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Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) 
Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 
THE ROLE OF E-GOVERNANCE IN INCREASING OF LOCAL 
 
GOVERNMENT PERFORMANCE 
(CASE STUDY IN DEMAK PROVINCE, CENTRAL JAVA, 
INDONESIA) 
Oleh : 
Edy Suprianto, SE, MSI, Akt 
Department of Accouting 
Sultan Agung Islamic University, Semarang, Indonesia 
Email: edy_2806@yahoo.co.id 
ABSTRACT 
The purpose of research is to identify affectivity and efficiency of implementation of E-good 
governance to increase local government performance in Demak, central java, Indonesia. 
This research more focuses on how far the capacity of technology information can support 
increasing of local government performance. There are many factors which affected the capacity 
of technology information. They are executive capability, financial support and legislative support 
(Kim  Stuart, 2004) and organization commitment (Osmad, 2006). The support of the fourth 
factor are many factors which effected the capacity of technology information. The Population of 
research are all of work unit in local government performance in Demak, central java, Indonesia. 
While samples were selected used purposive random sampling with criterias : first, work unit had 
implemented the E-Governance consistenly. Second, work unit must report their performance to 
regional had every year. Regression is used to analys the data. Based on the research result, we 
can concluded that the role of e-governance is very big. It is supported by the result of on the 
regression analys where degree of significancy more than 1,96. So we can reveals that executive 
capability, financial support, legislative support and organization commitment have positive effect 
significantly on work unit performance. This result indicated that all of government organization 
have to more focus on increasing of technology infrmation capacity. 
Keyword : E-Government, executive capability, financial support, legislative support and 
organization commitment. 
INTRODUCTION 
On of the good local government performance indicator is achivement of independent their 
citizen prosperious and affluent. It is suitable with statement in 1945 Constitution of The Republic 
of Indonesia. The constitution mention that to form a government of the state of Indonesia which 
shall protect all the people of Indonesia and all the independence and the land that has been 
struggled for, and to improve public welfare, to educate the life of the people and to participate 
toward the establishment of a world order based on freedom, perpetual peace and social justice, 
therefore the independence of Indonesia shall be formulated into a constitution of the Republic of 
Indonesia which shall be built into a sovereign state based on a belief in the One and Only God, 
just and civilised humanity, the unity of Indonesia, and democratic life led by wisdom of thoughts 
in deliberation amongst representatives of the people, and achieving social justice for all the 
people of Indonesia.. 
Demak Distric is one of Local Government which existing in indonesia, exactly in central 
java province. To increase their performance Demak District has long away implemented good 
government governance. Besaide that they also has set using of information technology to support 
implementation of Good Governance. It called by E-Governance. Mario and Brzica (2008)
Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) 
Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 
 
mention that E-government concept originated at the beginning of 21 
st 
century, mostly as a copy of 
e-commerce into public sector9. All intentions were directed towards the presence of the public 
services on the Internet. In the early years of its development, e-government follows the 
evolutionary e-business evolving model. 
In the implementation process, there are many problems which be forced by local 
government. They are first, Coordination and Controlling of use IT is not yet optimal. Second, 
Capacity of information technology is not too adequate and less of awareness of using information 
technology. Thirth, Using of information technology is not optimal, Fourth, less of qualified 
human resources and fifth, there is no standart of procedur for management information 
technology system. Based on these problems, this research try to analyse what the type of 
information technology which suitable with the characteristics of Demak Distric and how about 
capacity of information technology (software and hardwre) in Demak District can support the 
implementation of good governance. Beside that we also will be asses what the effect of financial 
and legislative support on the capacity of information technology and how far the effect of using 
IT on Demak District performance. 
LITERATURE REVIEW 
E-GOVERNANCE 
Mario and Brzica (2008) mention that E-government concept originated at the beginning 
of 21 
st 
century, mostly as a copy of e-commerce into public sector. All intentions were directed 
towards the presence of the public services on the Internet. In the early years of its development, 
e-government follows the evolutionary e-business evolving model (Earl in Mario and Brzica, 
2008), which in particular means that in the early days of e-government evolvement, primary 
focus of the e-services was simple appearance of graphic user interfaces with possibilities of 
interactions. Early enthusiasm during the mean time weakened but such experiences brought 
crucial acknowledgments. Today, because of those acknowledgments, the focus is on coordination 
and effective assessment of the needs, efficiency and public benefits for such services. The 
development of electronic public services enters in the new phase, which is mostly determined by 
reengineering of existing processes of public government. Public sector by its nature (based on 
information and communications) is ideal for international increase of efficiency and quality. 
