Role of substantive and rhetorical signals in the market reaction to announcements on AI adoption: a configurational study

ABSTRACTHow do shareholders respond to technologies hyped in general discourse, e.g., artificial intelligence (AI), if a common understanding is lacking and the technologies are still evolving? Do they respond primarily to substantive signals in technology announcements, such as AI capabilities, or do rhetorical signals also play a significant role? Adopting signalling theory as a theoretical lens, we conceptualise announcements of AI capabilities as substantive signals and linguistic elements in the announcements pertaining to organisational time horizon and risk-reward considerations as rhetorical signals. Departing from the typical focus on bijective relationships, we consider holistic, complex configurations of interdependent factors using the qualitative comparative analysis (QCA) methodology. Notably, announcements pertaining to AI capabilities are not necessarily associated with positive market reactions; in fact, when all three types of AI are included in announcements without explicit consideration of risks, shareholders react negatively. We find that shareholder response is based on joint evaluation of substantive and rhetorical signals, and that these signals interact in a complex way to produce positive and negative market reactions. These findings motivate several propositions for market reactions to IT announcements, providing implications for both theory and practice.KEYWORDS: Artificial intelligence (AI)IT business valuesubstantive and rhetorical signalsIT announcementorganisational time horizonsCrisp-set qualitative comparative analysis (csQCA) Disclosure statementNo potential conflict of interest was reported by the author(s).Notes1. We thank an anonymous reviewer for this suggestion. We thank the review team for guiding us to specifically focus on maturity.2. Substantive signals are messages that provide meaningful information about a firm’s investments or activities, indicating its current and/or future capabilities. Rhetorical signals are messages that use language elements to appeal to emotions and/or reason.3. Organizational time horizon includes present-focus and future-focus. Present-focus pertains to signals articulating whether AI business value will be realised in the short-term. Future-focus pertains to signals articulating whether AI business value will be realised in the long-term.4. Risk-Reward orientation includes risk-focus and reward-focus. Risk-focus pertains to signals articulating risks associated with AI investment. Reward-focus pertains to signals articulating rewards associated with AI investment.5. We examined three types of AI: (1) Automation AI automates structured and repetitive work processes; (2) Insight AI helps firms gain insights through extensive analysis; and (3) Engagement AI engages employees and customers by providing them with rich personalised information or services.6. We thank an anonymous reviewer for suggesting this timeframe.7. We would like to express sincere thanks to an anonymous reviewer for highlighting this aspect.8. The output column (OUT) in the truth table is coded in mainly three values: positive (1) and negative (0) for those configurations where empirical evidence does exist, and unknown (?) for those remainder configurations for which there is no empirical evidence. OUT = 1 if the observed configuration has the inclusion score that is greater than inclusion cut-off 0.8 and OUT = 0 if vice versa.Additional informationFundingThe work was supported by the NUS Business School Financial Database [WBS: N-311-000-251-001]; Singapore Ministry of Education Academic Research Fund Tier 1 [WBS R-314-000-117-115]; Universite Laval [Soutien à la recherche (SAR) Faculté des Sciences de l'administration].Notes on contributorsRohit NishantRohit Nishant (rohit.nishant@fsa.ulaval.ca) is an Associate Professor at MIS Department, Faculté des sciences de l'administration, Universite Laval, Quebec, Canada. He holds a PhD in management from NUS Business School, where he was valedictorian for the class of 2015. His dissertation won the World Future Foundation prize for the best PhD thesis (2015). He is also the winner of the SIM Annual Best Paper Competition Winner, 2010. His research has been published/ accepted for publication in several international refereed journals such as MIS Quarterly, Journal of the Association for Information Systems (JAIS), The Journal of Strategic Information Systems (JSIS), Journal of Information Technology, Information Systems Journal, Decision Sciences, Research Policy, IEEE Transactions on Engineering Management and MIS Quarterly Executive.Tuan (Kellan) NguyenTuan (Kellan) Nguyen (t.t.nguyen@exeter.ac.uk) is a Lecturer in Operations and Analytics, Faculty of Environment, Science and Economy, University of Exeter. Before his appointment, Kellan had worked at IESEG School of Management, France and Middlesex University London, UK. He received his PhD in Management from National Tsing Hua University, Taiwan. He was a visiting research scholar at National University of Singapore, Singapore. Dr. Nguyen’s research endeavours are dedicated to the betterment of both business practices and human values, with a particular emphasis on Digital Innovation, Service Science, IT Business value, Sustainable Management, and Asymmetrical Comparative Analysis. He has published in European Journal of Information Systems, Journal of Business Research, International Journal of Electronic Commerce, Electronic Markets, Electronic Commerce Research and Applications, and other journals.Thompson S. H. TeoThompson S. H. Teo (bizteosh@nus.edu.sg) is a Professor in the Department of Analytics and Operations at the School of Business, National University of Singapore. His research interests include technology adoption, green IT, knowledge management, e-government, and sustainability. He has served as a Senior Associate Editor for the European Journal of Information Systems, Regional Editor (Asia and Pacific) for the International Journal of Information Management, and Editorial Review Board member for IEEE Transactions on Engineering Management. Thompson is currently serving as an Associate Editor for the Communications of the AIS, Information & Management, and Omega, as well as an Editorial Board Member for MIS Quarterly Executive. He has coedited four books on IT and e-commerce, and is also a four-time winner of the SIM Paper Awards Competition. He won the Best Associate Editor Award 2017 from the Communications of the Association for Information Systems.Pei-Fang HsuPei-Fang Hsu (pfhsu@iss.nthu.edu.tw) is Professor and Director at the Institute of Service Science, College of Technology Management, National Tsing Hua University, Taiwan. She received her Ph.D. in Information Systems from the Paul Merage School of Business at the University of California, Irvine. Her research focuses on the adoption and value of information systems, IT user behavior, and IT-enabled service innovations. She has published in European Journal of Information Systems, Journal of Management Information Systems, International Journal of Electronic Commerce, Decision Support Systems, Decision Sciences, Information and Management, Journal of Business Research and other journals.