraneous variables on IS strategic alignment and firm performance measures. Moreover, the hospital industry is considered to be information intensive, which implies that IS can potentially influence organizational outcomes [113]. For each hospital, data (other than financial performance) were collected via a matched-pair survey of CIOs and a tMt peer executive. Financial performance data were derived from the American hospital Directory. Consistent with prior research, we define the CIO as the most senior IS executive in the organization [4, 100] and the tMt as the CEO and those senior-most executives in the organization who report directly to the CEO [36].

Instrument Pretest and Operationalization of research Variables

A CIO and tMt mail survey and corresponding Web-based survey were developed for the study. Where validated scales did not exist, new items were created for the study. All the constructs were measured using multi-item scales. Appendix B shows all the scales used in the study grouped by construct as well as the source of each item. table 1 provides a summary of key informants for each construct. the survey was validated in a three-step process. First, semistructured interviews were held with six CIOs to assess content validity and to gain richer insights into the phenomenon. Second, an item-sorting exercise was used to qualitatively evaluate the discriminant validity of each of the measured constructs. Finally, the psychometric properties of the scales were statistically assessed.3

CIO-TMT structural social capital is a multidimensional construct consisting of (1) structural position of the CIO with the tMt and (2) informal interaction between the CIO and tMt. Structural social capital was operationalized as a second-order latent variable with the two dimensions modeled as formative indicators of the con- struct [113]. Structural position is operationalized as the hierarchical level of the CIO (measured by reporting distance of the CIO to the CEO) and formal membership of the CIO in the tMt [4, 113]. Informal interaction is operationalized as the degree of CIO informal contact, informal interaction, and socialization with tMt members [4, 113]. the CIO was the key respondent for the questions pertaining to both formal and informal interaction.

CIO-TMT cognitive social capital is a multidimensional construct consisting of the degree of (1) shared language and (2) shared cognition between the CIO and tMt with respect to the role of IS in the organization. Cognitive social capital was operationalized as a second-order latent variable with the two dimensions modeled as formative indicators of the construct. Shared language is defined as the extent to

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which the CIO and tMt share a common language and terminology in their com- munication and is operationalized as the extent to which the CIO and tMt members share a common language, the CIO primarily uses business terminology when inter- acting with tMt members, and the CIO avoids using IS jargon when interacting with tMt members [100]. Shared cognition is measured as the extent to which a shared understanding exists between the CIO and the tMt regarding the role of IS in the organization, the role of IS as a competitive weapon in the organization, the role of IS in increasing the productivity of organizational operations, and the prioritization of IS investments [15, 100]. Shared language and shared cognition are based on the average of the CIO and tMt member responses. Before averaging across responses, CIO and tMt agreement was assessed via r

wg [53]. the median and mean level of

CIO-tMt agreement for shared language and shared cognition were each above 0.80, which indicates substantial agreement between the CIO and tMt, and thus averaging across responses is appropriate.

CIO-TMT relational social capital is a multidimensional construct consisting of the tMt’s trust in the CIO and the CIO’s trust in the tMt. thus, trust was operational- ized as a second-order latent variable with the two dimensions of trust as formative indicators of the construct. the CIO was the respondent for items regarding their trust in the tMt, and tMt members were the respondent for items regarding their trust in the CIO. Each of these formatively measured constructs assessed the CIO’s and tMt’s honesty, ability, and benevolence [12, 83, 84, 85, 111].

IS strategic alignment, defined as the congruence of the organization’s business strategy and IS strategy, is measured as the congruence of the organization’s IS strat- egy with the corporate business strategy, the degree to which decisions in IS planning are tightly linked to the organization’s strategic plan, and the degree to which the organization’s business strategy and IS strategy are closely aligned [22, 23, 106]. IS strategic alignment is based on tMt members’ response.

table 1. Summary of Key Informants

Construct Key informant/data source

CIO-TMT structural social capital Structural position CIO Informal interaction CIO

CIO-TMT cognitive social capital Shared Language CIO and TMT members (average) Shared cognition with respect to the role of IS CIO and TMT members (average)

CIO-TMT relational social capital TMT’s Trust in the CIO TMT members CIO’s Trust in the TMT CIO

IS strategic alignment TMT members

Firm performance: ROA, ROE, CFM Secondary data source: American Hospital Directory

28 KArAhANNA AND PrEStON

Firm performance is defined as the financial performance of the organization. We measure firm performance using the following three variables: return on assets (rOA), return on equity (rOE), and cash flow margin (CFM). these measures were modeled as reflective indicators of firm performance.4 Each of these measures has been widely used to assess hospital performance [17, 31, 124]. rOA and rOE are closely related and widely accepted profitability measures to assess return on investment (rOI), and are used by internal management and external analysts to evaluate performance [17]. rOA focuses on the overall performance of the firm [75] and is calculated by dividing net income by total assets. rOE provides an alternative measure of how effectively a firm has utilized its financial capital and is related to the economic value added [48]. Ginn and lee [43] note that rOE can differ in calculation due to different types of ownership. however, Westphal et al. argues “that rOE is a meaningful measure of financial performance for all hospitals, including not-for-profits, since the distinction between for-profit and not-for-profit hospitals is largely a legal one having to do with the distribution of retained earnings” [124, p. 378]. rOE is calculated by dividing net income by the total assets minus liabilities. CFM is calculated by the following equation [31]: CFM = (Net income + Depreciation + Interest expense) / (Net patient revenue + total other income). the data used to calculate each of these financial measures were derived from the American hospital Directory. Each of these three measures of financial performance for each hospital was calculated for the years 2004 through 2006 and then averaged. this three-year time frame was used to measure firm performance for several reasons.5 First, multiple years need to be averaged to elimi- nate any single year anomaly. Second, a time lag is needed to assess the performance outcomes that occur due to organizations actions. last, the time frame chosen must be limited since it has been noted that both CIOs and tMt members often have a turnover rate of just a few years [114]. the preponderance of hospitals in our study are not-for-profit hospitals (91.4 percent), which is consistent with the population in the hospital industry. We control for the profit status of the hospital when we test the research model.

Survey Distribution and Data Collection

A dual-stage matched-sampling strategy was employed for the distribution of the CIO and tMt surveys. the data collection process took place from November 2003 through May 2004. In stage 1, the CIO survey was distributed to a sample of hospital CIOs. the CIO contact information was obtained from the American hospital Directory. A total of 1,057 surveys were distributed to CIOs with 206 CIO surveys returned for a response rate of 19.5 percent. All of the surveys included an identifying code that could be removed by the respondent if they wished to remain anonymous. Of the 206 surveys returned, 198 were considered complete and usable based on the following criteria: the identity of both the CIO and company were traceable either through the identifying code, the survey questions were completed, and the CIO was identified as the most senior IS executive within the organization. In stage 2, the tMt instru- ment was sent to the tMt members of each organization for which we had received

thE EFFECt OF SOCIAl CAPItAl IN tOP MANAGEMENt 29

a completed CIO questionnaire. tMt members include the CEO and any other senior executive who is a formal member of the tMt (e.g., COO, CFO). tMt members were identified through secondary data sources (American hospital Directory, Dun & Bradstreet Million Dollar Database [D&B Database], and organization Web sites). Data from tMt members were collected within three months of receiving the CIO data. to increase response rates (and consistent with prior literature [4, 113]), questionnaires were sent to all the tMt members. tMt membership was confirmed by asking tMt respondents about tMt membership and the reporting structure of the organization on the survey. In addition, each tMt respondent was asked to confirm the name of the organization’s CIO. A total of 81 of the 198 (40.9 percent) organizations returned at least one tMt member survey.

