A moral hazard perspective on environmental uncertainty and IT governance

Ling Xue, Gautam Ray, Bin Gu

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Abstract

Using a moral hazard model, this study examines the relationship between environmental uncertainty and the adoption of decentralized IT governance. We show that this relationship is determined by a trade-off between the need for processing local information and the concern on moral hazard. The trade-off results in an inverted-U-shaped relationship between environmental uncertainty and decentralization in IT governance. The increase in environmental uncertainty first increases and then decreases the likelihood of adopting decentralized IT governance, and thus decentralized IT governance is less likely to be adopted when the external environment is either highly stable or highly turbulent. We validate our analytical result using a sample of 455 business sites of Fortune 1000 companies. The empirical analysis provides evidence consistent with an inverted-U-shaped relationship between environmental uncertainty and decentralization in IT governance.

Original languageEnglish (US)
Title of host publication14th Americas Conference on Information Systems, AMCIS 2008
Pages1158-1167
Number of pages10
StatePublished - Dec 1 2008
Event14th Americas Conference on Information Systems, AMCIS 2008 - Toronto, ON, Canada
Duration: Aug 14 2008Aug 17 2008

Publication series

Name14th Americas Conference on Information Systems, AMCIS 2008
Volume2

Other

Other14th Americas Conference on Information Systems, AMCIS 2008
CountryCanada
CityToronto, ON
Period8/14/088/17/08

Keywords

  • Agency theory
  • Environmental uncertainty
  • IT governance
  • Moral hazard

ASJC Scopus subject areas

  • Computer Science Applications
  • Computer Networks and Communications
  • Library and Information Sciences
  • Information Systems

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  • Cite this

    Xue, L., Ray, G., & Gu, B. (2008). A moral hazard perspective on environmental uncertainty and IT governance. In 14th Americas Conference on Information Systems, AMCIS 2008 (pp. 1158-1167). (14th Americas Conference on Information Systems, AMCIS 2008; Vol. 2).