Week6_Xue et al (2010)_Xinyu

Driven by the contradictory empirical findings from extant literature, Xue et al. (2010) seeks to answer the question about the relationship between environmental uncertainty and centralization/ decentralization of IT governance. Because IT governance can be multidimensional constructs, to gain a better understanding of the relationship, this paper only focus on IT infrastructure governance.

Most of the prior research suggests environmental uncertainty will increase the decentralization of IT infrastructure governance because decentralization improves flexibility and responsiveness of business units which are crucial in uncertain environments. However, other theories such as agency theory suggests that decentralization in highly uncertain environments increases headquarters’ monitoring and evaluation costs, and also prevents efficient coordination and resource sharing among different business units. Therefore, this paper proposes a curvilinear relationship between environmental uncertainty and IT infrastructure governance, in which decentralization will increase as uncertainty moves from low to intermediate but will decrease as uncertainty moves from intermediate to high. In addition, the paper also proposes that the curvilinear relationship will be strengthened when business units and their headquarters are in unrelated business.

The unit of analysis in this study is business unit. There are three main constructs. The IT infrastructure governance is measured by a binary variable indicating whether the majority of IT infrastructure decisions are made by business unit managers. Environmental uncertainty is conceptualized by three dimensions—dynamism, munificence and complexity. Business unrelatedness is measured as the difference between a business unit and its headquarters’ NAICS industry codes. The model is constructed using a logistic regression. Both the curvilinear relationship between environmental uncertainty and IT infrastructure governance and the moderating effect of business unrelatedness are empirically confirmed.