Proceedings of the 42nd Hawaii International Conference on System Sciences - 2009

Proposing a theoretical model for IT governance and IT business alignment

Daniel Beimborn, Frank Schlosser, Tim Weitzel

University of Bamberg, Germany
{daniel.beimborn | frank.schlosser | tim.weitzel}@uni-bamberg.de

Abstract diates the impact of governance actions to success.

This paper suggests extending the view that strateg-
ic alignment is a core IT governance issue and post-
ulates that considering operational alignment as well
offers more precise insights into how governance me-
chanisms influence business process performance.
Theoretically combining findings from IT value, IT
business alignment and IT governance research, we
show the tantamount role of top executive support and
operational alignment from a governance perspective.
Empirical data from 82 firms show, among others, that
the impact of IT governance mechanisms on success is
mediated by strategic and operational alignment.
1. Introduction
Building on the suggestion by van Grembergen et
al. [70] that strategic alignment is a core IT governance
issue we suggest to extend this view and postulate that
operational alignment is a key IT governance mechan-
ism as well. We expect a closer integration of insights
from alignment and from IT governance research to
offer a better understanding of how IT governance
mechanisms actually work in theory and practice.
Encouraged by recent insights from case studies
and cross sectional surveys on the role of IT business
alignment for IT value creation and especially the
effectiveness of practical alignment mechanisms [10,
11, 72], we propose a theoretical model that links
alignment with governance mechanisms and business
process performance. More precisely, we want to eva-
luate if our understanding of structures and processes
associated with IT value creation is theoretically suffi-
ciently sound to explain business process performance
and sufficiently relevant to evaluate the effectiveness
of particular governance/alignment actions.
While this study is only a first step to evaluate if
our approach is worth further pursuing, we offer two
main insights. First, by combining IT governance and
IT business alignment arguments it is shown that oper-
ational alignment, i.e. alignment at the level of daily
business, is a relational governance aspect that me-
Second, the results strongly indicate that executive
support in terms of both structural (IT represented in
the board) and behavioral (top management does ac-
tively support and propel alignment) factors as a pri-
mary governance obligation drive strategic alignment,
operational alignment, and governance mechanisms.
Besides, the model offers exciting avenues for further
research to analyze the effectiveness of governance
measures and also to maybe think about the role of
alignment for compliance issues.
2. Model Development
Recent literature on both, IT business alignment
and IT governance has highlighted the important role
of alignment for IT value creation. And while there is a
rich and maturing research on both areas, we suggest
that closer aligning the literature and theoretical con-
cepts on IT governance and alignment can help to put
forward clear theoretical models for IT governance and
IT business alignment. This should also allow us to
evaluate practical measures and approaches towards IT
governance structures and processes.
In the following, we implicitly explore an analogy
between IT governance (long term, strategic) and IT
management (short term, daily business) on the one
side and strategic (long term) and operational (short
term, daily business) alignment on the other. Within IT
governance research, governance mostly refers to the
distribution of decision rights [51] while IT manage-
ment is concerned with the daily IT operations and
centers around more practical questions related to
strategy implementation and mechanisms to ensure
effective IT governance in daily work routines. Thus,
IT management and IT governance belong together but
still are distinct from one another [69]. Analogous,
strategic alignment, as elaborated below, has long been
discussed as the extent of harmony between business
and IT plans [39, 56] while operational alignment
comprises interaction, communication and cognitive
linkages between IT and business personnel in daily
business [9, 71]. Accordingly, de Haes & van

