Week 9_IT Governance and Business Value_Vicky Xu

IT governance and business value in the public sector organizations –The role of elected representatives in IT governance and its impact on IT value in U.S. state governments

Pang (2014) examines the moderating effect of IT governance on the relationship between IT spending and performance, measured by cost efficiency, in U.S. state governments. Different from prior studies, Pang (2014) studies the impact of IT governance on performance in the public sector, which is the new setting in IT governance research, meanwhile Pang (2014) focuses on the principal side of IT governance effect of legislative controls on IT management and investments.

Pang (2014) presents the following hypotheses:

H1: All others being equal, the association between IT spending and cost efficiency is stronger in states whose legislature has an IT-related legislative committee than in ones without such a committee.

H2: All others being equal, the association between IT spending and cost efficiency is stronger in states whose CIO position is established by legislation than otherwise.

H3: All others being equal, the association between IT spending and cost efficiency is stronger in states whose legislature approves a state CIO nominee than otherwise.

Pang (2014) adopts two-stage estimation approach in this study. First, cost efficiency of each state-year observation estimated by a stochastic frontier model. Second, the estimated cost efficiency regressed on IT spending and governance measures and control variables.

There are several findings in this study: (1). The empirical analysis results show that IT spending in U.S. state governments has positive effects on cost efficiency in state governments. (2). Supervision of state legislatures on IT management and approval of a CIO appointee complement each other. The main contributions include: First, this research contributes to the literature on IT business value and IT governance. Second, a new finding presented to the IS literature that the involvement of principals in IT management helps organizations utilize IT resources more effectively. Third, this study contributes to the literature by recombining research from two distant literatures (IS and political sciences). Finally, this study has several important managerial implications for the public sector organizations.