A Study Of The Relationship Between Relational Governance,Formal Governance,and Information Technology Impact

As the business value of information technology(IT)becomes significant and the complexity of IT projects increases,how to realize IT business value with IT risks controlled has drawn extensive attention from both the academia and the industry,and IT governance(ITG)has been a hot topic for the past two decades.ITG consists of the framework for IT decision rights and accountabilities,as well as the processes and mechanisms for making,executing,monitoring and measuring IT decisions,to ensure that the organization's IT sustains and extends the organization's strategy and objectives.Researchers agree that ITG can be realized through a combination of structures,processes,and relational mechanisms.Existing research predominantly focuses on formal governance mechanisms represented by structures and processes,despite the reported difficulty in implementing them.By reviewing IT governance and inter-organizational governance literature,this study argues that relational governance is an alternative way to achieve ITG.Drawing from Relational Contract Theory,the study points out that the nature of relational ITG is utilizing beneficial relational norms between business and IT to realize roles,responsibilities and expectations,and identifies five dimensions of relational norms: role integrity,mutuality,flexibility,conflict resolution,and propriety of means.By a case study of two firms and a survey of 107 firms,the study confirms the proposed dimensional structure of relational norms,and proves that structural and relational social capital between business and IT will serve to promote those norms.The study also verifies that relational norms,process maturity,top management's involvement in IT planning and projects,and top management's knowledge and recognition of IT,will all improve business/IT strategic alignment,and the latter will strengthen IT's impact on the firm's strategic advantage,operational efficiency,and management control.In addition,relational norms also have a significant direct effect on IT's business impact,making it the most important predicting factor in terms of total contribution to IT impact.The study is innovative in three ways.First,it is among the few studies that focus on the relational side of ITG.The study not only thoroughly reviews relevant literature,but theorectically defines and empirically confirms the nature,dimensions,antecedents and outcomes of relational ITG.Second,the study is the first to apply Relational Contract Theory used in inter-organizational governance to ITG,revealing the similarities and differences between the two contexts.Last,the study builds and verifies a complete ITG value creation model by simultaneously examines the relationships between three types of governance mechanisms,business/IT alignment,and IT business impact.The study fills the void in relational governance among existing ITG theories,and provides valuable guidance to ITG practice.