978-0-7695-3450-3/09 $25.00 2009 IEEE 1

 Proceedings of the 42nd Hawaii International Conference on System Sciences - 2009
Grembergen have emphasized that such relational
mechanisms are important for aligning IT and business
[28, 29].
Figure 1 depicts our suggested model that is ex-
plained and empirically evaluated in the following.
Process
performance
H1
Operational
alignment
alignment
H2
H7 Strategic H4
alignment
governance
H5 H3
Executive H6
IT
governance
support
tools
Figure 1. Research model.
2.1. IT Business Alignment and Performance
In recent years, IT business alignment has become an
important explanatory factor within the IT business
value debate [31, 56]. The literature has conceptualized
alignment as a multi-faceted construct with different
levels (alignment on the strategic level vs. alignment
on the structural level [39]) and dimensions (intellec-
tual vs. social dimension [56]). Since strategies are
only effective when they are translated into actions
[31], interaction between the business and the IT do-
main has to be effective not only on the strategic level
but also within IT projects and on the operational (or
structural) level. Even perfectly aligned business and
IT strategies need to be implemented and transformed
into daily business in order to lead to the intended
results [35]. Therefore, in this work we build on both
levels of alignment, capturing them in distinct con-
structs. While strategic alignment (i.e. congruence of
IT and business strategies and plans [56]) has been
focused on in many research works during the last 15
years, there is more lack of clarity and of agreement on
conceptualizing alignment on the structural level.
As one of the more recent works, which bring several
of the more fundamental conceptualizations together,
Wagner [71] has composed operational alignment by
three different dimensions. Drawing on Reich and
Benbasat [55, 56], Tiwana et al. [33] and others [32,
49, 75], the first component is communication and
refers to the intensity and quality of interaction patterns
between business and IT [56]. The second dimension is
shared domain knowledge and refers to one sides
knowledge about the other sides domain, which has
shown to be a critical requirement for effective colla-
boration of IT and business side as well as for achiev-
ing superior IT performance [5, 49, 59]. For example,
if the IT staff does not have knowledge about the sup-
ported business activities, products, and processes, they
will not be able to provide valuable services or adapt
the systems to fulfill the demands of the business [65].
The third dimension in Wagners concept is described
as the cognitive dimension of the IT/business rela-
tionship. Based on [33, 66] the cognitive relationship
embraces concepts like trust, mutual acceptance and
respect of each others work, which have been shown
in numerous studies to be an essential factor for a suc-
cessful relationship between business and IT people.
Obviously, those three dimensions of operational
alignment are highly interrelated. Reich and Benbasat
[56] argue that shared knowledge improves communi-
cation, while it is also obvious that communication
leads to more shared knowledge [1, 14] and cognition
[66]. Similar argumentations can be made for the rela-
tionship between communication, shared knowledge,
and the cognitive dimension [17, 38, 60, 66].
Summarizing, operational IT business alignment
represents a linkage between the business and IT side
of the firm and allows effective interaction, knowledge
transfer and collaboration [74]. Operational alignment
leads to the IT services orientating at the actual de-
mands of the business and thus leads to higher IT ef-
fectiveness. Two propositions supporting this argument
can be directly drawn from Wagner [71]: (1) Align-
ment leads to more effective IS support processes at
the operational level [3, 40] and (2) alignment increas-
es the likelihood of developing and changing informa-
tion systems according to the business requirements by
frequent communication between the IT unit and the
business unit [71], cf. also [44, 64]. Since business
units, in case of high operational alignment, are more
strongly involved in IT planning and, thus, their re-
quirements are better reflected in the information sys-
tems, the resulting information systems both are more
likely to be used [3, 45] and providing a higher level of
efficiency. In turn, as a direct consequence from the IT
being better adapted to the business needs and the IT
being used more efficiently and effectively, the opera-
tional performance of the business process (e.g., in
terms of time/cost/quality) will increase.
Hypothesis 1: Operational IT Business Alignment
leads to increased process performance.
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 Proceedings of the 42nd Hawaii International Conference on System Sciences - 2009
By contrast, we do not propose a direct link be-
tween strategic alignment and operational process
performance. As [31] argues, strategies as well as stra-
tegic alignment have to be brought down and imple-
mented on the structural level of the firm in order to
actually generate value. Strategic alignment is useless
if it is not reflected by alignment on the operational
level. Therefore, although strategic alignment of course
has value-contributing characteristics, these will be
more indirect and are mediated by other variables, one
of them being operational alignment. The following
section will shed light on this interrelationship.
2.2. IT Governance
Previous literature has presented different definitions
of IT governance, indicating that there are various
ways in assessing this concept [73]. However, some
central aspects have been identified which should be
incorporated when dealing with IT governance. Ac-
cording to Broadbent [16], IT governance is part of the
corporate governance and has to provide mechanisms
for IT councils, business alignment, and implementa-
tion processes. Based on this, van Grembergen (2000)
defines IT governance as "the organizational capacity
to control the formulation and implementation of IT
strategy and guide to proper direction for the purpose
of achieving competitive advantages for the corpora-
tion" [68]. Since our research has a focus on IT busi-
ness alignment, especially on how alignment on the
operational level can leverage the impact of gover-
nance mechanisms on process performance, we lean on
this definition and do not include aspects like policies
and procedures, which is also in line with [73]. Van
Grembergen et al. referred to them as IT governance
structures, processes, and relational mechanisms [26]
[20]. In order to achieve them, promising mechanisms
have been proposed for each part [26, 49]. We build
upon that and investigate executive support (as aspect
of IT governance structures), distinctive governance
mechanisms like partnership rewards (as mechanisms
for relational IT governance mechanisms), and strateg-
ic alignment (as mechanism for IT governance
processes), which is in line with [26, 49]. In the follow-
ing we elaborate each aspect in more detail, starting
with strategic IT business alignment.
As highlighted above, IT business alignment has
