Towards a deeper understanding of information technology governance effectiveness: A capabilities-based approach

Given the substantial investment in information technology (IT), and the significant impact it has on organizational success, considerable organizational resources are consumed to manage how IT is acquired and used in organizations. While, various arguments have been put forward to suggest which IT governance arrangements may work best, the effectiveness of such initiatives is not well understood. Specifically, while current arguments postulate that it is the firms IT-related capabilities that explain performance differences across firms, the relationship between firms IT governance initiatives and these capabilities is not well understood. Thus, we examine the relationship between the effectiveness of IT steering committee-driven IT governance initiatives and firm’s IT management and IT infrastructure related capabilities. We further propose that firm’s IT-related capabilities, generated through IT governance initiatives should improve its business processes and firm-level performance. We test these relationships empirically by a field survey of 216 firms. Results of this study suggest that a firms’ effectiveness of IT steering committee-driven IT governance initiatives are positively related to the level of their IT-related capabilities. We also found positive relationships between IT-related capabilities and internal process-level performance. Our results also support the conjecture that improvement in internal process-level performance will be positively related to improvement in customer service and firm-level performance. For researchers, we have demonstrated that the resource-based theory provides a more robust explanation of the determinants of firms IT governance initiatives, and would be ideal in evaluating other IT governance initiatives effectiveness in relation to how they contribute to building performance-differentiating IT-related capabilities. For decision makers, we hope our study has reiterated the notion that IT governance is truly a coordinated effort, embracing all levels of human resources.