Multiple tMt responses were obtained from 31 of the 81 responding organizations (38.3 percent). For those organizations for which we obtained multiple tMt responses, we assessed within-team agreement with r

wg [53] for variables (tMt trust in the CIO,

shared language, shared cognition, and IS strategic alignment) for which the tMt member was a key respondent. For the tMt’s trust in the CIO, shared language, shared cognition, and IS strategic alignment, the mean and median within team agreement (r

wg ) were all above 0.80. Furthermore, the proportion of tMt groups with a level of

agreement (r wg

) greater than or equal to 0.70 for tMt’s trust in the CIO, shared lan- guage, shared cognition, and IS strategic alignment were all above 0.80. Within-team agreement was therefore acceptable and suggests substantial agreement among the tMt members, which provides support for combining tMt members’ perceptions to produce averaged, aggregated scores for respective firms [120]. therefore, we evalu- ated multiple tMt member responses through a consensus evaluation by taking the mean of answers from all responding tMt members in an organization. In addition, the high level of shared agreement between multiple team members provides support that data obtained from single tMt respondents are valid reflections of team and organizational phenomena [4, 113]. Appendix C provides summary statistics for the CIO and tMt responses to each construct and summarizes the characteristics of the respondents and the organizations in the sample.

While the response rate in the current study is typical of research involving CIO and tMt respondents (e.g., [4, 23]), it is important to test for nonresponse bias. We tested for nonresponse bias through the following approach: (1) we compared the organizational characteristics of firms (mean annual sales and mean total number of employees) for the responding organizations to that of all nonresponding organiza- tions (listed in the American hospital Directory), (2) we compared early versus late responders (as per Armstrong and Overton [5]), and (3) we compared responses of CIOs with and without matched-pair responses. this analysis revealed no significant differences between responding and nonresponding organizations in this industry, alleviating to some extent nonresponse bias concerns.

Finally, given that our measures of the independent and dependent variables were obtained from three different sources (social capital measures were obtained from the CIO, strategic alignment measures were obtained from members of the tMt, and firm performance measures were archival), common method bias is not a concern.

30 KArAhANNA AND PrEStON

Analysis and results

to tESt thE rESEarch moDEl, we used partial least squares (PlS) analysis. Specifically, we used SmartPlS version 2.0 for this analysis. As we have discussed, in accordance with prior literature and the four criteria described in Jarvis et al. [54], we operation- alize structural social capital, cognitive social capital, and relational social capital as second-order aggregate constructs [71] while IS strategic alignment and firm perfor- mance are first-order reflectively modeled constructs. All the measurement items were standardized for the PlS analysis.

Measurement Model

the psychometric properties of all the reflectively measured scales are assessed in terms of item loadings, internal consistency, and discriminant validity (tables 2 and 3). Item loadings and internal consistencies greater than 0.70 are generally considered acceptable [39]. the factor analysis results in table 2 and composite reliability scores in table 3 show that the scales used in the study largely meet these guidelines. For discriminant validity [25], (1) indicators should load more strongly on their corre- sponding construct than on other constructs in the model and (2) the square root of the average variance extracted (AVE) should be larger than the interconstruct correlations. As can be seen by the factor analysis results and the comparison of the interconstruct correlations and AVE (shaded leading diagonal) in table 3, the constructs meet these guidelines.

Since several of our second-order constructs are formatively measured, we fol- lowed guidelines established in the literature [20, 30, 63, 98] to validate them. two primary considerations for formatively measured constructs are content validity and multicollinearity. to ensure content validity, we derived our measures based on the IS leadership and social capital literature. We further validated the content validity of the measures through qualitative interviews with CIOs. We assessed multicollinearity for the dimensions of each formatively measured construct through variance inflation factors (VIFs). VIFs range from 1.0 to 1.2, which is well below the 3.3 guideline recom- mended by Diamantopoulos and Siguaw [30] and Petter et al. [98]. Further validation of the formatively measured constructs is presented in the next section.

Structural Model

We employed PlS using bootstrapping to test the structural model. the path coef- ficients and explained variances for the structural model are shown in Figure 2, and the results of the hypotheses tests are summarized in table 4. Based on review of the prior literature, we included (1) the organizational variables of organizational size (number of employees and number of beds), geographic location (urban/rural), and profit status (nonprofit/for-profit); and (2) the CIO individual characteristics of age, gender, functional background in business, organizational tenure, and tenure in the CIO position as controls for IS strategic alignment. the aforementioned CIO charac-

thE EFFECt OF SOCIAl CAPItAl IN tOP MANAGEMENt 31

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32 KArAhANNA AND PrEStON

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thE EFFECt OF SOCIAl CAPItAl IN tOP MANAGEMENt 33

teristics were included as controls for relational social capital and firm performance, and the organizational variables were also included as controls for firm performance. In addition, we included prior firm performance as a control variable for firm perfor- mance. Prior firm performance was measured as the average of the prior two years (2002–3) of rOA, rOE, and CFM. All of the control variables were retained in the model, although with the exception of prior firm performance, none of the control variables had significant effects.6 to ensure that any nonsignificant effects were not due to lack of statistical power, we calculated the statistical power of our sample for each of the four dependent variables (cognitive social capital, relational social capital, IS strategic alignment, and firm performance) in our structural model. the statistical power to detect significant effects for each dependent variable (given the number of predictors, explained variance, sample size, and a significance level of 0.05) was 0.99, and exceeded the recommended guideline of 0.80 [26], suggesting that our sample provides sufficient statistical power for testing our research model.

the main constructs in the nomological network explain approximately 21.9 percent, 26.8 percent, 36.1 percent, and 5.8 percent of the variance in cognitive social capital, relational social capital, strategic alignment, and firm performance, respectively. the variance explained by the main constructs in addition to the control variables are approximately 21.9 percent, 26.8 percent, 46.3 percent, and 39.4 percent of the vari- ance in cognitive social capital, relational social capital, strategic alignment, and firm performance, respectively. IS strategic alignment explains an additional 5.8 percent of

Figure 2. PlS results

** Significant at 0.01; * significant at 0.05.

34 KArAhANNA AND PrEStON

the variance in firm performance beyond that which was explained by prior firm perfor- mance and the other organizational control variables (which explained 33.6 percent of the variance in firm performance). the three dimensions of social capital collectively explained 36.1 percent of the variance in strategic alignment beyond that explained by the individual and organizational control variables. All the hypothesized paths in the research model were significant, with the exception of structural social capital’s effects on relational social capital and IS strategic alignment. thus, all the hypotheses except h1b and h2a were supported.

