Do CIO IT Budgets Explain Bigger or Smaller Governments? Theory and Evidence from U.S. State Governments

Min-Seok Pang (), Ali Tafti () and M. S. Krishnan ()
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Min-Seok Pang: Fox School of Business, Temple University, Philadelphia, Pennsylvania 19122
Ali Tafti: College of Business Administration, University of Illinois at Chicago, Chicago, Illinois 60637
M. S. Krishnan: Stephen M. Ross School of Business, University of Michigan, Ann Arbor, Michigan 48109

Management Science, 2016, vol. 62, issue 4, 1020-1041

Abstract: Given the recent concern on “big governments” and rising budget deficits in the United States and European nations, there has been a fundamental economic debate on the proper boundary and role of governments in a society. Inspired by this debate, we study the relationship between information technology (IT) and government size. Drawing on a broad range of the literature from multiple disciplines such as information systems, industrial organization, and political sciences, we present several theoretical mechanisms that explain the impact of IT on government expenditures. Using a variety of data on IT spending and state government expenditures, we find that greater IT investments made by a state chief information officer (CIO) are associated with lower state government spending. It is estimated that on average, a $1 increase in state CIO budgets is associated with a reduction of as much as $3.49 in state overall expenditures. This study contributes to the literature by identifying a key technological factor that affects government spending and showing that IT investments can be a means to restrain government growth. This paper was accepted by Anandhi Bharadwaj, information systems.

Keywords: IT investments; government growth; U.S. state government; CIO budgets (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (4)

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