IT governance and business value in the public sector organizations — The role of elected representatives in IT governance and its impact on IT value in U.S. state governments

• We study the impact of IT spending on cost efficiency in U.S. state governments.
• We measure the moderating effect of the involvement of state legislatures in IT value.
• The returns to IT investments are greater when state legislatures are part of IT governance.

This paper studies IT business value in the public sector organizations, to which the information systems (IS) literature so far has paid little attention. Specifically, we investigate the moderating effect of IT governance on the relationship between IT investments and government performance. Drawing upon the theory of political control on bureaucracy from the political sciences literature, we hypothesize that the presence of legislative controls on IT management increases returns to IT spending, which are measured by cost efficiency. Our empirical analysis in the context of U.S. state governments shows that formal establishment of a chief information officer (CIO) position by legislation is a key prerequisite to positive returns from IT expenditures in state governments. Also, the impact of IT spending on state cost efficiency increases when a state senate approves appointment of CIO nomination than when it does not. This study contributes to the IS literature by demonstrating the importance of elected representatives as part of IT governance in the public sector organizations.