IT Infrastructure Governance and IT Investment Performance: An Empirical Analysis

The value of information technology (IT) investment comes increasingly from its ability to complement and enable business strategies and organizational capabilities. As a general purpose technology, however, IT could either a complement or a constraint. Making the right IT investment, particularly the right IT infrastructure investment could thus have far-reaching impact on a firm " s IT investment performance. A necessary condition to make the right IT infrastructure investment is to ensure that a firm " s IT infrastructure governance (ITIG) configuration is aligned with the firm " s organizational structure and business strategies. In this study, we use a two-step approach to provide an empirical assessment of the impact of the ITIG alignment on IT investment performance. We first recognize that a key challenge is that the appropriate IT governance mode varies across both firms and business units within. We address the challenge by extending the multiple contingency theory for IT governance from the firm level to the business unit level. We use the business unit level multiple contingency theory to develop an empirical model to predict the appropriate ITIG configuration for each business unit and use the difference between the predicted and observed ITIG configurations to derive a multiple contingency theory based measure of ITIG misalignment. We then assess the relationship between ITIG misalignment and IT investment performance across a Fortune 1000 firm samples. We find that firms with high ITIG misalignment receive limited benefits from IT investments; whereas firms with low ITIG misalignment obtain about twice the value from their IT investments compared to firms with average ITIG misalignment.