Week 9_Pang et al. (2015)_Jung Kwan Kim

Pang, Tafti, and Krishnan (2015) conjoin multiple perspectives of the Information system, Public economics, and Political science literatures to examine the relationship between IT and governmental size. More specifically, the authors attempt to reveal the impact of IT budgets of a state CIO on state government size.

Theoretically, we can expect both positive and negative relationships. On the one hand, as the Hypothesis 1A argues, “the size of CIO IT budgets in a state is associated with lower state government spending.” This argument can be supported in that the introduction and advancement of IT systems may 1) increase the productivity of administrative processes, 2) ameliorate information asymmetry between legislatures and governmental agencies with lower monitoring costs, and 3) decrease the costs of transaction and coordination by more privatization of public services. Collectively, these benefits facilitate the reduction of government size.

On the other hand, the competing Hypothesis 1B contends that “the size of CIO IT budgets in a state is associated with larger state government spending.” Its main rationales are, 1) the IT infrastructure and enterprise systems may create strategic initiatives to serve public areas which used to be underserved; 2) the enhanced capabilities to monitor and coordinate administrative processes can lead to push further the boundary of administration, even incorporating some roles of federal, local, and private players.

Based on system GMM model with a five-year unbalanced panel data of 190 observations from 44 states, the empirical test supports the Hypothesis 1A, implying that more IT investment by state CIOs are associated with lower state governmental expenditures. This main finding suggests that the increase in the IT budgets by state CIOs may mitigate “bureaucrats’ interests to maximize their expenditures.”