been identified to be positively correlated with busi-
ness process performance. What is still rather unclear
is the question of how IT business alignment, in partic-
ular on the operational level, can be reached. First, one
has to distinguish between strategic and structural or
operational alignment. Guldentops [37] distinguishes
between Alignment in strategy and Alignment in
operations and points out that alignment is important
in the operational level rather than only on the strategic
level. Alignment on the operational level needs to be
based on alignment on the strategic level. Thus, we
state that an IT strategy that is documented and accu-
rately aligned with the business strategy allows to
clearly communicate this strategy as well as major
objectives down to the IT unit and the business units.
In this way, strategic IT business alignment is positive-
ly correlated with operational IT business alignment.
Hypothesis 2: Alignment between business and IT
strategy increases operational IT business alignment.
In addition to this direct link between strategic and
operational alignment, we propose a mediating effect
of strategic alignment over distinctive governance
mechanisms as good alignment on the strategic level
might allow for a more effective application of these
mechanisms. The reason is that only when there are
clear objectives and aligned IT and business strategies
it is likely that, first, there are mechanisms to imple-
ment these plans and strategies in daily business, and,
second, these mechanisms are used in a valuable way.
Our next hypothesis therefore is that better strategic IT
business alignment has a positive impact on the use of
alignment governance mechanisms.
Hypothesis 3: The appropriate use of alignment
governance tools is driven by strategic alignment.
Since it is very unlikely that good alignment on the
operational level happens by accident, it seems promis-
ing to investigate the enablers which drive operational
alignment. Above, we argued that alignment on the
strategic level enhances alignment on the operational
level. However, we assume that this link can be facili-
tated by the appropriate implementation of several
mechanisms, some of them identified by Wagner [71]
and supported by others. It has been shown that e.g. the
existence of a liaison unit that aims at improving the
collaboration between business units and the IT unit
can have positive effects [32, 71]. However, it is also
possible that it leads to a reduced level regarding the
direct communication between business and IT as it
represents an additional layer within the organization.
This can result in longer ways and more bureaucracy.
Also, the involvement of business units into IT plan-
ning has been identified to enhance the operational
alignment in terms of better shared domain knowledge
and cognitive relationship [26, 55, 56]. This is even
more important as the process of IT planning is regu-
larly mentioned to be decisive for improving alignment
[54, 57]. Moreover, incentives rewarding good interac-
tion between business and IT on the operational level
will lead to better operational IT business alignment
[70], as it might be an enabler and accelerator for supe-
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 Proceedings of the 42nd Hawaii International Conference on System Sciences - 2009
rior communication [69]. Our next hypothesis thus is
as follows.
Hypothesis 4: Governance mechanisms facilitate IT
business alignment on the operational level.
Extending the hypotheses stated so far, we address and
include another factor into our research model which is
the executive support, or top management support.
According to [21] the role of top management is cru-
cial for gaining firm-internal abilities and shaping the
firms environment. Top management support is shown
to be important in the literature in various ways. Teo
and Ang [64] found that top management commitment
to the strategic use of IT is a critical success factor for
alignment. Luftman and Brier [47] identified senior
executive support for IT as an enabler of strategic
alignment. To make this even more effective it is key
that the IT is personally represented in the executive
board what also explicates the role and responsibilities
as well as the decision rights of IT executives within a
firm. Thus, IT governance must be driven from the
highest levels within the organization [73]. The need
for IT being part of the firms governance or being
addressed by an distinctive IT governance arises from
the fact that IT has become a key factor in supporting
and sustaining the business [70]. Business executives
have to deal with IT decisions in most sectors and
industries and cannot simply delegate, ignore, or avoid
them [52, 67, 70]. Van Grembergen et al. [70] also
point out that strategic alignment is a core issue of IT
governance, being a responsibility of the firms board.
Thus, when clear leadership and guidance are present
and everybody knows who is accountable for specific
decisions and furthermore this is done in a way of
close collaboration between business and IT, this may
have positive effects on other parts of the firm, such as
IT business alignment and governance mechanisms.
We therefore state the following three hypotheses:
Hypothesis 5: Executive support positively influ-
ences IT business alignment on the strategic level.
Hypothesis 6: The appropriate use of governance
mechanisms is driven by executive support.
Hypothesis 7: Executive support increases opera-
tional IT business alignment.
3. Methodology
3.1. Approach / Data collection
As unit of analysis for this study we examined the
banks business process of granting credits to small
and medium sized enterprises (SME credit process).
The overall survey was conducted to investigate the
influence of IS usage on process performance and to
examine which factors actually lead to a more effective
IS usage in order to achieve and sustain business value
from IT and a competitive advantage in the corporate
loans business as the relevant market. The data shows
that more than 90% of all respondents see their bank
within a highly competitive environment in regard of
the SME credit process, indicating the relevance of the
SME loans business. Moreover, more than two third of
the banks (69%) perceive the design of their SME
credit process to deliver a sustainable competitive
advantage.
Besides the high relevance of the corporate loans
business for the typical banks retail model, the SME
credit process was chosen as application domain for
various reasons: banking processes in general are high-
ly IT reliant, Thus, IT can spend a business value, but
the ubiquitousness can also lead to the opposite effect
[20]. Moreover, the SME credit process does not nec-
essarily force a bank to utilize a high degree of IT since
loan applications can also be processed by humans.
Consequently, this process shows high potential for
variation in IT usage which facilitates our research.
Choosing only one industry and one business
process for conducting a survey avoids heterogeneity
and, thus, makes the use of several demographic con-
trol variables obsolete [see 24]. The study focuses on
similar IT systems, on similar business contexts, on
