On IT governance structures and their effectiveness in collaborative organizational structures

Organizations today engage in various forms of alliances to manage their existing business processes or to diversify into new processes to sustain their competitive positions. Many of today's alliances use the IT resources as their backbone. The results of these alliances are collaborative organizational structures with little or no ownership stakes between the parties. The emergence of Web 2.0 tools is having a profound effect on the nature and form of these alliance structures. These alliances heavily depend on and make radical use of the IT resources in a collaborative environment. This situation requires a deeper understanding of the governance of these IT resources to ensure the sustainability of the collaborative organizational structures. This study first suggests the types of IT governance structures required for collaborative organizational structures. Semi-structured interviews with senior executives who operate in such alliances reveal that co-created IT governance structures are necessary. Such structures include co-created IT steering committees, co-created operational committees, and inter-organizational performance management and communication systems. The findings paved the way for the development of a model for understanding approaches to governing IT and evaluating the effectiveness for such governance mechanisms in today's IT‐dependent alliances. This study presents a sustainable IT-related capabilities approach to assessing the effectiveness of suggested IT governance structures for collaborative alliances. The findings indicate a favorable association between organizations' IT governance efforts and their ability to sustain their capabilities to leverage their IT resources. These IT-related capabilities also relate to measures business value at the process and firm level. This makes it possible to infer that collaborative organizations' IT governance efforts contribute to business value.     

The association between human resource investment in IT controls over financial reporting and investment efficiency

This study investigates the association between human resource investment in information technology (IT) controls over financial reporting and its investment efficiency. To conduct the analysis, it uses novel hand-collected data on the number of IT control personnel. In particular, it uses the ratio of (1) the number of IT control personnel, (2) the number of IT control personnel who are certified public accountants to the total number of employees in a firm, and (3) the natural logarithm of average working experience of IT control personnel in months as a proxy for human resource investment in IT controls. This study finds that such investment is negatively associated with the firm's abnormal investment, suggesting that investing in IT control personnel enhances a firm's investment efficiency. Furthermore, not only quantitative but also qualitative investment in IT control personnel improves investment efficiency. We also find that the association between human resource investment in IT controls and a firm's investment efficiency is more pronounced for firms with lower financial reporting quality and information environment. The results of this study provide useful implications for management, regulators, and market participants, as they demonstrate the positive role of investment in IT control personnel on the firm's internal decision.     

Enhancing IT governance practices: A model and case study of an organization's efforts

For many organizations, Information Technology (IT) enabled business initiatives and IT infrastructure constitute major investments that, if not managed properly, may impair rather than enhance the organization's competitive position. Especially since the advent of Sarbanes–Oxley (SOX), both management and IT professionals are concerned with design, implementation, and assessment of IT governance strategies to ensure that technology truly serves the needs of the business. Via an in-depth study within one organisation, this research explores the factors influencing IT governance structures, processes, and outcome metrics. Interview responses to open-ended questions indicated that more effective IT governance performance outcomes are associated with a shared understanding of business and IT objectives; active involvement of IT steering committees; a balance of business and IT representatives in IT decisions; and comprehensive and well-communicated IT strategies and policies. IT governance also plays a prominent role in fostering project success and delivering business value.     

Internal and external influences on IT control governance

This study provides empirical evidence on the effects of internal and external governance on IT control quality proxied by IT related material weaknesses. IT control governance is defined as the leadership and organizational structures and control processes which ensure that the company's IT sustains and extends the company's strategies and objectives. Specifically, we examine the influence of senior management, the board of directors, and audit committees regarding IT control governance. We find that companies with more IT-experienced senior managers, with CIO positions or longer tenured CIOs and with higher percentages of independent board directors are less likely to have IT material weaknesses. We also provide partial evidence that more IT-experienced audit committee members are associated with less IT material weakness. The results suggest that both internal and external governance serve important roles in IT control quality.     

