Week 9 Reading Summary – Pang et al. (2016, Mgt Sci) – Xi Wu

Pang, M.-S., Tafti, A., & Krishnan, M. S. (2016). Do CIO IT Budgets Explain Bigger or Smaller Governments? Theory and Evidence from U.S. State Governments. Management Science, 62(4), 1020–1041.

There is a fundamental economic debate among the public, the media, and academia as to what is the proper boundary and role of a government in the contemporary economy. Technological development as one of the key factors behind government growth, should be paid more attention. This study is interested in how information technology (IT) investments made by governments affect the size of government spending. More specifically, this paper examines the relationship between IT budgets of a state chief information officer (CIO) and state government size.

Two opposing hypotheses are proposed. One is that IT investments make state administration more efficient, productive, and transparent, leading to a reduction in state expenditures. The other one is that state governments can utilize digital technologies in initiating a new range of public services that would not have been offered without IT and having a greater control over functions that external organizations would otherwise handle, thus increasing government spending.

Using a variety of data on IT spending and state government expenditures, this study finds that greater IT investments made by a state chief information officer (CIO) are associated with lower state government spending. It is estimated that on average, a $1 increase in state CIO budgets is associated with a reduction of as much as $3.49 in state overall expenditures. Dynamic panel-data model is applied the empirical analysis. A series of robustness checks are implemented to provide further evidences and support the hypothesis.

This work contributes to the IS literature by expanding the boundary of IS research on IT and organizational size to the public sector organizations, to which the IS research has not paid as much attention as it has to the business setting.