Public government disappointment is triggered by bureaucracy, information abuse for internal 
purposes, increasing cost of transactions and mostly because of lack of responsibility for td, he 
client. Especially in European countries the problem of ever-growing public sector is present, 
making the concept the efficient e-government even more important. Regarding the participants 
engaging in e-government activities, four models can be recognized: 
- G2C (Government to Citizens), 
- G2B (Government to Business), 
- G2E (Government to Employees; which includes workflow management and knowledge 
management), and 
- G2G (Government to Government; which includes Business Process Reengineering and 
ERP systems). 
Based on the relationship between e-governance and information technology (IT), there are 
two main question which have be answered. First, How to determine the qriterias of good 
governance to use IT themselves. Second, How to set the IT to achive the good governance. In 
generally, IT and good governance have mutually relationship. Better IT will support 
implementation of good governance. It means IT which can be acces well, with minimum cost, 
and public needs responsible, it will accelerate national development.
Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) 
Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 
 
INFORMATION TECHNOLOGY CAPACITY 
Organizational capacities or capabilities are typically defined as an ability of an 
organization to do something, for example technological capacity is the ability to change or 
innovate through technological Proceedings of the 37th Hawaii International Conference on 
System Sciences – 2004 Following this model our general concept of IT capacity for local 
governments is the ability of the local government to effectively apply IT to achieve desired ends. 
It is important to note that, the type and amount of IT varies significantly across local 
governments, even local governments of comparable size and character, but the amount and type 
of IT does not adequately capture variation in effective use of technology. One reason for this 
failure is that IT by itself does not accomplish anything without the appropriate human and 
managerial resources. Over two decades ago, Kraemer and associates found that in order to 
understand how computers changed organizations, it was necessary to look at the entire “computer 
package” which encompasses ‘technique’ that is organizational structures and institutional 
arrangements for maintaining information system, as well as ‘equipment’ (e.g. hardware, software, 
network) and ‘people’ who operate, process and use the equipment. Thus, IT must be coupled with 
human and managerial resources in-place to more accurately capture IT capacity as defined above. 
The factors found in innovation literature in general as well as IT innovation research may 
contribute to developing a model to explain what organizational factors are critical to the level of 
IT capacity. Innovation is a function of the motivation to innovate, the strength of obstacles 
against innovation, and the availability of resources for overcoming such obstacles. In local 
governments, therefore, barriers to IT innovation can be resistance from end-users to new 
information system, top decision makers’ lack of will and understanding about the IT innovation 
and insufficient support or inappropriate regulations from upper level government. On top of that, 
IT manager who is not capable of planning and implementing IT innovation projects may hinder 
the success of IT innovation 
There are many factors have been founded and created in literatur and empiric research. It 
will give contribution in model development about capacity of information technology (Kim  
Stuart, 2004). Mohr (2004) mention that innovation is the fuction of motivation to creat 
something which effected by two factors. They are the power of constrain that faced and 
availability of resources to encounter the constrain. 
Figure 1. Degree of IT Capacity
Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) 
Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 
AN INITIAL THEORY OF LOCAL GOVERNMENT INFORMATION TECHNOLOGY 
CAPACITY 
Kim  Stuart (2004) mentioned that the factors found in innovation literature in general as 
well as IT innovation research may contribute to developing a model to explain what 
organizational factors are critical to the level of IT capacity. Based on Mohr (2004), innovation is 
a function of the motivation to innovate, the strength of obstacles against innovation, and the 
availability of resources for overcoming such obstacles. In local governments, therefore, barriers 
to IT innovation can be resistance from end-users to new information system, top decision makers’ 
lack of will and understanding about the IT innovation and insufficient support or inappropriate 
regulations from upper level government. On top of that, IT manager who is not capable of 
planning and implementing IT innovation projects may hinder the success of IT innovation. 
 
SUPPORT FROM ADMINISTRATIVE AUTHORITIES 
Kim  Stuart (2004) mentioned that Innovation would be more likely when the political 
environment to which an organization belongs has norms favoring the change. According to 
Fountain, enacting technology is highly influenced by institutional and political arrangements. 
Hence, improving IT capacity of local governments depends on whether support from 
administrative authorities elected or appointed top administrators (mayor or city manager), city 
council and also state government is available for IT managers who are in charge of implementing 
IT adoption process and its utilization. Even in the case that IT managers initiate the adoption of 
new technology, support from administrative authorities may play a significant role in whether the 
innovation efforts are frustrated or completed. Support from administrative authorities can be 
expressed in several ways. First, top administrators’ innovativeness is important for mobilizing 
resources. 
