Towards an Understanding of Board IT Governance: Antecedents and Consequences
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Board involvement in Information Technology (IT) governance and the antecedents and consequences of such involvement are examined from both a theoretical and practical perspective. Practitioner and academic IT governance literature highlight the need for increased board involvement in IT governance; however, it seems that many corporate boards do not practice a formalized style of IT governance, while those that do, face significant challenges. A gap clearly is seen as in spite of the potential benefits of board IT governance and the costs of ineffective oversight, there has been little field-based research in this area, nor adequate application of theory. This research addresses this gap by developing and testing an exploratory multi-theoretic framework of board IT governance. Drawing upon strategic choice and institutional theories, and Ashby’s Law of Requisite Variety, a model of the antecedents (organization factors and board attributes) of board IT governance and its consequences (financial performance and operational performance) is both developed and tested. Unlike previous studies, board IT governance is designated as a central construct in this model rather than a secondary factor. Constructs of board IT governance and IT competency are explored and multi-item measures for both constructs are developed. Board IT governance is conceptualized as the extent of offensive and defensive board oversight activities, while IT competency is conceptualized as the extent of IT expertise (IT knowledge, experience and training) and IT governance mechanisms (structures, processes and relational mechanisms). Detailed interviews with board members enabled a preliminary examination of the theoretical framework. To further test the propositions in the theoretical framework and to validate the measures for the board IT governance and IT competency constructs, an online survey was administered to corporate directors across Canada. Exploratory Factor Analysis and Ordinary Least Squares multiple regression were used to analyze responses from 188 directors. The board IT governance and IT competency constructs were well supported by the data. In addition, the results show that the organizational factors explain 28% of the variance in board IT governance, and that board attributes explain 39% more of the variance, for a total explained variance in board IT governance of approximately 68%. The results also show that board IT governance has a positive impact on operational performance, explaining 19% of the variance in operational performance. However, the proposed impact of board IT governance on financial performance, and the impacts of ‘fit’ between role of IT and board IT governance approach on financial and operational performance were not supported by the survey results. Overall, this research makes a theoretical contribution by: focusing on the board’s role in IT governance; developing a multi-theoretical model of the antecedents and consequences of board IT governance; developing measures of board IT governance and board IT competency, and; empirically assessing the antecedents and consequences of board IT governance.