Living IT infrastructures — An ontology-based approach to aligning IT infrastructure capacity and business needs

Changes in organizational processes often interact with changes in the IT infrastructure. Accounting for the structural and economic consequences of changes to the modern IT infrastructure remains a challenge, as their complexity can affect more than one business process, and the need to share a common understanding between the IT and the business management challenges current IT governance practices. An integrative perspective of business processes and IT resources would help meet these challenges, but despite some progress such a perspective remains to be developed. This paper proposes a domain ontology – an Ontology for Linking Processes and IT infrastructure (OLPIT) – to model the relationship between IT resources and business processes for the purpose of measuring the business value of IT. The ontology was developed and evaluated in the context of a design research project conducted in the Hilti Corporation, an international manufacturing company, with the aim of defining how IT impacts the business and calculating the cost of IT services used.     

How do investors underreact to seasoned equity offerings? Evidence from Taiwan's corporate governance evaluation

This study examines whether long-run stock underperformance following seasoned equity offerings (SEOs) differs with a firm's corporate governance practices. We address this issue by using Taiwan's official annual corporate governance evaluation to represent the quality of firm governance. Results show that firms with better governance exhibit positive long-run post-SEO stock performance, whereas those with poor governance continue to be underperforming after SEOs. Our findings reveal that investor’ underreaction to SEOs varies with the levels of corporate governance.     

Impact of IT governance mechanisms on organizational agility and the role of top management support and IT ambidexterity

Organizations have increasingly relied on information technology (IT) to remain agile in today’s business environment. This study examines the antecedents of organizational agility by integrating top management support, IT governance mechanisms (i.e., structural, process-based, and relational governance), and IT ambidexterity (i.e., IT exploration and exploitation) into a research model. We test our model using statistical data collected from 326 firms in China. Our findings indicate that top management support positively influences structural, process-based, and relational governance. Results show that process-based and relational governance positively influence IT exploration and exploitation, whereas IT exploration and exploitation positively influence organizational agility. In addition, top management support positively impacts organizational agility through the dual mediation of process-based and relational governance and IT exploration and exploitation. We interpret and discuss these findings as well as their theoretical and practical implications.     

Corporate Governance,Managers' Independence,Exporting, and Performance of Firms in Transition Economies

Using data on 157 large companies in Poland and Hungary, this paper employs Bayesian structural equation modeling to examine the relations among corporate governance, managers' independence from owners in terms of strategic decision making, exporting, and performance. Managers' independence is positively associated with firms' financial performance and exporting. In turn, the extent of managers' independence is negatively associated with ownership concentration, but positively associated with the percentage of foreign directors on the firm's board. We interpret these results as indicating that concentrated owners tend to constrain managerial autonomy at the cost of the firm's internationalization and performance, but board participation of foreign stakeholders enhances the firm's export orientation and performance by encouraging executives' decision-making autonomy.     

The impact of family control on the use of performance measures in strategic target setting and incentive compensation: A research note

This paper deals with the impact of a firm's governance structure on its management control system (MCS). We argue that the involvement of founding family members in the top management team (TMT) as a corporate governance characteristic has an impact on how the TMT exercises control over subordinates. Based on a sample of 304 mainly small and medium-sized firms, our paper provides empirical evidence that founding family involvement in the TMT is associated with the latter making less use of performance measures in its strategic target setting and incentive practices, and that this impact of family involvement is moderated by firm size.     

Corporate governance post-Enron: Effective reforms,or closing the stable door?

We examine Enron's collapse to provide insights as to the efficacy of recent governance reforms. In doing so, we explore two main issues. First, if recently mandated governance changes had been in place earlier, would they have constrained actions by Enron's management? Second, and more generally, which of the recent governance changes might act to constrain governance failures going forward? Although many aspects of corporate governance failed at Enron, the firm's viability ultimately rested on an inherently risky business strategy, a strategy that the board and others apparently failed to understand. However, it is not apparent that increasing board independence would have changed Enron's strategic direction, or prevented the firm's collapse. From this perspective, many recent reforms, including those mandating specific board structures likely move firms away from their optimal governance structure and are tantamount to closing the stable door after the horse has bolted. We assert that, ceteris paribus, stronger internal controls coupled with reduced potential for conflicts of interest on the part of the external auditor might have constrained management's ability to hide the firm's true financial condition and are likely to constrain aspects of fraudulent behavior going forward.     