IT innovation requires large amount of investments, and its effects are not realized in a 
short term. To implement IT innovation, top administrators are expected to take the risk of failure 
or delay of IT adoption. Therefore, the top administrator has to have risk-taking propensity to 
support IT managers to design and implement IT adoption plan without worrying about the 
consequence. Second, top administrators’ knowledge of IT should be considered. Top 
administrators knowledgeable of the potentials of IT are more likely to have more positive attitude 
to IT innovation and to endorse the innovation initiatives raised by IT managers. Third, legislative 
body, i.e. city council, is as important as top administrators are, because budget allocation and 
other legislative supports are finally authorized by city councils. Like top administrators, city 
councils' IT innovativeness and knowledge form a crucial part of support from administrative 
authorities. Fourth, state governments’ influence also needs to be considered. State governments 
make efforts for state-wide technology diffusion, such as providing information about innovations, 
financial support during development, and procedural facilitation 
MANAGERIAL CAPABILITY OF IT MANAGER 
Kim  Stuart (2004) mentioned that the availability of individuals capable of producing 
new ideas is one of the significant factors promoting innovation, and innovations are likely to be 
proposed by individuals who have expertise in a particular area. Especially, IT innovations tend to 
start from ingenious application devised by managers with a technical background. Therefore, 
managerial capability of IT manager, which can be defined as the ability to identify problems of 
the current information system, and to develop and evaluate alternatives to improve the IT 
capacity of the organization appears to be a decisive factor affecting the IT capacity of local 
government. This notion of managerial capability conforms to our early definition of capacity in 
general and IT capacity specifically, as the ability of the local government to effectively apply 
information technology.
Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) 
Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 
In local governments, an IT manager is in the position of initiating and implementing IT 
innovation projects. An IT manager’s managerial capability as a change agent can be thought to be 
composed of knowledge of IT, innovativeness and motivation. Knowledge of IT is an essential part 
of IT managerial capability. As previously noted, IT encompasses a broad range of technologies. 
As innovation capability is contingent upon the skill level of the staff, without the comprehensive 
expertise in IT, IT managers may neither design a plan appropriate to obtaining IT capacity nor 
gain trust from the administrative authorities whose political supports are essential for executing 
innovation ideas. 
 
Financial support 
Kim  Stuart (2004) mentioned that the availability of financial resources is one of the 
strongest predictors of innovation. For organizational innovation, especially for adopting advanced 
IT, financial support is indispensable for procuring and developing adequate levels of hardware 
and software, and training end-users as needed. Therefore, we can expect that a large variation in 
IT innovation among city governments can be explained by the amount of budget available to 
adopting new IT. However, as the size of total budget differs from government to government, the 
relative proportion of the IT budget in the budget structure could be considered as the criteria to 
judge the level of financial support. 
PREVIOUS RESERACH 
There are many researches about good governance. One of them is Lukita (2009) 
conducted about implementation of Sarbanise Oxley to support Good Governance in PT. Telkom, 
Tbk. She founded that there is positive effect of implementation good governance in PT. Telkom 
Tbk on organitation performance. This research was supported by Edy  Marno (2010) reveals 
about the role good governance to support PNPM Mandiri performance in reducing poverty. 
Beside of good governance, there are many factors which will affect organitation 
performance. Edy (2009) founded that using of information taechnology can support auditor 
internal performance. This research was supported by (Wigrantoro, 2001) mentioned that 
information technology is very supoort implementation state governance.In 2013, oleh edy  Dedi 
(2013), also concluded that local government performance is affected by three factors. They were 
good government governance, information technology and strategic human resources 
management. 
This research more focused on the role of information technology to support 
implementation of good governance. The ability of information technology to increase 
organitation technology has been supported by capacity of information technology. There are 
many factors which affect the capacity of information technology. Kim  Stuart (2004), 
mentioned that capacity of information technology is affected by Executif capability, financial and 
legislatife support. Those factors are very important to determine the success of capacity of 
information technology to support local government performance. Beside that, Osmad (2006) 
added that there is one variable which will support the success of capacity of information 
technology. It is organitation commitment.
Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) 
Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 
 
Financial 
Support 
Legislatif 
Support 
Figure 2. Research Model 
Executive 
Capability 
Capacity of 
information 
technology 
Commitment 
Based on the research background and previous reserach, we can cunclude the hypothesis : 
H1 : Executive Capability has positive affect on capacity of information technology 
H2 : Comitment has positive affect on capacity of information technology 
H3 : Financial support can moderate the relationship between Executive Capability and capacity 
of information technology. 
H4 : Financial support can moderate the relationship between Comitment and capacity of 
information technology. 
H5 : Legislative support can moderate the relationship between Executive Capability and capacity 
of information technology. 
H6 : Legislative support can moderate the relationship between Comitment and capacity of 
information technology. 
RESEARCH METHODOLOGY 
POPULATION AND SAMPLES 
The research population is all of work unit of Demak District about 55 unit. Purposive 
sampling method is used to collect data with some criterias : first, Work unit of Demak District 
had implemented E-Governance in their organitation more than one years. Second, Work unit of 
Demak District has budget to support development of the capacity of information technology. 