people with comparable skills and competencies, and
on firms acting in the same regulatory environment and
market. We focus on the business process level and the
relevant IT system because aggregation of organiza-
tional measures across the firm will lead to the dilution
and disguise of IT impacts [4]. Therefore, all con-
structs are operationalized at a business process level.
In this analysis, we particularly focus on the colla-
boration of IT and business units involved in this
process both on the strategic and the operational level.
Which roles do superior executive support and distinc-
tive governance mechanisms play for enhanced opera-
tional IT business alignment and thus process perfor-
mance?
Data collection was conducted in 2007 by sending a
six-page questionnaire to C-level executives in the
1,500 largest US banks according to total assets. In
order to ensure that the questionnaire will be addressed
to the person who is in charge of the SME credit
process (i.e. the Chief Credit Officer or the Chief
Lending Officer), we contacted the corporate office of
each bank to identify the adequate addressee, explain
the objective of our survey and ask for participation.
Since only the headquarters have been called, there are
no bank duplicates in the overall population.
Out of the 1,500 credit process managers, 1,213 in-
itially agreed to participate. We sent them the ques-
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 Proceedings of the 42nd Hawaii International Conference on System Sciences - 2009
tionnaire using the individually preferred channel (e-
mail, mail, or fax) and resent it after four weeks to
those banks who had not answered. Four to six weeks
after that, the managers who still had not sent back the
completed survey were called again to make sure they
had received the questionnaire and to find out why they
had not replied. Most of those executives who indi-
cated a reason for not taking part in the survey, men-
tioned lack of time or lack of interest. Those who were
still willing to complete the questionnaire received it
once again. Finally, we received 149 mainly completed
questionnaires, representing a response rate of 12.3 %
when ignoring the 287 initial declines where no ques-
tionnaire was sent out. This rate is in line with other
studies among firm managers (e.g. [12, 14, 71]).
All data were then entered into a data base and veri-
fied by a second person based on the original docu-
ments. For testing our model, we conducted a PLS
analysis using smartPLS [58]. Before starting the cal-
culation, all cases containing at least one missing value
regarding the items used were skipped, leading to a
final sample for calculation that consisted of 82 data
sets.
3.2. Measurement
Next, we show how the different constructs in our
research model have been operationalized. A detailed
overview of all indicator questions is presented in the
appendix at the end of this paper. Executive support
(ES): Executive support reflects both the general IT
commitment of executives, in particular those from the
business area, and moreover the active support for
alignment initiatives between business and IT. In our
model, we also evaluate if the IT unit is personally
represented in the banks board. Thus, the two indica-
tors assessing the level of executive support count for a
sufficient representation of the IT unit in the banks
executive board, and for an dedicated top management
support of interaction between business and IT. The
construct executive support is one out of two constructs
measured formatively in our model.
Strategic IT business alignment (SA): This con-
struct is concerned with the functional integration at
the strategic level. It is about the link between business
and IT strategy. According to Reich and Benbasat [55],
strategic IT business alignment can be seen as a
process of organizational learning that brings business
and IT knowledge together in order to support business
objectives. For the purpose of this research, we meas-
ure strategic alignment by three items: (1) alignment of
IT strategy with the business strategy, (2) documenta-
tion of IT strategy, and (3) familiarity of the Chief
Credit Officer with the IT strategy.
Governance Mechanisms (GM): Governance Me-
chanisms is the second construct to be measured for-
matively. These mechanisms contain tools which help
to transform the executive support and IT business
alignment on the strategic level into daily business and
thus enhance the IT business alignment on the opera-
tional level. We address this construct by taking into
account three tools, which have already been pointed
out in section 2.2. First, it is important if there is a
dedicated liaison unit to foster the collaboration be-
tween business and IT. Second, we examined if there
are explicit incentives rewarding good interaction be-
tween business and IT. Third, the fact whether the back
office is proactively involved into IT planning has been
included.
Operational IT business alignment (OA): Since a
consistent framework which allows for measuring the
structural or operational dimension of IT business
alignment is still missing, we focus on the three major
dimensions discussed above: (1) communication, (2)
shared domain knowledge, and (3) cognitive linkage
(cf. section 2.1). However, we do not measure the three
domains as separate constructs but consider them alto-
gether as operational IT business alignment. The rea-
son is, as already pointed out in section 2.1, that the
three dimensions are strongly interrelated. Since these
correlations are not subject to our investigations in this
research, we can aggregate all three dimensions all into
one reflective construct. Nevertheless, the indicators
used represent each of the dimensions and are adopted
from previous literature (cf. appendix). Communica-
tion [56] is evaluated by the extent to which there is
extensive communication between IT unit and back
office, and by checking if there are regular meetings
between the different parties in order to identify busi-
ness process improvements. For measuring shared
domain knowledge [5, 49, 59], we asked, if the IT
employees are able to interpret business related prob-
lems and develop solutions. Finally, cognition [33, 66]
is measured by two items: (1) the level of mutual trust
and respect between IT and business; (2) the fact if IT
unit and business units regularly consult each other.
Process Performance (PP): Process performance
displays the overall success measure in our research
model. Basically process performance can be measured
by time, cost, and quality [48]. We argue that process
performance in the SME credit process is positively
correlated with the quality level and therefore focus on
quality issues. Thus, we wanted to know, if the current
SME credit process configuration allows the respective
bank to sustain a competitive advantage, and/or allows
differentiating from the competitors. Additionally, a
third and a fourth indicator captured the level of opera-
tional efficiency and the excellence of the process
design compared to the competitors. This approach of
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 Proceedings of the 42nd Hawaii International Conference on System Sciences - 2009