Exploring differences between smaller and large organizations' corporate governance of information technology

Corporate governance of information technology (CGIT) is targeted at maximizing IT investment to achieve business objectives and value. Yet there is little empirical evidence about organizations' attitudes to and use of CGIT to deliver such value, or the role of related policies, practices, frameworks and methodologies. This study explored the views of Chief Information Officers and executive managers of smaller and large, primarily Australian organizations, regarding governance of IT. Through a survey, we investigated their views regarding the perc eived relevance, influential drivers, challenges and perceived benefits from the use of CGIT. Regardless of organizational size, our findings demonstrate substantially the same benefits, influences and challenges. Further, besides the widely acknowledged importance of strategic alignment of business and IT, risk management was found to be significant both in influencing the decision to adopt CGIT and as a perceived key capability for delivering improved organizational performance and resource-based value. As such, the study contributes new knowledge related to delivering business value through governing IT.     

Interrelación de la cultura,flexibilidad laboral,alineación estratégica,innovación y rendimiento empresarial

The objectives of this research are to understand the relationships between the organizational practices related to alignment strategies (AE), organizational culture (CO), innovation initiatives (INN), and flexible labor practices (PFL), with the perceived firm's performance from the worker's perspective. To achieve these goals, we use a quantitative analysis with a sample of 98 people working on a firm with more than 500 employees. We define firm's performance using five alternative definitions: Creativity and initiatives (IC), goals achieved (OA), workers’ satisfaction (ST), fast workers’ advance (EO), and resources’ efficient use (AR). Preliminary results indicate that CO and AE positively affect firm's performance under the five alternative definitions used. However, INN and PFL have asymmetric effects in firm's performance, which are sensitive to the firm's performance definition used. Particularly, firms face a tradeoff between performance objectives selection and the organizational flexible processes they pursue. In summary, innovation processes and flexible labor practices work in opposite directions in pursuing the firm's goals achievement, and consequently do not lead to the development of a unidirectional development of a sustainable competitive advantage.     

An Ohlson valuation framework for valuing corporate governance: The case of Taiwan

We examine the relation between a firm's market value, financial performance, and corporate governance as a cointegrated system in the Ohlson (1995) valuation framework. Using a comprehensive set of 29 governance measures in 4 categories for Taiwanese firms, we find that governance related to ownership structure and divergence between cash flow rights and control rights are important for a firm's market valuation. In particular, information about shareholdings of board directors and supervisors, shareholdings of controlling family, and voting rights are influential for firm value. Controlling for book value and residual incomes in the model, these governance measures track much of the remaining firm valuation that is unrelated to a firm's financial performance. Our findings provide some insight into the intrinsic value of corporate governance and the types of corporate governance mechanisms that are especially important for firms with similar ownership structure and controls.     

Six IT decisions your IT people shouldn't make

Senior managers often feel frustration--even exasperation--toward information technology and their IT departments. The managers complain that they don't see much business value from the high-priced systems they install, but they don't understand the technology well enough to manage it in detail. So they often leave IT people to make, by default, choices that affect the company's business strategy. The frequent result? Too many projects, a demoralized IT unit, and disappointing returns on IT investments. What distinguishes companies that generate substantial value from their IT investments from those that don't? The leadership of senior managers in making six key IT decisions. The first three relate to strategy: How much should we spend on IT? Which business processes should receive our IT dollars? Which IT capabilities need to be companywide? The second three relate to execution: How good do our IT services really need to be? Which security and privacy risks will we accept? Whom do we blame if an IT initiative fails? When senior managers aren't involved in these decisions, the results can be profound. For example, if they don't take the lead in deciding which IT initiatives to fund, they end up overloading the IT department with projects that may not further the company's strategy. And if they aren't assessing security and privacy risks, they are ignoring crucial business trade-offs. Smart companies are establishing IT governance structures that identify who should be responsible for critical IT decisions and ensure that such decisions further IT's strategic role in the organization.     

Returns to IT excellence: Evidence from financial performance around information technology excellence awards

The resource-based view has been used in IT business value research to theorize and investigate the impact of unique IT capabilities on sustainable competitive advantages. Prior research has empirically documented a positive association between superior IT capabilities and firm performance. However, such analyses have focused on IT capabilities of firms in the early 1990s. In this study, we examine the impact of superior IT capabilities on firm performance over the 1988–2007 period, which allows us to consider the structural shifts in the return of IT capability over time. Our results suggest that firms with superior IT capabilities are able to attain higher firm performance levels until 1999. However, such performance advantage disappears in the post-1999 time period. We also find that a subset of firms that sustain high levels of IT capabilities during the period 1988 to 2007 continue to perform better than their peers. We conclude that managers are able to achieve superior firm performance if they are able to maintain high levels of IT capability over time.     