VARIABLE OPEARTIONAL DEFINITION 
This research has five variables. They are two independent variable consist of Executive 
Capability and Organitation Commitment, two moderating variables consist of Financial and 
Legislative Support, and one dependent variable Capacity of Information Tchnology. This 
research uses questionaire to describe the standardized operating variables. Previously the vailidty 
and the realibility will be tested. In the dimension of strategic Human Resources Management, 5 
(five) likert’s scale is used in all questions ( 1 = Totally Disagree to 5 = Totally Agree). Ordinal 
scale category is used on some variables through profound interviewsThe indicators of each 
variables can see in table1.
Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) 
Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 
 
Tabel 1 
Definisi Operasional Variabel 
Variabel Indikator Pengukuran 
Executive 
Capability 
1. Comprehension about information 
technology 
2. Skill to motivate and innovate of 
information technology 
3. Skill to redesign information 
technology 
4. Skill in politic and get financial 
support for information technology 
Interval Scale 
Use likert Scale. (Kim  Stuart, 
2004) 
Organitation 
Commitment 
1. feel proud as member of 
organitation. 
2. invite colleague to hard work in 
organitation. 
A sense of belonging on 
organitation. 
Interval Scale 
Use likert Scale. (Jaramillo et al 
2009). 
Financial 
Support 
1. Percentage of IT Budget 
2. Investation in IT 
3. Size of local government 
4. Tipe of government 
Interval Scale 
Use likert Scale. (Kim  Stuart, 
2004) 
Legislative 
Support 
1. Legislative has skill to innovate 
2. Legislative has courage to take risk 
to support IT 
3. Legislative has courage to take risk 
to approve IT Budget 
4. Legislative has skill to effect 
executive to innovate IT 
Interval Scale 
Use likert Scale. (Kim  Stuart, 
2004) 
Capacity of 
Information 
Technology 
1. Capacity of Software and Hardware 
2. Capacity of operation system and 
Software network 
3. The user ability in analyse IT 
4. The attitude of IT user. 
5. Program of training for IT User 
Interval Scale 
Use likert Scale. (Kim  Stuart, 
2004) 
The quantitative analysis is conducted by Partial Least Square (PLS), with the following 
steps: first, Validity Analysis, to test and confirm that all research intruments / indicators represent 
the proposed variables, which are Economic performance, Social Capital, Social entrepreneurship 
and the influenced variable i.e. Developed and wealthy people. The indicator that the instrumens 
are valid is the level of correlation with significance less than 0,05. Second, Reliability Analysis, 
to test the level of consistency of repsondents responses, by which cornbach alpha number is 
attained. The Indicator that the responses are reliable is the high cornbach alpha number (  0,7 ; 
nunnaly, 1990). Thirth, Classical Assumption Analysis in form of Normality test, 
Heterocedastisity, Multi co-linearity and auto-corelation. This test is carried out so that regression 
will not be BLUE and can be used to predict the equation that will be made. Fourth, Hypotheses 
Analysis; ANOVA analyst is used to attained both t count value an and the level of determinde 
significance so that the proposed hypothesis can be tested.
Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) 
Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 
 
FINDINGS  DISCUSSION 
This research have 50 sampels consists of officers who work in work unit local 
government Demak province. The data was asses used Partial Least Squares (PLS). There are 
three criterias to evaluate outer model. They were convergent validity, discriminant validity and 
composite reliability. From the fifth variables in this research (Executive Capability (X1), 
Organitation Commitment (X2), Financial Support (X3), Legislative Support (X4), and Capacity 
of Information Technology (Y)) have loading factor value above 0,5. So all aof variables have 
cover convergent validity test. It is also with Reliability test, all aof variables have Composite 
Reliability higher than 0.50. So we can suggest that the data were very reliable. 
Hypothesis Test 
The following is the result of PLS to test each hypothesis: 
Table 2 
Hipotheses Test Results 
Entire Mean of Standard 
T-Statistic 
Sample subsamples error 
Estimate 
Exec_Cap-Capacity_IT 0.091 0.3691 0.1593 3.6109 
Commitment- Capacity_IT 0.144 0.1815 0.0972 3.1673 
Finance_Suuport- Capacity_IT 0.235 0.0161 0.0869 2.4029 
Leg_Support- Capacity_IT 0.215 0.2127 0.0289 2.1633 
Exe_Cap*Fin- Capacity_IT 0.107 0.2346 0.0763 3.2021 
Com*Fin- Capacity_IT 0.307 0.2346 0.0763 3.4021 
Exe_Cap*Leg - Capacity_IT 0.468 0.6022 0.0629 2.8735 
Com*Leg- Capacity_IT 0.272 0.0036 0.0418 2.9178 
Source: The analyzed primary data 2014 
Based on the result of PLS test on tabel 2, we can see that for the first hypothesis until 
Sixth hypothesis were eccepted. It was support by t–statistik value bigger than t-table value 
about 1,96. It means that Ho is rejected and Ha is accepted. So it can be seen that variabel 
Executive Capability (X1), Organitation Commitment (X2), Financial Support (X3), and 
Legislative Support (X4) have posi t ive effect on Capacity of Information Technology (Y). 
