To Calculate or To Follow Others : How Do Information Security Managers Make Investment Decisions?

Abstract

Economic models of information security investment suggest estimating cost and benefit to make an information security investment decision. However, the intangible nature of information security investment prevents managers from applying costbenefit analysis in practice. Instead, information security managers may follow experts’ recommendations or the practices of other organizations. The present paper examines factors that influence information security managers’ investment decisions from the reputational herding perspective. The study was conducted using survey questionnaire data collected from 106 organizations in Finland. The findings of the study reveal that the ability and reputation of the security manager and the strength of the information about the security investment significantly motivate the security manager to discount his or her own information. Herding, as a following strategy, together with mandatory requirements are significant motivations for information security investment.