The relationship between CTO and performance

Abstract

Upper-echelon theory has identified top managerspsila influence on organizational outcomes, but no study has assessed the impact of a Chief Technology Officer (CTO) on firm performance. This study deals with two integrated questions: do CTO roles affect firmpsilas performance and which factors enhance the effectiveness of CTO roles? Based on a survey of 49 electronic and machinery firms in Turkey, the study finds that even though the CTO position does not prevail, CTO roles are performed in varying degrees. The findings confirm the upper-echelon theory that performing decisional CTO roles increases profitability of firms and the educational background of a manager carrying out CTO roles strengthens this positive impact. Further, the study clearly shows the role of social capital theory in explaining how the effectiveness of a CTO increases when he/she is embedded in the top management relations. The hierarchical level of a CTO thus directly increases the impact of both decisional and informational roles on performance. The informational roles of a CTO result in a positive impact on profitability when a CTO has frequent communication with a CEO. In other words, the higher the extent of networking, the higher profits achieved from the realization of informational roles. As a final observation, the size of the company affects profitability, the bigger the firm the better the performance.