This research support the previous reserach which conducted by Kim  Stuart (2004) mentioned 
that Executive Capability , Financial Support, and Legislative Support have posi t ive effect on 
Capacity of Information Technology. It also support Osamd (2006) revealed that organization 
have commitment posi t ive effect on Capacity of Information Technology. 
Based on this result we can see that the role of information technology to support 
implementation of good governance is very big. So, local government has responsibility to 
maintain their information technology effectively. They have to redesain their IT so it can synergy 
with implementation of information technology. Local governments have, for a long time, made 
use of information technology (IT) to manage public services. Applying IT to government has to 
consider some factors like Executive Capability, Organitation Commitment, Financial Support, 
and Legislative Support. All of factors is very important for the success of E-Governance. Kim
Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) 
Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 
Stuart (2004) added that they also has to mantain organizational and environmental factors, for 
example the effect of environmental and organizational factors. 
Pathak. (2008) mentioned that Governments now realize that e-Governance is more 
than just floating government web sites on the Internet. The definition for the purposes 
of this paper is to characterize e- Governance as a process to make simpler and improve 
democratic government and business aspects of governance through an application of 
electronic means in the interaction between citizens and government and businesses 
and government and also in internal government operations (Backus, 2001). E-Governance 
represents a significant opportunity to move forward with qualitative, cost 
effective government services and a better relationship between citizens and 
government (Fang, 2002). The potential benefits of using ICT in government include, but 
go beyond, efficiency and effectiveness. By making available interactive access to and 
use of information by people who use government services e-Governance initiatives 
hope to empower citizens (Gage, 2002) and improve relationships between 
governments and citizens by helping build new spaces for citizens to participate in their 
overall development (Gasco, 2003). Online systems have not only helped achieve 
efficiency gains by cutting overall time to process applications but also made transactions 
more traceable, transparent and easier to access (Bhatnagar, 2003). However, if e- 
Governance initiatives are to curb corruption then the design of such systems needs an 
appropriate conceptual framework and needs to be understood by policy makers 
and public managers (Cisar, 2003; Mahmood, 2004; Tangkitvanich, 2003). 
	 
CONCLUSION 
The conclusion of this research are : first, variabel executive capability, organitation 
commitment, financial support, and legislative support have posi t ive ef fect on capacity of 
information technology. The second is Good Governance has positive impact significantly on 
work unit performance in Demak local Government. Thirth, information technology has positive 
impact significantly on work unit performance in Demak local Government. 
This limitation of the study are the first, performance variabel is just measured from 
persption side. It can not reflection of full performance. So the next research expected use others 
measurement. The second, value of R2 about 20%, means that capacity of information technology 
variable is effected by four variables (executive capability, organitation commitment, financial 
support, and legislative support) in this model just 20%. It can be seen that performance variable 
is effected by other variables in outside of the model like politics, birocration, environment and 
etc. 
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indonesia, Unpublished.

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  • 1. Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 THE ROLE OF E-GOVERNANCE IN INCREASING OF LOCAL GOVERNMENT PERFORMANCE (CASE STUDY IN DEMAK PROVINCE, CENTRAL JAVA, INDONESIA) Oleh : Edy Suprianto, SE, MSI, Akt Department of Accouting Sultan Agung Islamic University, Semarang, Indonesia Email: edy_2806@yahoo.co.id ABSTRACT The purpose of research is to identify affectivity and efficiency of implementation of E-good governance to increase local government performance in Demak, central java, Indonesia. This research more focuses on how far the capacity of technology information can support increasing of local government performance. There are many factors which affected the capacity of technology information. They are executive capability, financial support and legislative support (Kim Stuart, 2004) and organization commitment (Osmad, 2006). The support of the fourth factor are many factors which effected the capacity of technology information. The Population of research are all of work unit in local government performance in Demak, central java, Indonesia. While samples were selected used purposive random sampling with criterias : first, work unit had implemented the E-Governance consistenly. Second, work unit must report their performance to regional had every year. Regression is used to analys the data. Based on the research result, we can concluded that the role of e-governance is very big. It is supported by the result of on the regression analys where