Week8 – Reading Summary -Leting Zhang

Tiwana, A., Kim, S. K., & Kim, S. K. (2015). Discriminating IT Governance. Information Systems Research, 143(December 2015). 

Based on the idea that different types of IT assets must be governed different, the paper examines an interesting research question: how does the interplay between firms’ IT governance choices and departmental peripheral knowledge influence IT strategic agility?

The theoretical foundation is Jensen and Meckling’s theory, the central idea is that decision rights must be colocated with the knowledge needed to make those decisions when the two are not colocated, there are delegation solution and transmission solution.  In the IT context, both the delegation and transmission solution should be used,  increasing the peripheral knowledge is also important in tandem with IT governance. Then they propose, For the IT apps, which are often uniquely tailored to different functions, JM’s delegation solution could minimize problems like agility-imperiling delays. Then, with more business knowledge, IT unit could better help line functions, which could increase the strategic agility. However, for IT infrastructure decision which requires deep technical expertise and holistic understanding, JM’s delegation solution implies the centralization of IT infrastructure governance is an optimal strategy. In the meantime, with the increase in line function’s technical knowledge, the strategic agility could be promoted.

In order to test these hypotheses, the authors design a survey and collected matched-pair data from senior IT managers and line function managers in 105 U.S firms. Data on IT strategic agility were collected from line function managers, other variables come from IT managers. Constructs in surveys are based on prior literature. After testing their validity, they use  Garen’s two-stage econometric techniques to analyze the data. In the first stage, they evaluated the endogeneity concern by Hausman test. In the second stage, they use a three-step hierarchical weighted least squares (WLS) model to test hypotheses.They also solve some main endogeneity concerns.  The paper’s main contributions are showing 1. IT governance enhances IT strategic agility only when it is discriminatingly aligned with departments’ peripheral knowledge; 2. governance-contingent nature of which department needs peripheral knowledge.