considering different aspects of performance helps to vergent validity, an AVE of above .5 [25] and a com-
more consistently reflect the real level in each bank. posite reliability of above .7 [50] is recommended.
Table 2 shows that the composite reliability is larger
4. Analysis and Results than .8 for all (reflectively measured) constructs and
that AVE is larger than .5 for all reflective constructs.
4.1 PLS Measurement Model
Table 2. Quality measures for reflective con-
Our model was tested based on formative and ref- structs
lective measures. While formative measures were ap- Composite Cronbachs
AVE R Square
plied for the constructs executive support and gover- Reliability Alpha
nance mechanisms, the other constructs (strategic IT SA 0.886 0.722 0.816 0.388
business alignment, operational IT business alignment, OA 0.920 0.698 0.891 0.717
process performance) were measured reflectively. PP 0.884 0.657 0.824 0.254
The analysis of the measurement model was carried
out with respect to content validity, indicator reliabili- The following tables show furthermore that the con-
ty, and construct validity. Content validity was ad- structs fulfill the requirement of discriminant validity.
dressed by deriving the indicator questions from the Cross-correlations between latent variables are smaller
existing literature, which is in line with [30]. than the squared AVE in all cases (table 3), indicating
Testing the stability and statistical significance of a good fit between the latent variables and their mea-
the constructs was performed by applying the PLS surement [34]. Also, all indicators load highest on their
bootstrap algorithm. In our case, we calculated 500 own construct (table 4).
random samples. The results of both the factor loadings
and the T-values are presented in table 1. Literature
Table 3. Correlations of latent variables and
suggests that loadings should be above .707 [41]. All
AVE square root (shaded cells)
reflective measures fulfill this requirement and are
SA OA PP
significant at the .001 level, so that indicator reliability
can be assumed (cf. Table 1). SA 0.850
OA 0.594 0.835
Table 1. Measurement model parameters PP 0.382 0.504 0.811
Construct Ind. ID Loading T-Value
/Weight
Executive support ES1 0.298 2.680 Table 4. Cross-loadings of manifest variables
(ES) (formative) ES2 0.818 9.313 Indicator ES SA GM OA PP
SA1 0.844 17.046 ES1 0.706 0.543 0.407 0.507 0.271
Strategic alignment
SA2 0.884 36.216 ES2 0.966 0.564 0.676 0.736 0.423
(SA) (reflective)
SA3 0.820 13.979 SA1 0.424 0.844 0.309 0.385 0.250
GM1 0.112 0.921
Governance Tools SA2 0.692 0.884 0.518 0.633 0.405
GM2 0.889 12.275
(GM) (formative) SA3 0.383 0.820 0.338 0.428 0.276
GM3 0.121 0.896
OA1 0.817 24.466 GM1 0.340 0.195 0.505 0.399 0.184
Operational align- OA2 0.883 30.878 GM2 0.670 0.484 0.983 0.758 0.405
ment (OA) (reflec- OA3 0.812 17.153 GM3 0.330 0.233 0.576 0.500 0.187
tive) OA4 0.894 39.371
OA1 0.706 0.557 0.601 0.817 0.393
OA5 0.763 16.182
PP1 0.825 12.162 OA2 0.614 0.524 0.660 0.883 0.474
Process Performance PP2 0.858 20.050 OA3 0.562 0.436 0.629 0.812 0.339
(reflective) PP3 0.709 8.534 OA4 0.676 0.496 0.702 0.894 0.400
PP4 0.842 19.449
OA5 0.576 0.461 0.657 0.763 0.485
PP1 0.360 0.364 0.299 0.344 0.825
Further, the following tables show that the require-
ments regarding construct validity are fulfilled as well. PP2 0.387 0.363 0.331 0.407 0.858
According to [62] one has to distinguish between con- PP3 0.312 0.216 0.308 0.441 0.709
vergent and discriminant validity. For ensuring con- PP4 0.321 0.306 0.361 0.419 0.843