degree of significancy more than 1,96. So we can reveals that executive capability, financial support, legislative support and organization commitment have positive effect significantly on work unit performance. This result indicated that all of government organization have to more focus on increasing of technology infrmation capacity. Keyword : E-Government, executive capability, financial support, legislative support and organization commitment. INTRODUCTION On of the good local government performance indicator is achivement of independent their citizen prosperious and affluent. It is suitable with statement in 1945 Constitution of The Republic of Indonesia. The constitution mention that to form a government of the state of Indonesia which shall protect all the people of Indonesia and all the independence and the land that has been struggled for, and to improve public welfare, to educate the life of the people and to participate toward the establishment of a world order based on freedom, perpetual peace and social justice, therefore the independence of Indonesia shall be formulated into a constitution of the Republic of Indonesia which shall be built into a sovereign state based on a belief in the One and Only God, just and civilised humanity, the unity of Indonesia, and democratic life led by wisdom of thoughts in deliberation amongst representatives of the people, and achieving social justice for all the people of Indonesia.. Demak Distric is one of Local Government which existing in indonesia, exactly in central java province. To increase their performance Demak District has long away implemented good government governance. Besaide that they also has set using of information technology to support implementation of Good Governance. It called by E-Governance. Mario and Brzica (2008)
  • 2. Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 mention that E-government concept originated at the beginning of 21 st century, mostly as a copy of e-commerce into public sector9. All intentions were directed towards the presence of the public services on the Internet. In the early years of its development, e-government follows the evolutionary e-business evolving model. In the implementation process, there are many problems which be forced by local government. They are first, Coordination and Controlling of use IT is not yet optimal. Second, Capacity of information technology is not too adequate and less of awareness of using information technology. Thirth, Using of information technology is not optimal, Fourth, less of qualified human resources and fifth, there is no standart of procedur for management information technology system. Based on these problems, this research try to analyse what the type of information technology which suitable with the characteristics of Demak Distric and how about capacity of information technology (software and hardwre) in Demak District can support the implementation of good governance. Beside that we also will be asses what the effect of financial and legislative support on the capacity of information technology and how far the effect of using IT on Demak District performance. LITERATURE REVIEW E-GOVERNANCE Mario and Brzica (2008) mention that E-government concept originated at the beginning of 21 st century, mostly as a copy of e-commerce into public sector. All intentions were directed towards the presence of the public services on the Internet. In the early years of its development, e-government follows the evolutionary e-business evolving model (Earl in Mario and Brzica, 2008), which in particular means that in the early days of e-government evolvement, primary focus of the e-services was simple appearance of graphic user interfaces with possibilities of interactions. Early enthusiasm during the mean time weakened but such experiences brought crucial acknowledgments. Today, because of those acknowledgments, the focus is on coordination and effective assessment of the needs, efficiency and public benefits for such services. The development of electronic public services enters in the new phase, which is mostly determined by reengineering of existing processes of public government. Public sector by its nature (based on information and communications) is ideal for international increase of efficiency and quality. Public government disappointment is triggered by bureaucracy, information abuse for internal purposes, increasing cost of transactions and mostly because of lack of responsibility for td, he client. Especially in European countries the problem of ever-growing public sector is present, making the concept the efficient e-government even more important. Regarding the participants engaging in e-government activities, four models can be recognized: - G2C (Government to Citizens), - G2B (Government to Business), - G2E (Government to Employees; which includes workflow management and knowledge management), and - G2G (Government to Government; which includes Business Process Reengineering and ERP systems). Based on the relationship between e-governance and information technology (IT), there are two main question which have be answered. First, How to determine the qriterias of good governance to use IT themselves. Second, How to set the IT to achive the good governance. In generally, IT and good governance have mutually relationship. Better IT will support implementation of good governance. It means IT which can be acces well, with minimum cost, and public needs responsible, it will accelerate national development.