We tested h3, which posits that IS strategic alignment mediates the effect of social capital on firm performance, via the mediation analysis proposed by Baron and Kenny [10] and through a Sobel test [115]. the results indicate that IS strategic align- ment did not mediate the effects of structural social capital on firm performance (as expected, since structural social capital has no significant effect on IS strategic align- ment; thus, not supporting h3a); however, IS strategic alignment fully mediates the effect of cognitive social capital (z = 2.22, p < 0.050; supporting h3b) and relational social capital (z = 2.21, p < 0.050; supporting h3c) on firm performance. Also, since structural social capital did not have a significant effect on IS strategic alignment or relational social capital in our research model, we also conducted additional post hoc mediation analyses. We conducted Sobel tests to determine if the effect of structural social capital on IS strategic alignment is mediated by cognitive and relational social capital, and if the effect of structural social capital on relational social capital is medi-

table 4. Summary of hypothesis tests

hypotheses

Standardized path

coefficient Support for hypothesis

H1a: Structural social capital → Cognitive social capital

0.468** Supported

H1b: Structural social capital → Relational social capital

0.045 Not supported

H1c: Cognitive social capital → Relational social capital

0.485** Supported

H2a: Structural social capital → IS strategic alignment

0.007 Not supported

H2b: Cognitive social capital → IS strategic alignment

0.368** Supported

H2c: Relational social capital → IS strategic alignment

0.373** Supported

H3a: IS Strategic Alignment Mediates: Structural Social Capital → Firm Performance

Not supported

H3b: IS strategic alignment mediates: Cognitive social capital → Firm performance

Supported

H3c: IS strategic alignment mediates: Relational social capital → Firm performance

Supported

** Significant at 0.01.

thE EFFECt OF SOCIAl CAPItAl IN tOP MANAGEMENt 35

ated by cognitive social capital. the results of the Sobel tests revealed that cognitive social capital mediates the effect of structural social capital on IS strategic alignment (z = 3.83, p < 0.001); however, relational social capital did not mediate this relation- ship. Finally, the Sobel tests provided support that cognitive social capital mediates the effect of structural social capital on relational social capital (z = 3.32, p < 0.001). the total effects of the social capital dimensions, which include the cumulative effects of the direct effects and any indirect effects that are mediated by other variables, are summarized in table 5. the results show that cognitive social capital has the strongest total effect on IS strategic alignment (and consequently on firm performance), structural social capital has the lowest, and relational social capital lies in between.

Post hoc tests

First, we conducted a post hoc test to examine the possibility of endogeneity. to exam- ine whether there is an endogeneity problem among the social capital dimensions, we correlated the error terms obtained by running regressions on relational and cognitive social capital as per our model with all the social capital predictor dimensions [102]. Since we did not detect any significant correlations (at α = 0.10), the relationships across the social capital dimensions do not appear to be subject to the endogeneity problem, lending support to our conceptualization.

Second, we examined the weights of the formative dimensions of the second-order latent constructs. It is important to examine the significance of the weights of these formative dimensions to assess the relative influence of the dimensions as they relate to

table 5. Summary of total Effects

relationship

Standardized path

coefficient (direct effect)

Indirect effect

total effect

Structural social capital → Cognitive social capital

0.468** N/A 0.468

Structural social capital → Relational social capital

0.045 0.227 0.272

Cognitive social capital → Relational social capital

0.485** N/A 0.485

Structural social capital → IS strategic alignment

0.007 0.274 0.281

Cognitive social capital → IS strategic alignment

0.368** 0.181 0.549

Relational social capital → IS strategic alignment

0.373** N/A 0.373

IS strategic alignment → Firm performance

0.252** N/A 0.252

Notes: N/A = not applicable. ** Significant at 0.01

36 KArAhANNA AND PrEStON

the construct. results show that, with the exception of the CIO’s trust in the tMt, the formative measures are significant indicators of their respective constructs. however, although the tMt’s trust in the CIO is a significant first-order dimension of relational social capital, the CIO’s trust in the tMt is not. to examine the nonsignificant weight, we ran a number of tests [20]: (1) although the Pearson correlation between the two trust dimensions was low and nonsignificant (correlation = –0.014, p = 0.905), we tested to see whether multicollinearity between the trust dimensions was the culprit. Multicol- linearity statistics showed this was not a concern (VIF = 1, conditioning index < 1.014, variance proportion < 0.51); and (2) we examined both the absolute importance of each trust dimension (i.e., the bivariate correlation between the trust dimension and relational social capital) as well as its relative importance. Both the weight and the loading of CIO trust in the tMt were nonsignificant, indicating that in this specific context this does not appear to be an important aspect of relational social capital.

We also conducted a post hoc test to provide further evidence of the validity of the formatively measured relational social capital construct. Specifically, we replaced the second-order latent construct of relational social capital with a first-order construct that was measured through a single reflective indicator of mutual trust between the CIO and tMt. this indicator was obtained by averaging the responses of the CIO and the tMt to the question: Is there a high level of trust between the CIO and the tMt (mean interrater agreement [r

wg ] between the CIO and tMt responses = 0.78 [above

the recommended 0.70 level] with 91.4 percent of responses having an interrater agree- ment of over 0.70)? the results of both models are essentially the same, thus providing further validation of our second-order operationalization of relational social capital.

to further validate not just the relational social capital construct but all the forma- tively measured constructs, we assessed external consistency7 and potential interpreta- tional confounding (see [63]). to assess external consistency, we conducted a post hoc analysis in which the first-order dimensions of each of the three social capital dimen- sions were included in the model instead of the second-order constructs. Consistent with the findings for the second-order factor model, the results of this post hoc analysis show that the tMt’s trust in the CIO significantly influences IS strategic alignment, while the CIO’s trust in the tMt does not. In addition, none of the structural social capital constructs influence either dimension of trust, which is also consistent with our model. Finally, the cognitive social capital constructs influence the tMt’s trust in the CIO but not the CIO’s trust in the tMt, which again is consistent with our second-order model. therefore, external consistency is not a concern.

Finally, we conducted a post hoc validation test for the formative constructs to assess interpretational confounding. Interpretational confounding occurs when for- mative indicators drive the empirical meaning of a latent variable in a way that is in contrast to the intended meaning assigned to it by the researcher. to assess that, we ran two models as suggested by Kim et al. [63]: one with IS strategic alignment as the sole dependent variable and another with firm performance as the sole dependent variable. the weights of all the formative indicators except for CIO trust in the tMt remain consistent across the two models, indicating that interpretational confounding is not a major concern in the study. In terms of CIO trust in the tMt, as we discuss

thE EFFECt OF SOCIAl CAPItAl IN tOP MANAGEMENt 37

above, relational social capital has the same effects when we replace the formatively measured second-order construct with a reflectively measured first-order construct. As such, interpretational confounding is not a concern in this case either.