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 Proceedings of the 42nd Hawaii International Conference on System Sciences - 2009

Having examined the measurement model, we now formance increased slightly from 25.4% to 26.3% with
present the results of the PLS analysis regarding the all added direct links being insignificant. In the second
structural model in the following section. model the R2 dropped down to 20.9%. Consequently,
we can argue that operational alignment as a mediating
4.2 Structural Model: Test of Hypotheses factor contributes to the explanation of process perfor-
mance.
Figure 2 displays an overview of the PLS calcula-
tion results. As can be seen, all hypotheses except one
could be supported. Executive support reveals a high 5. Conclusion, Limitations, and Further
and significant impact on operational IT business Research
alignment (H7). However, this correlation is consider-
ably mediated by both strategic IT business alignment 5.1. Limitations
and governance mechanisms. Both links (H5, H6) are
very strong and significant, too. The corresponding As our model was partly derived from prior work
hypotheses from strategic IT business alignment (H2) on successful alignment practices, the theoretical scope
and governance mechanisms (H4) to operational IT is certainly limited and especially the opportunistic
business alignment could also be supported. Validation selection of the governance tools is not exhaustive and
of H2 is not that strong and less significant, neverthe- can and should be substantially extended. We still
less existent. Merely the proposed positive correlation decided in favor of our approach because particularly
between strategic IT business alignment and gover- the measurement model for alignment and governance
nance mechanisms (H3) turned out to be insignificant. tools has been refined and validated in a previous large
Finally, we could find evidence that operational IT survey [6, 7, 8].
business alignment is significantly correlated with The empirical evaluation might be subject to non-
process performance (H1). response and common method bias. In order to control
for non-response bias, one should carefully compare
Significance levels:
*** p <= 0.01 the data of early and late respondents [2]. The reason is
**
*
0.01 < p <= 0.05
0.05 < p <= 0.1
Process that late respondents share similarities with non-
n.s. p >= 0.1 performance respondents [44]. Accordingly, we compared late res-
R2 = 25.4%
ponding banks (i.e. answering after the second remind-
H1+: .504***
er, N=27) to the rest (N=55), but we did not find any
T = 6.531 significant differences in answering the items used in
this analysis.
Operational According to [53], common method bias refers to
alignment the amount of variance explained by the measurement
R2 = 71.7%
alignment