  • 3. Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 INFORMATION TECHNOLOGY CAPACITY Organizational capacities or capabilities are typically defined as an ability of an organization to do something, for example technological capacity is the ability to change or innovate through technological Proceedings of the 37th Hawaii International Conference on System Sciences – 2004 Following this model our general concept of IT capacity for local governments is the ability of the local government to effectively apply IT to achieve desired ends. It is important to note that, the type and amount of IT varies significantly across local governments, even local governments of comparable size and character, but the amount and type of IT does not adequately capture variation in effective use of technology. One reason for this failure is that IT by itself does not accomplish anything without the appropriate human and managerial resources. Over two decades ago, Kraemer and associates found that in order to understand how computers changed organizations, it was necessary to look at the entire “computer package” which encompasses ‘technique’ that is organizational structures and institutional arrangements for maintaining information system, as well as ‘equipment’ (e.g. hardware, software, network) and ‘people’ who operate, process and use the equipment. Thus, IT must be coupled with human and managerial resources in-place to more accurately capture IT capacity as defined above. The factors found in innovation literature in general as well as IT innovation research may contribute to developing a model to explain what organizational factors are critical to the level of IT capacity. Innovation is a function of the motivation to innovate, the strength of obstacles against innovation, and the availability of resources for overcoming such obstacles. In local governments, therefore, barriers to IT innovation can be resistance from end-users to new information system, top decision makers’ lack of will and understanding about the IT innovation and insufficient support or inappropriate regulations from upper level government. On top of that, IT manager who is not capable of planning and implementing IT innovation projects may hinder the success of IT innovation There are many factors have been founded and created in literatur and empiric research. It will give contribution in model development about capacity of information technology (Kim Stuart, 2004). Mohr (2004) mention that innovation is the fuction of motivation to creat something which effected by two factors. They are the power of constrain that faced and availability of resources to encounter the constrain. Figure 1. Degree of IT Capacity
  • 4. Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 AN INITIAL THEORY OF LOCAL GOVERNMENT INFORMATION TECHNOLOGY CAPACITY Kim Stuart (2004) mentioned that the factors found in innovation literature in general as well as IT innovation research may contribute to developing a model to explain what organizational factors are critical to the level of IT capacity. Based on Mohr (2004), innovation is a function of the motivation to innovate, the strength of obstacles against innovation, and the availability of resources for overcoming such obstacles. In local governments, therefore, barriers to IT innovation can be resistance from end-users to new information system, top decision makers’ lack of will and understanding about the IT innovation and insufficient support or inappropriate regulations from upper level government. On top of that, IT manager who is not capable of planning and implementing IT innovation projects may hinder the success of IT innovation. SUPPORT FROM ADMINISTRATIVE AUTHORITIES Kim Stuart (2004) mentioned that Innovation would be more likely when the political environment to which an organization belongs has norms favoring the change. According to Fountain, enacting technology is highly influenced by institutional and political arrangements. Hence, improving IT capacity of local governments depends on whether support from administrative authorities elected or appointed top administrators (mayor or city manager), city council and also state government is available for IT managers who are in charge of implementing IT adoption process and its utilization. Even in the case that IT managers initiate the adoption of new technology, support from administrative authorities may play a significant role in whether the innovation efforts are frustrated or completed. Support from administrative authorities can be expressed in several ways. First, top administrators’ innovativeness is important for mobilizing resources. IT innovation requires large amount of investments, and its effects are not realized in a short term. To implement IT innovation, top administrators are expected to take the risk of failure or delay of IT adoption. Therefore, the top administrator has to have risk-taking propensity to support IT managers to design and implement IT adoption plan without worrying about the consequence. Second, top administrators’ knowledge of IT should be considered. Top administrators knowledgeable of the potentials of IT are more likely to have more positive attitude to IT innovation and to endorse the innovation initiatives raised by IT managers. Third, legislative body, i.e. city council, is as important as top administrators are, because budget allocation and other legislative supports are finally authorized by city councils. Like top administrators, city councils' IT innovativeness and knowledge form a crucial part of support from administrative authorities. Fourth, state governments’ influence also needs to be considered. State governments make efforts for state-wide technology diffusion, such as providing information about innovations, financial support during development, and procedural facilitation MANAGERIAL CAPABILITY OF IT MANAGER Kim Stuart (2004) mentioned that the availability of individuals capable of producing new ideas is one of the significant factors promoting innovation, and innovations are likely to be proposed by individuals who have expertise in a particular area. Especially, IT innovations tend to start from ingenious application devised by managers with a technical background. Therefore, managerial capability of IT manager, which can be defined as the ability to identify problems of the current information system, and to develop and evaluate alternatives to improve the IT capacity of the organization appears to be a decisive factor affecting the IT capacity of local government. This notion of managerial capability conforms to our early definition of capacity in general and IT capacity specifically, as the ability of the local government to effectively apply information technology.
  • 5. Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 In local governments, an IT manager is in the position of initiating and implementing IT innovation projects. An IT manager’s managerial capability as a change agent can be thought to be composed of knowledge of IT, innovativeness and motivation. Knowledge of IT is an essential part of IT managerial capability. As previously noted, IT encompasses a broad range of technologies. As innovation capability is contingent upon the skill level of the staff, without the comprehensive expertise in IT, IT managers may neither design a plan appropriate to obtaining IT capacity nor gain trust from the administrative authorities whose political supports are essential for executing innovation ideas. Financial support Kim Stuart (2004) mentioned that the availability of financial resources is one of the strongest predictors of innovation. For organizational innovation, especially for adopting advanced IT, financial support is indispensable for procuring and developing adequate levels of hardware and software, and training end-users as needed. Therefore, we can expect that a large variation in IT innovation among city governments can be explained by the amount of budget available to adopting new IT. However, as the size of total budget differs from government to government, the relative proportion of the IT budget in the budget structure could be considered as the criteria to judge the level of financial support. PREVIOUS RESERACH There are many researches about good governance. One of them is Lukita (2009) conducted about implementation of Sarbanise Oxley to support Good Governance in PT. Telkom, Tbk. She founded that there is positive effect of implementation good governance in PT. Telkom Tbk on organitation performance. This research was supported by Edy Marno (2010) reveals about the role good governance to support PNPM Mandiri performance in reducing poverty. Beside of good governance, there are many factors which will affect organitation performance. Edy (2009) founded that using of information taechnology can support auditor internal performance. This research was supported by (Wigrantoro, 2001) mentioned that information technology is very supoort implementation state governance.In 2013, oleh edy Dedi (2013), also concluded that local government performance is affected by three factors. They were good government governance, information technology and strategic human resources management. This research more focused on the role of information technology to support implementation of good governance. The ability of information technology to increase organitation technology has been supported by capacity of information technology. There are many factors which affect the capacity of information technology. Kim Stuart (2004), mentioned that capacity of information technology is affected by Executif capability, financial and legislatife support. Those factors are very important to determine the success of capacity of information technology to support local government performance. Beside that, Osmad (2006) added that there is one variable which will support the success of capacity of information technology. It is organitation commitment.