Discussion of results

thE main PrEmiSE oF thiS StuDy iS that thE rElationShiP between the CIO and tMt is important to the creation of organizational value. Using social capital as the theoretical lens, the study contextualizes social capital to the CIO-tMt relationship by drawing upon the IS leadership literature and theorizes that knowledge exchange and combi- nation between the CIO and tMt is facilitated by the social capital between these parties. We posit that this knowledge exchange and combination leads to integration of business and IS knowledge, which is manifest in IS strategic alignment. IS strategic alignment then mediates the relationship between social capital and firm performance. the results of the study largely support the hypothesized relationships. Specifically, we find that IS strategic alignment is influenced by cognitive and relational social capital but not by structural social capital. Furthermore, structural social capital influ- ences cognitive social capital, which in turn influences relational social capital. these results imply that, although opportunity for interactions may influence shared cogni- tions between the CIO and tMt, the alignment of IS and business strategies require shared cognitions and trust to occur. these interrelationships between the social capital dimensions provide a level of granularity and insights that tap at the mechanisms of the value creation process. We discuss the results in detail below.

First, the results of the study provide evidence that the relationship between the CIO and tMt, and specifically social capital, is consequential to organizational value creation and that IS strategic alignment is a mediating mechanism by which this occurs this is consistent with social capital theory that suggests that knowledge integration, manifested as IS strategic alignment in our context, is an important mediating variable between social capital and organizational outcomes. Social capital facilitates knowl- edge exchange and combination, resulting in knowledge integration, which in turn influences organizational advantage [88]. Also, while prior research has acknowledged the importance of structural arrangements (e.g., CIO being a member of the tMt, reporting to the CEO) [113], our research shows that, although important, they are not sufficient. In fact, structural arrangements will lead to positive outcomes only to the extent to which they build cognitive or relational social capital.

Second, findings of the study provide insights into the relationships among the vari- ous dimensions of CIO-tMt social capital. Based on tsai and Ghoshal [117], we hypothesized that structural social capital would influence both cognitive social capital (h1a) and relational social capital (h1b) and that cognitive social capital would influ- ence relational social capital (h1c). the results show that while structural social capital influences cognitive social capital, it does not significantly affect relational social capital. In other words, knowledge exchange facilitated through formal and informal network ties that the CIO has with members of the tMt influence shared cognitions and language but have no direct effect on the level of trust between the CIO and tMt.

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the nonsignificant relationship between structural and relational social capital in the current study contradicts tsai and Ghoshal’s [117] empirical findings of a significant effect but is consistent with the findings of Van den hooff and huysman [118], who examined the effects of social capital on knowledge sharing among IS end users. A mediation analysis we conducted suggests that the influence of structural social capi- tal on relational social capital is mediated by shared cognition between the CIO and tMt. In other words, network ties between the CIO and tMt will result in trusting relationships by creating shared cognitions between these parties.

the relationship between structural social capital and cognitive social capital (h1a) is consistent with empirical evidence from prior IS alignment research [100] that the degree to which the CIO and tMt interact influences shared language and understanding. however, it contradicts empirical results by tsai and Ghoshal [117], who, contrary to their theorizing, did not find a significant relationship between social interaction between members of different business units and shared cognition among these organizational members.

the inconsistencies with respect to the relationships of structural social capital may be attributed to differences in context and conditions for development of social capital across the three studies that have examined interrelationships among the social capital dimensions (i.e., tsai and Ghoshal [117], Van den hooff and huysman [118], and the current study). Nahapiet and Ghoshal [88] suggest that four factors influence the development of social capital: time (accumulated history), stability, and continuity of the social structure; interdependence between members; interaction to sustain and strengthen social capital; and network closure (e.g., open networks versus explicit boundaries). the social structures examined in these studies (business units, IS end users, tMt) differed on these four characteristics. Unlike the other two studies, social capital of the tMt is characterized by accumulated history of interactions and continuity, high interdependence across members, a high level of frequent interac- tion, and closure (small team with finite boundaries). thus, future research should further investigate the relationship between structural social capital and the other two dimensions of social capital to determine contingencies that influence the significance of these relationships.

Consistent with prior social capital research, our findings suggest that cognitive social capital positively influences relational social capital. In other words, shared language and shared cognitions about the role of IS in the organization are associated with higher levels of trust between the CIO and tMt. It is worth noting that the tMt’s trust in the CIO is the only significant indicator of trust between these parties; therefore, shared cognitions increase the tMt’s trust in the CIO but not necessarily vice versa. Although prior research conceptualizes trust between organizational executives to be a mutual phenomenon [88, 111, 117], our findings suggest that knowledge exchange and combination between the CIO and tMt is facilitated only by the amount of trust the tMt has in the CIO. It is worth noting, however, that the average level of trust (CIO in tMt and tMt in CIO) in our study was high. Future research should examine whether this finding generalizes to contexts that are characterized by low levels of trust between the CIO and tMt.

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third, our findings provide insights into the relationship between each dimension of CIO-tMt social capital and IS strategic alignment. Although all three dimensions have significant total effects on IS strategic alignment, cognitive social capital has the strongest total effect and structural social capital the lowest. In addition, although both cognitive (h2b) and relational (h2c) social capital have significant direct effects on IS strategic alignment, structural social capital does not (h2a). this suggests that greater leverage in attaining IS strategic alignment is obtained through creating shared language and shared cognitions and the building of trusting relationships than through formal and informal interactions. As the nonsignificant relationship between structural social capital and IS strategic alignment indicates, formal and informal interactions influence IS strategic alignment to the extent to which they result in shared cognitions and build trust between the CIO and tMt. As a result, future research on IS strategic alignment and on the CIO-tMt relationship may explore factors (other than structural social capital) that build shared cognition and trust and which can then be leveraged for organizational advantage.

limitations, theoretical Implications, and Future research

Prior to DiScuSSing imPlicationS, limitations of the study must be acknowledged. First, although the response rate for the study is comparable with those of other studies that use matched-pair responses from top executives (e.g., [4, 23]), and although the various nonresponse bias tests did not show significant differences between respond- ing and nonresponding organizations, it is still possible that systematic differences may exist. Second, the study focused on a single industry in an attempt to reduce industry effects and other alternative explanations that could potentially influence the level of alignment obtained or firm performance. Although the health care industry is information intensive and complex, and thereby provides an appropriate popula- tion in which the relationship between the CIO and tMt should be important to organizational strategy [113], the results of the study may not be fully generalizable to other industries. third, the majority (over 91 percent) of our sample consisted of not-for-profit hospitals. Although we controlled for profit status in our analysis and found nonsignificant effects, future research should examine the generalizability of our findings to for-profit organizations in other industries. Fourth, data were collected between 2004 and 2006. Although the theoretical underpinnings of the study (i.e., that social capital between the CIO and tMt would influence organizational outcomes) reflect an enduring phenomenon, the results should be interpreted with this caveat in mind. to alleviate this potential limitation, we compared the financial data in our analysis (2004–6) to the newest financial performance data available from the American hospital Directory (2009–11) for each of the corresponding hospitals in our study sample. the financial performance data used for our analysis are highly and signifi- cantly correlated to current financial performance data. Fifth, there were high levels of CIO trust in the tMt (mean = 4.4/5.0) and tMt trust in the CIO (mean = 4.6/5.0) in our sample. the findings may not apply to organizations with lower levels of trust between the CIO and tMt.

