Apocalypse Now (or Later?): Climate Change and Non-Implementation of IT Applications

Adverse Climatic Events (ACEs) are physical manifestations of climate change threatening global societies and businesses alike. We examine the effect of ACEs on the composition of the information technology (IT) portfolios of firms. Using a unique fifteen-year panel dataset, we find a negative relationship between ACEs and both the size and composition of the IT Portfolio of firms. This negative impact is more for Other IT than Strategic IT systems. Further, though the effect is negative and significant on both categories of Strategic IT, there is a more pronounced impact on Growth IT as compared to Efficiency IT. Additionally, we find that operational slack (inventory slack) mitigates the negative effect of ACEs on firms’ IT portfolios. Overall, our results indicate that following exposure to ACEs, firms reallocate resources away from their IT portfolios, therefore resulting in non-implementation of IT applications, thereby serving as a cautionary note to executives and managers.