method rather than by the constructs represented by the

H2+: .157* measures. Common method bias may be existent when
T = 1.795 the predictor and the criterion variables are taken from
only one source (Podsakoff et al. 2003), which is true
H7+: .331*** Strategic H4+: .481***
T = 3.533 T = 5.542 for our survey as we merely asked one person in each
alignment
R2 = 38.8% bank. To sufficiently address the issue of common
method bias, Podsakoff et al. [53] recommend both
H3: .100n.s.
procedural and statistical remedies. The first ones deal
governance

T = 0.874
H5+: .623*** with the questionnaire design prior to data collection,
T = 8.970 IT
Executive
the latter ones with both detection and control of com-
governance
support H6+: .611***
tools
mon method bias inside the data. In our survey, proce-
T = 5.577
R2 = 46.0% dural remedies have been addressed by conducting pre-
tests to identify complex or ambiguous items, which
Figure 2. PLS results.
then were deleted or adjusted. Furthermore, we in-
cluded reverse-coded items to avoid acquiescence
In order to test the validity of the mediating effect via
effects and ensured anonymity to the respondents to
operational alignment on process performance, we
encounter social desirability effects. As statistical re-
tested two alternative models containing (1) additional
medy, we applied Harmans single-factor test which
direct links from ES, SA, GM on process performance
did not identify a single component explaining all or
or (2) only direct links from ES, SA, GM on process
the majority of the overall variance extracted.
performance. In the first case, the R2 of process per-