40 KArAhANNA AND PrEStON

this research was motivated by an interest in how the relationship between the CIO and tMt influences organizational value creation. Specifically, the study examines how the social capital of the relationship between the CIO and tMt influences knowledge integration (manifested as IS strategic alignment) and its consequential influence on firm performance. Using the IS leadership literature, the study contextualizes social capital to the domain of the CIO-tMt relationship and theorizes its role in the nomological network leading to IS strategic alignment and firm performance. Several implications for future research and theoretical development emerge from our find- ings. First, as shown by our literature review, our understanding of how social capital among tMt members influences organizational outcomes is limited. therefore, a contribution of the study is to provide insights into the phenomenon by examining the social capital of the relationship between the CIO and tMt using primary data from CIOs and matched-pair tMt respondents. As we discuss, the CIO may have a unique relationship with the tMt, and the results may be idiosyncratic to this relationship. For example, the technical aspects of It may have increased the salience of the cogni- tive dimension of social capital in facilitating knowledge exchange and combination between the CIO and tMt, and thus IS strategic alignment. Furthermore, the fact that many tMt members are not tech savvy and thus must rely more on the CIO on such issues may have increased the salience of the tMt trust in the CIO. Future research should examine the generalizability of our findings to other traditional members of the tMt who may have different relationships with the tMt than the CIO. For instance, future research could tailor the social capital dimensions and knowledge integration to the context of the CEO, CFO, COO, or CMO (chief marketing officer) and examine the relationships.

Second, few studies have examined the relationship across the various social capi- tal dimensions and none in the context of the tMt. Our results support many of the theoretically posited relationships in tsai and Ghoshal’s [117] conceptualization of social capital, contradict some (specifically those involving structural social capital), and provide a nuanced mediating conceptualization of others. therefore, our results contribute to the social capital stream of research by examining how structural, cog- nitive, and relational social capital interrelate in the context of the top echelon of the organization. the fact that some of our findings (such as the absence of a significant relationship between structural social capital and relational social capital) contradict findings in some other studies (e.g., [117, 118]) may suggest that these relation- ships are moderated by contextual factors in the CIO-tMt context. Future research should examine such moderating effects as well as the mediating role of cognitive social capital on the effects of structural social capital on relational social capital and knowledge integration. In addition, some studies disagree with positing relationships among the social capital dimensions as part of a nomological network [1, 50]. Although the research model for the current study was grounded in the social capital literature (e.g., [117]) and the posited causal relationships among the dimensions were based on this literature, the cross-sectional nature of our data precludes actually testing causal- ity. Future research would benefit from examining these relationships longitudinally and examining causal and reciprocal effects.

thE EFFECt OF SOCIAl CAPItAl IN tOP MANAGEMENt 41

third, our study suggests that social capital of the relationship between the CIO and tMt is an important antecedent of IS strategic alignment (explaining about 36 percent of its variance), indicating that future studies of IS strategic alignment may consider the relationship between the CIO and tMt as an important antecedent factor. Further- more, research that focuses on how each of the CIO-tMt social capital dimensions are developed and shaped would be valuable. Future studies may wish to expand the nomological network to a wider range of variables (e.g., prior experiences, knowledge bases, and personal attributes of the CIO and members of the tMt) that may act as antecedents to each of the specific dimensions of social capital. Since combination and exchange are complex social processes and much knowledge is socially embedded in coactivity and relationships, future research that engages in longitudinal studies that examine the process by which social capital temporally develops from the time the CIO is hired and the process by which social capital facilitates knowledge integration would be of great value.

Fourth, future research should further expand on the conceptualization of each CIO- tMt social capital dimension. For instance, the social capital literature [88, 118] and shared mental model literature [18, 82, 86] may provide insight into additional facets of cognitive social capital, such as shared values or shared culture, that may be relevant. In addition, we examined structural position and interaction frequency as measures of structural social capital. Future studies may use social network analysis techniques to capture structural social capital. For example, although the current study examines the CIO position in terms of reporting level and tMt membership, the centrality of the CIO in the tMt social network may be relevant. In addition, future research may examine structural social capital by focusing on the nature of the interaction between the CIO and the tMt (e.g., expressive versus instrumental) and investigate differential effects of these on cognitive and relational social capital. Finally, in the current study, relational social capital was reflected through trust between the CIO and tMt. Although our measures focused on the most salient aspects of the relational social capital based on the IS leadership literature and our interviews, relational social capital has been defined more broadly to include aspects such as norms, identification, and mutual obligations. Future research may include these additional aspects of relational social capital and examine their effects on IS strategic alignment and on firm performance as well as how they are influenced by structural and cognitive social capital.

Finally, we used social capital theory as the theoretical basis for our study. We chose to ground our study in social capital theory as it is a useful lens through which we could examine the phenomenon of how the relationship between the CIO and tMt can influence organizational outcomes through alignment. With some exceptions, most of the studies that have focused on the relationship between the CIO and tMt are atheoretical. We thus extend CIO research by providing a theoretically grounded perspective of how CIO relationships at the upper echelons of the organization affect organizational value and of the mediating role of IS strategic alignment. this perspec- tive integrates prior CIO research findings into a cohesive theoretical framework and provides a foundation for future research that examines the relationship between the CIO and tMt and its role in organizational value creation. As we discussed, future

42 KArAhANNA AND PrEStON

research can expand the nomological network to include additional facets of the social capital dimensions and examine additional antecedents and consequences that involve not just firm performance but also more granular value creation outcomes and It-enabled innovation. Future research might also take a temporal view that examines the process by which social capital is created and possible influences on how the process unfolds (e.g., homophily between the CIO and tMt or whether a CIO is promoted from within the company or externally). Prior anecdotal findings on the CIO-CEO relationship may provide insights into additional fruitful extensions of this model.

