Upper echelons under uncertainty: how executive perceptions shape strategic digital investment
Sai Xie, Yuanhan Gu, Zhi YangPurpose
This study aims to examine how executives’ uncertainty perceptions shape firms’ strategic digital investment. While prior research has emphasized structural and skill-based executive antecedents, less is known about how executives’ subjective interpretations of uncertainty influence long-horizon digital commitments.
Design/methodology/approach
Using panel data from Chinese A-share listed firms (2013–2023), the authors construct a text-based measure of executive uncertainty perception (EUP) from MD&A narratives and operationalize strategic digital investment (SDI) as the proportion of digital-related intangible assets. The authors estimate fixed-effects models and triangulate identification using propensity score matching and an instrumental-variable strategy. The authors further test behavioral pathways through TMT risk-taking propensity, R&D intensity and financial leverage and examine heterogeneity across ownership and industry contexts. Finally, the authors assess economic consequences for short-term cash flow and long-term firm value.
Findings
EUP is positively associated with SDI. This relationship is consistently linked to higher TMT risk-taking propensity, while R&D intensity and lower financial leverage reflect broader organizational responses associated with strategic digital investment. The effect is stronger in private firms, low-concentration industries and nonmanufacturing sectors. SDI is associated with lower short-term cash flow but higher long-term firm value.
Originality/value
This study foregrounds executives’ cognitive uncertainty perceptions as a key antecedent of strategic digital investment. Conceptually, it integrates upper echelons theory with real options logic by treating real options as a valuation lens through which perceived uncertainty increases the attractiveness of flexibility-enhancing digital investments and clarifies how this valuation is enacted through observable organizational behaviors. Methodologically, it offers a scalable text-analytic approach to measuring executive perceptions from corporate disclosures.