Week 9- Reading Summary-Leting Zhang

Pang, M.-S., Tafti, A., & Krishnan, M. S. (2014). Information Technology and Administrative Efficiency in U.S. State Governments: a Stochastic Frontier Approach1. MIS Quarterly, 38(4), 1079-A16. 

In recent decades, IT has become an indispensable tool for major strategic initiatives in state governments, but whether these efforts improve the administrative efficiency remain is unknown. In order to get a better understanding of IT’s impact on the public sector, this study estimates the relationship between IT spending and cost efficiency in U.S. state government.

IT investments in government organizations can lead to cost efficiency improvements in two ways:  reducing human labor and enhancing the productivity of the administrative process; automating digitized business and increasing transparency and accountability in administration. Furthermore, the study proposes three moderating factors from economic, demographic and political environments respectively, specifically, given in the states with more private-sector IT industries or a larger share of rural population or more divided government, the positive of IT would be stronger.  Then authors leverage several public data sources and use a two-stage estimation approach to analyze data. Because there is not a collective output measure for state government, and production of public service is exogenous, the study uses cost function and to posit state governments attempt to limit the use of inputs accordingly. In the first stage, they measure the cost efficiency of state governments in a stochastic frontier analysis with a translog cost function; in the second state, they regress the estimated efficiency on IT measures and other exogenous factors that are used in previous literature. The estimated results support all of their hypothesis.

The study offers meaningful policy implication, specifically, the results justify states governments’ investment in IT. It also contributes to the IS by integrating research from IS, political sciences, and public economics, expanding the boundary of IT value research to the public sector.