Practical Implications

thiS StuDy ProviDES SEvEral Practical imPlicationS. First, given the financial perfor- mance implications, it highlights the importance of IS strategic alignment to organiza- tional leaders at least in It-intensive industries. Second, the findings indicate that the relationship between the CIO and tMt and the social capital that ensues is important to organizational value creation and a key antecedent of the alignment between IS and business strategies in the organization. More concretely, it is of the utmost importance that the CIO obtains the tMt’s trust, communicates in business terms, and develops a shared cognition with the tMt on the role of IS in the organization. the CIO and the tMt share responsibility in achieving this [100]. they can facilitate the develop- ment of this shared cognition by engaging in both formal and informal interaction with each other at every opportunity and building strong network ties. the CEO can facilitate this through structural arrangements that encourage such interaction and knowledge exchange and combination (e.g., membership in the tMt, direct report- ing relationship to the CEO) and by hiring or promoting a CIO who shares some of these characteristics. On his or her part, the CIO can formally and informally reach out to members of the tMt to understand the challenges and opportunities they face. third, it is important to note that structural social capital (i.e., network ties between the CIO and tMt in the form of formal and informal interactions) lead to IS strate- gic alignment through shared cognitions and trust. therefore, although network ties facilitate knowledge exchange, additional mechanisms need to exist to develop trust and shared cognitions that will catalyze knowledge combination and integration and lead to IS strategic alignment. this is a critical distinction that CEOs and CIOs need to keep in mind. Finally, the development of social capital is a socially complex process, with socially embedded and path dependent relationships that take time and effort to develop. this implies that CIOs need to be given time to develop their social capital with the tMt, and they must devote deliberate effort to its development. It can be an essential asset in the creation of IS strategic alignment and organizational value, and its development may be a worthwhile investment by both the CIO and tMt.

notES 1. It is worth noting that how the relationship among tMt members influences organizational

outcomes has been examined by other theoretical perspectives in strategic management. More

thE EFFECt OF SOCIAl CAPItAl IN tOP MANAGEMENt 43

specifically, several studies have examined the relationship between the CEO and tMt. Most of these studies, however, examine personal characteristics of the top executives and are grounded in upper echelons theory (see [19] for a review). For instance, prior research in this domain has examined how the CEO’s personality characteristics influence the dynamics of the tMt and subsequent levels of organizational performance [2, 76, 95, 97]. however, few studies have examined the relationship of other tMt members (besides the CEO) with the CEO or with the tMt as a whole [19]. One exception is Marcel [81], who examined the chief operating officer (COO)–tMt dynamic by testing if the presence of a COO in the organization creates tMt- level information-processing benefits that can improve firm performance.

2. there is a clear distinction between knowledge integration processes and knowledge integration outcomes. Kearns and Sabherwal argued that knowledge integration processes are distinct from knowledge integration, which is an “outcome of that knowledge being shared, applied, or combined with other knowledge to create new knowledge” [61, p. 132]. Furthermore, Okhuysen and Eisenhardt stated: “the knowledge integration process involves the actions of group members by which they share their individual knowledge within the group and combine it to create new knowledge. By contrast, knowledge integration is the outcome of these pro- cesses, consisting of both the shared knowledge of individuals and the combined knowledge that emerges from their interactions” [92, p. 371].

3. Details of the interviews and item-sorting exercise can be obtained from the second author.

4. the results remain essentially the same regardless of whether firm performance is measured reflectively or formatively.

5. to test the robustness of our results, we tested the structural model using single-year financial data (2004) and the average of two years, which yield similar results.

6. Since it is possible for prior firm performance to influence CIOs reporting level and mem- bership in the tMt [9], we conducted a post hoc analysis to test this endogeneity concern. the results show that prior firm performance does not significantly influence either the CIO’s reporting level or membership in the tMt.

7. to test for external consistency, one reviews consistency of correlation between the for- mative indicators of a construct (in our study, the first-order dimensions) and the dependent construct [63].

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48 KArAhANNA AND PrEStON

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thE EFFECt OF SOCIAl CAPItAl IN tOP MANAGEMENt 49

A pp

en di

x A

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um m

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ap it

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(c o n ti

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)

50 KArAhANNA AND PrEStON

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[7 ]

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, a

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l) w

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h ig

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fo

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lo

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] S

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f n e w

ve

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thE EFFECt OF SOCIAl CAPItAl IN tOP MANAGEMENt 51

[6 ]

In te

rv ie

w s

a n d

su rv

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T M

T m

e m

b e rs

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1 7 9 n

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ve

n tu

re s

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s)

S tr

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tr y

m a n a g e ri

a l

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p o w

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R e la

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s)

T M

T

e xt

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a rn

in g

S C

p e

rs p

e c-

tiv e

S ig

n ifi

ca n t

p re

d ic

to rs

o f

e xp

lo ita

tiv e le

a rn

in g

• S

tr u

ct u ra

l ( in

tr a -

a n d e

xt ra

-i n d u st

ry m

a n a -

g e

ri a

l t ie

s; p

o w

e r)

• R

e la

tio n a l (

tr u st

) •

C o

g n iti

ve (

so lid

a ri

ty )

S ig

n ifi

ca n t

p re

d ic

to rs

o f

e xp

lo ra

to ry

le a rn

in g

• S

tr u

ct u ra

l ( in

tr a -

a n d e

xt ra

-i n d u st

ry m

a n a -

g e

ri a

l t ie

s; p

o w

e r)

• C

o g

n iti

ve (

st ra

te g ic

c o n se

n su

s) C

o n

se q u e n ts

o f

o rg

a n iz

a tio

n a l l

e a rn

in g

• E

xp lo

ita tiv

e a

n d e

xp lo

ra to

ry le

a rn

in g in

flu -

e n

ce n

e w

p ro

d u ct

p e rf

o rm

a n ce

[6 5 ]

S e co

n d -

a ry

d a ta

4 7 3 p

u b lic

ly

tr a d e d

K o re

a n

fir m

s

(1 9 9 8 – 2 0 0 3 )

S tr

u ct

u ra

l: o u t-

si d e d

ir e ct

o r

S C

( th

e d

e -

g re

e t

o w

h ic

h

o u ts

id e b

o a rd

m

e m

b e rs

h a ve

o u ts

id e

co n ta

ct s

in

th e e

xt e rn

a l

e n vi

ro n m

e n t)

O u

ts id

e

d ir e

ct o

r e xt

e rn

a l

tie s

N /A

F ir

m v

a lu

e S

C p

e rs

p e

c- tiv

e T

h e

r e su

lts p

ro vi

d e s

tr o n g e

vi d e n ce

t h a t

o u

ts id

e d

ir e ct

o r

S C

p o si

tiv e ly

in flu

e n ce

s fir

m v

a lu

e .

[1 2 7 ]

S e co

n d -

a ry

d a ta

C E

O c

o m

- p e n sa

tio n

o f

1 ,6

8 4

Ta iw

a n e se

fir

m s

S tr

u ct

u ra

l: C

E O

’s

n e tw

o rk

C E

O e

xt e

r- n

a l t

ie s

N /A

C E

O c

o m

p e

n sa

- tio

n H

u m

a n

c a

p ita

l th

e o

ry T

h e

r e su

lts s

h o w

t h a t

C E

O S

C is

a n im

p o r-

ta n

t d e te

rm in

a n t

in s

e tt

in g n

o n fa

m ily

C E

O

co m

p e n sa

tio n b

u t

n o t

fa m

ily C

E O

c o m

- p

e n

sa tio

n . A

s su

ch ,

th is

s tu

d y

e xa

m in

e s

C E

O S

C ,

d e fin

e d a

s e xt

e rn

a l d

ir e ct

o rs

h ip

tie

s h e ld

b y

th e C

E O

, in

d e te

rm in

in g f a m

ily

ve rs

u s

n o n fa

m ily

C E

O s’

c o m

p e n sa

tio n

in a

n e tw

o rk

-b a se

d b

u si

n e ss

s o ci

e ty

a n d

g o ve

rn a n ce

s ys

te m

.

