Study On Relationships Between Information Technologies Governance And Internal Control On Firms' Performance

There are contrary research views and reality results about whether information systems(IT)bring super business value or not.Other researchers think IT must coordinate with other resources as to obtain special IT capabilities.Among related concepts as IT investment,IT resources,IT capabilities,IT controls and IT governance,IT governance can be seen an integrated mechanism covering all the other IT activities.Although there are some opinions to explain how IT get extra performance with synergy with other enterprise's resources,such as IT-strategic alliances,IT-knowledge management synergies,IT-business complementary,etc.al.But all of the study focused on IT governance work with partial resource of a company only.Is there any more comprehensive mechanism which can substitute or cover aforementioned relationships and influence firm's performance? There are still wide space to explore.Meanwhile,Internal Control-Integrated Framework and Enterprise Risk Management-Integrated Framework(Hereafter COSO)are widely used in all over the world.IT controls get more attentions and play more and more important role in internal control systems when countries improve the two frames.Based on background just mentioned,three research questions are proposed:(1)What is the dynamic mechanism between IT governance and firm's performance?(2)Whether IT governance have effect on firm's performance when synerging with internal control? If so,what is the detail mechanism?(3)Considering the uncertainty such as organization's complexity,will the relationship between IT governance and internal control on firm's performance be influence? Following research is conducted from the 3 research questions.First,this paper analyses the theoretical framework of IT governance on firms performance.Based on institution background and literature review,this paper distinguishes the different concepts around IT,develops a new framework of IT governance on firm's performance.That is,on one hand,IT governance allocate resources to invest IT to obtain IT resources through level of governance,then to attain IT capacity.On the other hand,IT governance monitor the life-time IT performance timely from the start of building to the end of disposing through management activities,furthermore to get more performance.Then,collecting with other management resources,IT governance can achieve advantages prior than competitors.This paper also extent the theoretical framwork of IT governance mechanism after analyzing the mediation effect of IT governance on firm's performance.Second,this article studies the effect of IT governance on firm's performance.Using Structure Equation Model,this research collects two kinds of samples between considering internal control factor and not.The result suggests that IT governance weakness has insignificant difference from other weakness when considering samples only with weakness(small sample).IT governance has significant opposite effect on firm's performance when differing companies with IT governance weakness and no-IT governance weakness(large sample).The reason for this difference result is internal control.Meanwhile,this research investigate the effect on firm's performance of one-level and two-level construct of IT governance,finding that two-level of IT governance have significant effect on firm's performance in large sample.The significant effect of one-level only comes from access and safe governance.Third,the effect of internal control on firm's performance is investigated.Both effect of entire internal control quality and five factors quality of internal control are examined.Four and five variables are used to substitute internal control quality and firm's performance.The regression results suggest that the entire internal control quality has significant opposite effect on firm's performance.And the sub-factors of control envionment,control activities,information and communication have significant direct effect on firm's performance.Fourth,this paper explores the relationship of IT governance and internal control on firm's performance.Lack of previous research among the three concepts,this paper explores the relationships among them through three stages:(1)IT governance has impact on firm's performance through internal control.(2)Internal control has impact on firm's performance through IT governance.(3)IT governance and internal control have coordinating effect on firms performance.The empirical result reveals the internal control entirely mediate the relationship between IT governance and firm's performance.Fifth,this paper further discusses the relationships among the IT governance,internal control and firm's performance in an uncertain environment.Complexity of a company will affect the relationship between IT governance and internal control,and then have a larger opposite effect on firm's performance contrary to a less complex company.Based on Resource-based View,Control Theory and Complementary Theory,using literature analysis,theoretical reduction and archival research,this paper analysis the mechanism of how complementary resources of IT governance and internal control interact to improve enterprises' value.The exploratory empirical investigate reveals that internal control mediate the relationship between IT governance and firm performance,and firm complexity moderate the relationship between IT governance and internal control,furthermore to influence the firms' performance.This paper contributes to the research domain of IT value by presents a new comprehensive mechanism of how IT impact firm's performance by developing the complement of IT governance and internal control,with the evidence from China public companies.This research also analyses both theoretically and empirically the detail interact impact of IT governance and internal on firms' performance,which contribute to improve the practical operation of both IT governance and internal control.