An Examination of IT Initiative Portfolio Characteristics and Investment Allocation: A Computational Modeling and Simulation Approach

We advance the theory pertaining to IT governance and portfolio management. We specifically examine how the portfolio characteristics can influence IT investment allocation. We propose two portfolio characteristics – flexibility and diversity. We define the flexibility as the number of IT investment choice, and the diversity as the dissimilarity of IT investment choice. Using the Monte Carlo simulation and real-world data, we find that 1) if a firm invests in a set of IT initiatives with higher flexibility, it will have greater potentiality to capture a superior IT investment allocation; 2) when a firm invests in a set of IT initiatives with lower flexibility, it will have greater potentiality to capture a superior IT investment allocation, if the set of IT initiatives involves higher diversity. Our findings implicate that a firm can exercise IT initiative flexibility and diversify IT initiative choice to improve portfolio investment allocation