(c o n ti

n u es

)

52 KArAhANNA AND PrEStON

S tu

dy r

es ea

rc h

de si

gn

r es

po nd

en ts

/ re

se ar

ch

co nt

ex t

S oc

ia l

ca pi

ta l

di m

en si

on s

In te

rn al

/ ex

te rn

al

ti es

A nt

ec ed

en ts

of

s oc

ia l

ca pi

ta l

C on

se qu

en ts

o f

so ci

al c

ap it

al t

he or

et ic

al

fo un

da ti

on F

in di

ng s

P a n e l B

: I S

li te

ra tu

re [5

8 ]

S u rv

e y

1 5 0 e

n d u

se rs

o f

a cr

o ss

7

o rg

a n iz

a -

tio n s

R e la

tio n a l (

tr u st

a n d p

ro sh

a r-

in g n

o rm

s)

K n

o w

le d

g e

re

p o

si to

- ry

u se

rs ’

in te

rn a

l tie

s

N /A

S ys

te m

u sa

g e

b y

kn o w

le d

g e

co

n tr

ib u

to rs

S o

ci a

l e xc

h a

n g

e

th e

o ry

S

C p

e rs

p e

c- tiv

e

G e

n e

ra liz

e d t

ru st

a n d p

ro sh

a ri

n g n

o rm

s m

o d

e ra

te t

h e e

ff e ct

o f

co d ifi

ca tio

n e

ff o rt

a

n d

r e ci

p ro

ci ty

o n e

le ct

ro n ic

k n o w

le d g e

re p

o si

to ri

e s

u sa

g e ,

re sp

e ct

iv e ly

.

[1 2 2 ]

N e tw

o rk

a n a ly

- si

s,

su rv

e y,

a n d

co n te

n t

a n a ly

si s

N e tw

o rk

u se

rs

in p

ro fe

s- si

o n a l l

e g a l

a ss

o ci

a tio

n

S tr

u ct

u ra

l ( ce

n -

tr a lit

y) C

o g n iti

ve

(e xp

e rt

is e ,

p ro

fe ss

io n a l

te n u re

) R

e la

tio n a l

(r e ci

p ro

ci ty

, co

m m

itm e n t)

E le

ct ro

n ic

n

e t-

w o

rk o

f p

ra ct

ic e

u

se rs

’ in

te rn

a l

tie s

N /A

K n

o w

le d

g e

co

n tr

ib u

tio n

in

e le

ct ro

n ic

n

e tw

o rk

s

T h

e o

ri e

s o

f co

lle ct

iv e

a

ct io

n

N e

tw o rk

e n d u

se rs

c o n tr

ib u te

t h e ir k

n o w

l- e

d g

e w

h e n it

e n h a n ce

s th

e ir p

ro fe

ss io

n a l

re p

u ta

tio n s,

t h e y

h a ve

t h e e

xp e ri

e n ce

t o

sh a

re ,

a n d t

h e y

a re

s tr

u ct

u ra

lly e

m b e d d e d

in t h

e n

e tw

o rk

. S u rp

ri si

n g ly

, co

n tr

ib u tio

n s

o cc

u r

w ith

o u t

re g a rd

t o e

xp e ct

a tio

n s

o f

re ci

p ro

ci ty

f ro

m o

th e rs

o r

h ig

h le

ve ls

o f

co m

m itm

e n t

to t

h e n

e tw

o rk

.

[9 1 ]

S o ci

a l

n e tw

o rk

a n a ly

si s

A ca

d e m

ic I

S

re se

a rc

h e rs

S tr

u ct

u ra

l ( n e t-

w o rk

t ie

s) B

o th

N /A

C o

lla b

o ra

tio n

(k

n o w

le d

g e

sh

a ri

n g

)

S o

ci a

l n e

tw o

rk

p e

rs p

e ct

iv e

T h

is s

tu d y

co n st

ru ct

e d a

k n o w

le d g e n

e tw

o rk

b

a se

d o

n I

S c

o a u th

o rs

h ip

t o a

n a ly

ze t

h e

d is

tin ct

iv e c

h a ra

ct e ri

st ic

s o f

e a ch

s u b fie

ld

a n

d t

o a

ss e ss

t h e a

m o u n t

o f

in te

rn a l a

n d

e xt

e rn

a l k

n o w

le d g e e

xc h a n g e t

h a t

h a s

ta ke

n p

la ce

a m

o n g I

S r

e se

a rc

h e rs

. T h e

re g re

ss io

n a

n a ly

si s

re ve

a ls

t h a t

kn o w

l- e

d g

e c

a p ita

l d e ri

ve d f

ro m

a n

e tw

o rk

r ic

h

in s

tr u ct

u ra

l h o le

s h a s

a p

o si

tiv e in

flu e n ce

o

n a

n in

d iv

id u a l r

e se

a rc

h e r’s

a ca

d e m

ic

p e

rf o rm

a n ce

.

thE EFFECt OF SOCIAl CAPItAl IN tOP MANAGEMENt 53

[1 0 7 ]

L a b o ra

- to

ry

e xp

e ri

- m

e n t

4 6 t

e a m

s o f

u n d e rg

ra d u -

a te

s tu

d e n ts

S tr

u ct

u ra

l (n

e tw

o rk

st

ru ct

u re

) C

o g n iti

ve

(s h a re

d u

n -

d e rs

ta n d in

g )

R e la

tio n a l

(n o rm

s, id

e n ti-

fic a tio

n ,

tr u st

, o b lig

a tio

n s)

Te a

m ’s

in

te rn

a l

tie s

N /A

K n

o w

le d

g e

in

te g ra

tio n

S C

p e

rs p

e c-

tiv e

S tr

u ct

u ra

l a n d c

o g n iti

ve c

a p ita

l w e re

im

p o rt

a n t

to k

n o w

le d g e in

te g ra

tio n w

h e n

te a

m s

co m

m u n ic

a te

d t

h ro

u g h le

a n d

ig ita

l n

e tw

o rk

s th

a n w

h e n t

h e y

co m

m u n ic

a te

d

fa ce

-t o -f

a ce

. R e la

tio n a l c

a p ita

l d ir e ct

ly

a ff e

ct e d k

n o w

le d g e in

te g ra

tio n e

q u a lly

, re

- g

a rd

le ss

o f

th e c

o m

m u n ic

a tio

n m

e d ia

u se

d

b y

th e t

e a m

. K n o w

le d g e in

te g ra

tio n ,

in t

u rn

, a

ff e

ct e d t

e a m

d e ci

si o n q

u a lit

y.

