Environmental Uncertainty and IT Infrastructure Governance: A Curvilinear Relationship

Information Systems Research 22(2), 2011, pp. 389-399

13 Pages Posted: 20 Apr 2010 Last revised: 10 Nov 2013

See all articles by Ling Xue

Ling Xue

Georgia State University

Gautamn Ray

University of Minnesota - Twin Cities - Department of Operations and Management Science

Bin Gu

Arizona State University (ASU) - Department of Information Systems

Date Written: April 20, 2009

Abstract

Extant research considers the IT governance choice to be a trade-off between the cost-efficiency of centralization and the responsiveness provided by local information processing. This view predicts that firms tend to decentralize IT governance in more uncertain environments. We investigate this issue by studying the relationship between environmental uncertainty and IT infrastructure governance in a sample of business units from Fortune 1000 companies. The key proposition in this paper is that the relationship between environmental uncertainty and decentralization in IT infrastructure governance is best characterized as a curvilinear relationship. That is, when environmental uncertainty increases from low to high, firms tend to first decentralize their IT infrastructure decisions to the business units in order to enhance their responsiveness; and then centralize their IT infrastructure decisions to the headquarters as uncertainty increases further, in order to achieve the benefits of coordination and to mitigate the potential agency problem in uncertain environments. Moreover, the study proposes that the business unrelatedness between business units and their headquarters moderates the curvilinear relationship between environmental uncertainty and IT infrastructure governance. We find that both the propositions are supported by the data.

Keywords: IT infrastructure governance, Environmental uncertainty, Agency theory

Suggested Citation

Xue, Ling and Ray, Gautamn and Gu, Bin, Environmental Uncertainty and IT Infrastructure Governance: A Curvilinear Relationship (April 20, 2009). Information Systems Research 22(2), 2011, pp. 389-399. Available at SSRN: https://ssrn.com/abstract=1593115 or http://dx.doi.org/10.2139/ssrn.1593115

Ling Xue (Contact Author)

Georgia State University ( email )

35 Broad Street
Atlanta, GA 30303-3083
United States

Gautamn Ray

University of Minnesota - Twin Cities - Department of Operations and Management Science ( email )

Minneapolis, MN 55455
United States

Bin Gu

Arizona State University (ASU) - Department of Information Systems ( email )

Tempe, AZ
United States

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