Does mandated RFID affect firm risk? The moderating role of top management team heterogeneity

The adoption of radio-frequency identification (RFID) can improve the efficiency of firms. However, RFID may also affect the risk and uncertainty in the operations of a firm. Although several studies have examined the effects of RFID on firm performance, the effects of mandated RFID on firm risk and the influence of top management team (TMT) characteristics on such effects remain largely unexplored. By examining mandated RFID in manufacturing industries, this study reveals that mandated RFID reduced firm risk in the long term. We further examined TMT heterogeneity to capture the influence of TMT cognitions and behaviors on mandated RFID related to firm risk. The results show that manufacturers with higher levels of demographic heterogeneity and higher levels of pay dispersion from incentive compensation experienced a greater reduction in firm risk following mandated RFID. However, pay dispersion of base salary compensation had no moderating effect on the relationship between mandated RFID and firm risk. The findings of this research provide important insights that an appropriate match between mandated RFID and certain TMT characteristics can lower firm risk associated with mandated RFID. The present study also contributes to information technology and operations management literature by providing the first empirical evidence showing the effect of mandated RFID on long-term firm risk and the influence of TMT heterogeneity on that effect.