The central theme of this paper is that information technology (IT) can serve to create ethical organizations endowed with virtuous characteristics, and that such ethical organizations can innovate better in todays dynamic market environment. Drawing on the notion of virtue ethics propounded by the Greek philosopher Aristotle, we theorize that core organizational IT affordances influence the development of organizational virtues, which in turn influence organizational improvisational capabilities and innovation. We propose the "IT-virtues-innovation" (IVI) model and test it using a cross-organizational survey of 250 employees from various organizations in the United States. Our findings largely support our proposal that IT affordances positively influence organizational virtues, which then influence organizational improvisational capabilities, thus improving organizational innovation. This paper contributes to the understanding of organizational innovation by articulating the strategic usefulness of IT-enabled organizational ethics, and it explains how IT-enabled ethical competence (virtues) influences strategic competence (improvisational capabilities and innovation).