Chasing the Hottest IT: Effects of Information Technology Fashion on Organizations1

Abstract

What happens to organizations that chase the hottest information technologies? This study examines some of the important organizational impacts of the fashion phenomenon in IT. An IT fashion is a transitory collective belief that an information technology is new, efficient, and at the forefront of practice. Using data collected from published discourse and annual IT budgets of 109 large companies for a decade, I have found that firms whose names were associated with IT fashions in the press did not have higher performance, but they had better reputation and higher executive compensation in the near term. Companies investing in IT in fashion also had higher reputation and executive pay, but they had lower performance in the short term and then improved performance in the long term. These results support a fashion explanation for the middle phase diffusion of IT innovations, illustrating that following fashion can legitimize organizations and their leaders regardless of performance improvement. The findings also extend institutional theory from its usual focus on taken-for-granted practices to fashion as a novel source of social approval. This study suggests that practitioners balance between performance pressure and social approval when they confront whatever is hottest in IT.