IT AS A PROBLEM AND A SOLUTION FOR ENVIRONMENTAL SUSTAINABILITY: WHEN DOES IT PAY TO BE GREEN?

Abstract

Information technology (IT) is emerging as a key element in environmental sustainability. In academic discourse, IT is commonly perceived as concurrently posing challenges and offering solutions to climate-related concerns. However, the existing literature lacks an in-depth understanding of the adverse impacts of different IT resources on the environment and how such impacts can be mitigated. Beyond its detrimental environmental effects, the influence of IT on green productivity remains relatively understudied in academic literature. This dissertation encompasses two empirical studies aiming to understand how IT can lead to organizational success in light of the rapid transformation toward a more sustainable economy and society. The first study examines the impact of two different IT resources – i.e., on-premises IT (OPIT) and on-demand IT (ODIT) – on a firm’s carbon intensity level. We extend this study by examining the moderating role of green management strategies – i.e., environmental board oversight and environmental management incentives – on the effect of OPIT and ODIT on a firm’s carbon intensity level. Using archival data with a sample of 3074 observations collected from 864 firms between 2016 and 2019, we find that OPIT usage is positively associated with carbon intensity, whereas ODIT usage is negatively associated with carbon intensity. In addition, we find that, while environmental board oversight reduces the positive impact of OPIT on carbon intensity, environmental management incentives strengthen the negative impact of ODIT on carbon intensity. The second study aims to investigate the effect of green practices on firm financial performance while considering the moderating role of information technology (IT). Using archival data with a sample of 2800 observations collected from 864 firms between 2016 and 2019, we show that there is a nonlinear relationship – an inverted U-shaped curve – between green practices and firm financial performance. We also find that the inverted U-shaped curvilinear relationship between green practices and financial performance is moderated by IT such that the impact of green practices on firm financial performance is stronger when IT intensity is high. Both studies reveal new insights on how firms mitigate the environmental impacts of IT resources (i.e., IT as a problem) and how IT enhances firm financial performance as the number of green practices scales (i.e., IT as a solution). It also informs the managerial decision-makers about how to align the appropriate green practices with IT capabilities to enhance organizational outcomes.