The Impact of Shadow IT Systems on Perceived Information Credibility and Managerial Decision Making

Abstract

SYNOPSIS Business trends show that more and more employees are creating shadow IT systems—IT systems that are not sanctioned or monitored by the IT department. This paper examines how the use of shadow IT in product costing impacts managers' perceptions of information credibility and managerial decision making. Using two experiments, we find that participants view information from shadow IT systems as less credible and they are less impacted by and less willing to rely on costing reports produced from shadow IT systems versus non-shadow IT systems. We also find that although participants are concerned about the credibility of shadow IT systems, they are not more likely to find simple mathematical errors embedded in shadow IT costing reports relative to non-shadow IT reports. This suggests that although concerned about shadow IT systems, managers still do not exercise sufficient care in evaluating reports created using these systems. The results of our study should prove informative as shadow systems become more prevalent in organizations. Data Availability: Contact the authors.

Shadow IT Use, Outcome Effects, and Subjective Performance Evaluation

“…This result holds regardless of outcome favorability, suggesting that opinions toward shadow IT are not altered by outcome favorability. We also find that evaluators explicitly consider the system used by the employee and that, similar to Myers et al (2016), shadow systems are viewed as less reliable than non-shadow IT systems. Thus, although shadow IT systems are prevalent in practice, we find that employees suffer negative consequences from their decision to use them.…”

“…Despite the potential benefits, a stigma against shadow IT persists in the workplace (Behrens, 2009). Prior research finds that managers are less willing to rely on reports generated from shadow IT systems than from non-shadow systems, suggesting that managers view these systems negatively (Myers et al, 2016). However, whether and how shadow IT usage affects managers' judgments remains an empirical question, and is the focus of our study.…”

“…The increasing use of shadow IT systems-IT applications not sanctioned or monitored by a company's IT department (Myers et al, 2016) -has emerged as an important topic for both practitioners and academics (Sherman, 2004;Raden, 2005;Olavsrud, 2012;Zimmerman, et al, 2017). 1 Shadow IT systems can pose a threat to businesses because they often lack adequate security, effective controls, and proper documentation (Schaffner, 2007).…”

“…Little research has been conducted with the goal of understanding managers' perceptions of shadow IT use and factors that can affect those perceptions. Myers et al (2016) report an experiment in which participants rate the reliability of reports generated from different IT systems. The study finds that reports generated by shadow systems are perceived as less reliable than those generated from traditional IT systems and that managers are less likely to incorporate data from shadow-generated reports into their decision-making.…”

“…While these results suggest that shadow IT is perceived as less reliable than traditional IT systems, they do not provide evidence on employees who choose to use shadow IT are perceived by managers. Our study seeks to build upon the results of Myers et al (2016) by examining how the use of shadow IT affects employee performance evaluations and how different work outcomes may alter the perceptions that managers have of employees who use shadow IT.…”