[1 1 8 ]

S u rv

e y

5 4 1 e

m p lo

y- e e s

(e n d u

s- e rs

) a cr

o ss

6 o

rg a n iz

a -

tio n s

S tr

u ct

u ra

l (c

o n n e ct

io n s

b e tw

e e n a

c- to

rs )

C o g n iti

ve

(s h a re

d r

e p re

- se

n ta

tio n s

a n d

la n g u a g e )

R e la

tio n a l (

tr u st

a n d n

o rm

s,

o b lig

a tio

n s,

id

e n tifi

ca tio

n )

E m

- p

lo ye

e ’s

in

te rn

a l

tie s

O rg

a n

iz a

tio n

a l

st ru

ct u

re ;

IC T

in fr

a -

st ru

ct u

re ; o

r- g

a n

iz a

tio n

a l

cu ltu

re

K n

o w

le d

g e

sh

a ri

n g

S C

p e

rs p

e c-

tiv e

A n

te ce

d e n ts

: •

O rg

a n iz

a tio

n a l s

tr u ct

u re

in flu

e n ce

s re

la -

tio n

a l S

C •

IC T

in fr

a st

ru ct

u re

in flu

e n ce

s re

la tio

n a l S

C •

O rg

a n iz

a tio

n a l c

u ltu

re in

flu e n ce

s a ll

th re

e

S C

d im

e n si

o n s

C o

n se

q u e n ts

: •

A ll

th re

e S

C d

im e n si

o n s

in flu

e n ce

k n o w

l- e

d g

e s

h a ri

n g a

m o n g e

n d u

se rs

In te

ra ct

io n a

m o n g S

C d

im e n si

o n s:

• S

tr u

ct u ra

l S C

in flu

e n ce

s co

g n iti

ve S

C a

n d

re la

tio n a l S

C •

C o

g n iti

ve S

C in

flu e n ce

s re

la tio

n a l S

C

N o te

s: N

/A =

n ot

a pp

li ca

bl e;

S C

= s

oc ia

l ca

pi ta

l; I

P O

= i

ni ti

al p

ub li

c of

fe ri

ng ;

t M

t =

t op

m an

ag em

en t

te am

; C

E O

= c

hi ef

e xe

cu ti

ve o

ffi ce

r; S

B U

= s

tr at

eg ic

b us

in es

s un

it ;

IS =

i nf

or m

at io

n sy

st em

s; I

C t

= i

nf or

m at

io n

an d

co m

m un

ic at

io ns

t ec

hn ol

og y.

54 KArAhANNA AND PrEStON

Appendix B: Operational Definitions and Sources of Construct Items CIO-TMT structural social capital

Informal interaction1: Frequency of informal interaction of the CIO with the TMT. Source: Smaltz et al. [113].

InformInter1: I have informal contact with TMT members. InformInter2: I socialize with the TMT members (e.g., social gatherings, golf, tennis, etc.). InformInter3: I have informal exchanges with TMT members.

Structural position: The structural position of the CIO within the organization that allows for official access to the TMT. Sources: Armstrong and Sambamurthy [4], Smaltz et al. [113], CIO interviews.

FormalPos12: How many reporting levels are between you and the CEO? FormalPos23: Are you are you a formal member of the TMT?

CIO-TMT cognitive social capital Shared language4: The degree to which the CIO and TMT share a common language and terminology in their communication. Source: CIO interviews.

ShLanguage1: CIO and TMT members share a common language in our conversations. ShLanguage2: CIO primarily uses business terminology when interacting with TMT members. ShLanguage3: CIO avoids using IS jargon when interacting with TMT members.

Shared cognition4: The degree to which the CIO and TMT have a shared understanding regarding the role of IS within the organization. Sources: Boynton et al. [15], Reich and Benbasat [106], CIO interviews.

ShCognition1: CIO and TMT members have a shared understanding of the role of IS in our organization.

ShCognition2: CIO and TMT members have a shared view of the role of IS as a competitive weapon for our organization.

ShCognition3: CIO and TMT members have a shared understanding of how IS can be used to increase productivity of our organization’s operations.

ShCognition4: CIO and TMT members have a common view regarding the prioritization of IS investments.

CIO-TMT relational social capital TMT’s trust in the CIO4: Sources: Bhattacherjee [12], Mayer et al. [83], McKnight et al. [84, 85], Schoorman et al. [111].

TrustinCIO1: The CIO acts in the best interest of the organization. TrustinCIO2: The CIO is honest in his/her dealings with me. TrustinCIO3: The CIO is competent in what he/she does.

CIO’s trust in the TMT4: Sources: Bhattacherjee [12], Mayer et al. [83], McKnight et al. [84, 85], Schoorman et al. [111].

TrustinTMT1: The TMT acts in the best interest of the organization. TrustinTMT2: The TMT is honest in its dealings with me. TrustinTMT3: The TMT is competent in what it does.

Strategic alignment4: The congruence of the business strategy and IS strategy. Sources: Chan et al. [22, 23], Reich and Benbasat [106], CIO interviews.

StratAlign1: The IS strategy is congruent with the corporate business strategy in your organization.

StratAlign2: Decisions in IS planning are tightly linked to the organization’s strategic plan. StratAlign3: Our business strategy and IS strategy are closely aligned.

1 7-point scale ranging from “daily” (7) to “never” (1). 2 Direct report to CEO (3) to two or more levels (1). 3 “Yes” (1) or “no” (0). 4 5-point scale ranging from “strongly agree” (5) to “strongly disagree” (1).

thE EFFECt OF SOCIAl CAPItAl IN tOP MANAGEMENt 55

Appendix C: Summary Statistics

Variable N Mean SD Min. Max.

CIO-TMT structural social capital Informal interaction1 (3 questions) 81 5.13 1.00 2.33 7.00 Structural position

CIO reporting level3 (1 question) 81 2.27 0.48 1.00 3.00 CIO formal TMT membership4

(1 question) 81 0.52 0.50 0.00 1.00

CIO-TMT cognitive social capital Shared language1 (3 questions) 81 3.93 0.50 2.92 5.00 Shared cognition1 (4 questions) 81 3.98 0.54 2.13 5.00

CIO-TMT relational social capital TMT’s trust in the CIO1

(3 questions) 81 4.58 0.60 2.33 5.00

CIO’s trust in the TMT1 (3 questions)

81 4.41 0.65 2.00 5.00

IS strategic alignment1 (3 questions) 81 4.81 0.73 2.30 5.00 Financial performance

ROA 81 0.05 0.06 –0.16 0.31 ROE 81 0.09 0.11 –0.18 0.63 CFM 81 0.09 0.05 –0.09 0.26

Industry characteristics Number of employees 81 1,605 1,582 136 12,114 Number of beds 81 246 168 32 873

CIO characteristics Age 80 50.14 7.58 35 64 Organizational tenure 81 7.89 6.62 1 26 Positional tenure 81 5.24 4.42 1 22

Notes: SD = standard deviation; Min = minimum; Max = maximum. 1 7-point scale ranging from “daily” (7) to “never” (1). 2 Direct report to CEO (3) to two or more levels (1). 3 Yes (1) or no (0). 4 5-point scale ranging from “strongly agree” (5) to “strongly disagree” (1).

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