Performance Paradox : Information Technology Investments and Administrative Performance in the Case of the 50 U.S. State Governments

This study introduces the terminology of performance paradox in the context of IT (information technology) investment and use. Although it is somewhat related to the concept of productivity paradox, in the case of performance paradox, the dependent variable (i.e., the measure of performance) is not productivity, but some other measure of performance. This paper presents the results of a study that examined the relationship between IT investments by the 50 state governments of the United States and the administrative performance of these state governments. There are two parts to this study. In the first part, IT investments by state governments were related to multiple measures of state government performance, namely performance in financial management, human resource management, information technology management, capital management, and managing for results. In the second part of the study, IT investments by state governments were related to projected state government budget deficits. State budget deficits are used as a performance measure because they are an indicator of state government planning performance. Structural equation modeling was performed to analyze the data. The results indicate incidence of performance paradox. It appears as though the more U.S. state governments invest in IT, the worse they perform. However, there are also indications that with the passage of time, the relationship between IT investment and performance shows improvement. Thus, over time, the performance paradox becomes less pronounced. In some cases, it appears that past investments in IT actually help future performance.