IT governance: Objectives and assurances in internet banking

This paper develops and tests a new factor of the trust model in electronic commerce; namely, internet banking. Internal control of internet banking is very consistent with high levels of trust factors such as security, privacy, and other risk issues. However, this type of association has not yet been widely recognized as a trusted model from the consumer's electronic commerce point of view. This study attempts to create new factors in IT governance and the COBIT (Control Objectives for Information and Related Technologies) assurance seal. The empirical results of this experiment show that customer familiarity with IT governance and the COBIT assurance seal has impacted customers' trust in internet banking. Moreover, the results also show that perceived internet banking quality and reputation impact customers' trust in internet banking. Given the results of this study, we propose future research aimed at developing a COBIT assurance web seal of internal control, applicable to information technology based on IT governance.     

Fuel Risk Management at American Electric Power

The senior management team and board of directors at American Electric Power (AEP) have emphasized the importance of an Enterprise Risk Management approach for dealing with the wide array of risk exposures that the firm faces. Senior management has put in place a risk governance structure that facilitates the identification of major risk exposures, assesses their impact on the firm's overall risk profile, and interacts the risk management process with the strategic planning process. Central to this structure is the firm's Risk Executive Committee, which includes the senior leadership of the firm and the Enterprise Risk Oversight staff. Members of the AEP Enterprise Risk Oversight group have just returned from a meeting of the Risk Executive Committee. The discussion at the meeting focused on an event that recently came to the firm's attention—an unexpected disruption in the firm's coal supply over the coming year due to necessary repairs in railroad facilities near the coal source. By the end of the week, the Enterprise Risk Oversight group needs to communicate with the relevant teams within the organization as part of its effort to identify the potential repercussions of the event for the enterprise. In addition, the Risk Executive Committee would like the groups to identify other possible adverse events that could occur and steps that should be taken now in preparation.     

The Credibility of Earnings Forecasts in IPO Prospectuses and Underpricing

This paper provides empirical evidence of the impact of the voluntary disclosure of management earnings forecasts in IPO prospectuses and of the credibility of these forecasts, as perceived by investors at the time of the IPO. We measure forecast credibility ex ante with two approaches: (i) a vector of determinants of credibility that are observable by market participants at the time of the issue and (ii) the predicted value of the forecast error based on some of these determinants. Controlling for the firm's decision on whether or not to issue a forecast, we find that the issue of a forecast reduces underpricing. We find that the quality of the firm's governance and of the auditor and underwriter associated with the issue seems to act as a substitute to the disclosure of an earnings forecast in the prospectus, so that they significantly decrease the level of underpricing only for non‐forecasters. However, despite our various approaches to measure ex ante credibility, we find no association between the pricing of the issue and perceived forecast credibility at the time of the IPO.     

Institutional Monitoring: Evidence from the F‐Score

The extant literature shows that institutional investors engage in corporate governance to enhance a firm's long‐term value. Measuring firm performance using the F‐Score, we examine the persistent monitoring role of institutional investors and identify the financial aspects of a firm that institutional monitoring improves. We find strong evidence that long‐term institutions with large shareholdings consistently improve a firm's F‐Score and that such activity occurs primarily through the enhancement of the firm's operating efficiency. Other institutions reduce a firm's F‐Score. Moreover, we find evidence that, while monitoring institutions improve a firm's financial health, transient (followed by non‐transient) institutions trade on this information.     

Strategic networks,certification, and initial public offerings

This study investigates the certification effect of a firm's strategic alliance network on initial public offerings using a large data set involving 3860 IPO events from the U.S. IPO market. The results show that IPO firms with more direct alliance relationships and a more central position in the strategic network allow them to: (i) attract more prestigious underwriters and greater institutional interest; (ii) experience lower underwriting expenses, larger IPO offer sizes, and higher initial returns; and (iii) achieve superior long-term performance. Further, both the IPO firm and their strategic partners' network positions have prominent impacts on an IPO's initial issuing status and long-term performance. Our results suggest that an IPO firm's strategic alliance network serves as a useful indicator by which to determine the quality of the IPO firm.