Week6_Banker et al. (2011)_Vicky Xu

CIO Reporting Structure, Strategic Positioning, and Firm Performance

Since the previous studies on the CIO reporting structure is still unclear, and the pursuit of the ideal CIO reporting structure remains an unresolved issue both in the academic and also the practitioner IS literature, Banker et al. (2011) investigate the alignment or “fit” between the CIO (a.k.a. CTO) reporting structure and a firm’s strategic positioning, using business performance as the outcome of such alignment. The CIO manages IT within a firm, the responsibilities of CIO includes but not limited to managing IT resources, overseeing IT operation, involving firm strategy making, and improving firm performance.

Banker et al. (2011) address two research questions:

1. How does a firm’s strategic positioning (differentiation or cost leadership) influence its CIO reporting structure (CIO reporting to the CEO versus to the CFO)?
2. Is there an alignment or “fit” between the CIO reporting structure and the firm’s strategic positioning that is associated with higher firm performance?

Depending on the reporting structure, a CIO can either report to a CFO or a CEO within a firm. Depending on the business positioning strategy, a firm can be a product differentiator or cost leader. The authors consider two CIO reporting relationships that correspond to a firm’s strategy: (1) direct reporting to the CEO, enabling the CIO to use IT to support a differentiating strategy, or (2) direct reporting to the CFO, enabling the CIO to use IT to support a cost leadership strategy. The following table (Table 1, p492) shows the reporting structure and strategic positioning arrangement:

By analyzing the data set that collected by integrating data from two surveys, Banker et al. (2011) find out that the CIO-CEO reporting structure is more suitable for firms using the position strategy of differentiation; while the CIO-CFO reporting structure is more fitting for firms using the position strategy of cost leadership.