7
 Proceedings of the 42nd Hawaii International Conference on System Sciences - 2009

5.2. Conclusion and Further Research
Theoretically integrating key findings from IT
value, IT business alignment and IT governance re-
search, we show the tantamount role of executive sup-
port and operational alignment from a governance
perspective. Executive support directly and significant-
ly drives not only strategy and operational alignment
but also IT governance tools, and indirectly business
process performance.
To summarize, the main findings are:
The impact of IT governance mechanisms on suc-
cess is mediated by strategic and operational
alignment.
The lack of a significant relation between strategic
alignment and governance mechanisms highlights
the gap between strategy and strategy implementa-
tion. Generally, it is quite obvious that strategic
alignment is required as a foundation for effective
IT governance, but our test results show that it is
not necessarily a driver as well. Firms that are stra-
tegically aligned still need to make substantial ef-
forts in order to implement alignment on the opera-
tional level as well and, thus, increase IT effective-
ness and process performance. Of course, there
might be many different reasons why a firm, which
has high strategic alignment does not set up the ap-
propriate IT governance tools, such as improper or-
ganizational structures, missing budgets and capaci-
ties, missing focus of top management due to com-
petitive pressure and others.
Executive support is strongly correlated with all
alignment dimensions and governance mechanisms.
rewarding good interaction (0.054) are at least mod-
erately important.
Finally, we think that our results open some poten-
tially relevant avenues for further research. Further
strengthening the governance alignment nexus might
help getting an even better understanding of how the IT
resource can be used successfully and in particular how
relational mechanisms like those mentioned above
interact with strategic and structural properties of a
firm.
Also, as we see growing amounts of regulation and
stronger public reactions to how firms conduct their
business, compliance issues have received increased
attention. Especially from an IT governance perspec-
tive, two questions are exciting to ask: How are align-
ment and compliance related, i.e. to what extent can or
should the dimensions of alignment be an explicit part
of compliance activities? And one step further: As
regulation regarding internal controls like the Sar-
banes-Oxley Act in the USA affects almost all IT ac-
tivities [61] this is a highly relevant issue. From an IT
business value perspective, IT business alignment may
be a driver but IT compliance may act as a constraint.
In practice, combining the demands for compliance
and value delivery of IT is widely seen as the domain
of IT governance [43]. This leads to the second
question: Is there a positive business value impact from
compliance beside just being compliant, i.e. do
improvements from better governance/alignment
structures and actions would have been worth the effort
even without external regulatory pressure?

What does that mean from a practitioners perspective?

First, executive support of alignment is a strong driver
of all facets of alignment and intensity of the applied
governance mechanisms. An analysis of the total ef-
fects of the two executive support indicators regarding
operational alignment (i.e. total effect of construct *
outer weight of indicator) shows that both top man-
agement support for interplay between business and IT
(0.320) and IT representation in the board (0.117) are
of considerable importance. Second, strategic align-
ment is surely an enabler of high process performance
but does not necessarily translate into success. It is
thus important to actively select adequate governance
tools to establish operational alignment. Focusing on
the total impact of the different governance tools we
assessed regarding operational alignment (again meas-
ured by the total effect of construct * outer weight of
indicator), we found a strong impact of involving the
back office proactively into IT planning (0.428), while
the existence of liaison units (0.058) and incentives

8
 Proceedings of the 42nd Hawaii International Conference on System Sciences - 2009
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Appendix
Table 5. Used indicators
(All items have been evaluated by using a 5-point Likert scale ranging from strongly agree to strongly disagree.)
ID Item References
Executive support (ES)
ES1 The IT unit is sufficiently represented in our banks executive board. [18]
ES2 Top management actively supports interplay between business and IT.
Strategic Alignment (SA)
SA1 I am familiar with the IT strategy. [55]
SA2 The IT strategy is accurately aligned with the business strategy. [22, 54, 55, 63]
SA3 The IT strategy is documented. [17, 54]
Governance Mechanisms (GM)
GM1 There are explicit incentives rewarding good interaction with the IT unit. [51]
GM2 The back office is proactively involved into IT planning. [17, 26, 55]
There is a specific organizational unit or function to improve the communication be- [17, 26]
GM3
tween the IT and the back office.
Operational Alignment (OA)
OA1 There is mutual trust and respect between IT unit and the back office. [13, 46, 64]
OA2 IT and the back office regularly consult each other. [13, 17, 19]
There are meetings on a regular basis between IT and back office for identifying busi- [17, 26, 55]
OA3 ness process improvements.
OA4 There is extensive communication between IT unit and back office. [15, 17, 26]
OA5 IT employees are able to interpret business related problems and develop solutions. [13, 60, 64]
Process Performance (PP)
The configuration of our credit process allows us to sustain a competitive advantage in [36]
PP1
the relevant market.
The configuration of our credit process allows us to differentiate us from the competi- [36, 42]
PP2
tors in the relevant market.
PP3 Compared to our competitors, the operational efficiency of our loans process is higher. [23, 27]
Compared to our competitors, the design of our business loans process is (much [71]
PP4
better 1 5 much worse).

11