  • 6. Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 Financial Support Legislatif Support Figure 2. Research Model Executive Capability Capacity of information technology Commitment Based on the research background and previous reserach, we can cunclude the hypothesis : H1 : Executive Capability has positive affect on capacity of information technology H2 : Comitment has positive affect on capacity of information technology H3 : Financial support can moderate the relationship between Executive Capability and capacity of information technology. H4 : Financial support can moderate the relationship between Comitment and capacity of information technology. H5 : Legislative support can moderate the relationship between Executive Capability and capacity of information technology. H6 : Legislative support can moderate the relationship between Comitment and capacity of information technology. RESEARCH METHODOLOGY POPULATION AND SAMPLES The research population is all of work unit of Demak District about 55 unit. Purposive sampling method is used to collect data with some criterias : first, Work unit of Demak District had implemented E-Governance in their organitation more than one years. Second, Work unit of Demak District has budget to support development of the capacity of information technology. VARIABLE OPEARTIONAL DEFINITION This research has five variables. They are two independent variable consist of Executive Capability and Organitation Commitment, two moderating variables consist of Financial and Legislative Support, and one dependent variable Capacity of Information Tchnology. This research uses questionaire to describe the standardized operating variables. Previously the vailidty and the realibility will be tested. In the dimension of strategic Human Resources Management, 5 (five) likert’s scale is used in all questions ( 1 = Totally Disagree to 5 = Totally Agree). Ordinal scale category is used on some variables through profound interviewsThe indicators of each variables can see in table1.
  • 7. Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 Tabel 1 Definisi Operasional Variabel Variabel Indikator Pengukuran Executive Capability 1. Comprehension about information technology 2. Skill to motivate and innovate of information technology 3. Skill to redesign information technology 4. Skill in politic and get financial support for information technology Interval Scale Use likert Scale. (Kim Stuart, 2004) Organitation Commitment 1. feel proud as member of organitation. 2. invite colleague to hard work in organitation. A sense of belonging on organitation. Interval Scale Use likert Scale. (Jaramillo et al 2009). Financial Support 1. Percentage of IT Budget 2. Investation in IT 3. Size of local government 4. Tipe of government Interval Scale Use likert Scale. (Kim Stuart, 2004) Legislative Support 1. Legislative has skill to innovate 2. Legislative has courage to take risk to support IT 3. Legislative has courage to take risk to approve IT Budget 4. Legislative has skill to effect executive to innovate IT Interval Scale Use likert Scale. (Kim Stuart, 2004) Capacity of Information Technology 1. Capacity of Software and Hardware 2. Capacity of operation system and Software network 3. The user ability in analyse IT 4. The attitude of IT user. 5. Program of training for IT User Interval Scale Use likert Scale. (Kim Stuart, 2004) The quantitative analysis is conducted by Partial Least Square (PLS), with the following steps: first, Validity Analysis, to test and confirm that all research intruments / indicators represent the proposed variables, which are Economic performance, Social Capital, Social entrepreneurship and the influenced variable i.e. Developed and wealthy people. The indicator that the instrumens are valid is the level of correlation with significance less than 0,05. Second, Reliability Analysis, to test the level of consistency of repsondents responses, by which cornbach alpha number is attained. The Indicator that the responses are reliable is the high cornbach alpha number ( 0,7 ; nunnaly, 1990). Thirth, Classical Assumption Analysis in form of Normality test, Heterocedastisity, Multi co-linearity and auto-corelation. This test is carried out so that regression will not be BLUE and can be used to predict the equation that will be made. Fourth, Hypotheses Analysis; ANOVA analyst is used to attained both t count value an and the level of determinde significance so that the proposed hypothesis can be tested.
  • 8. Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 FINDINGS DISCUSSION This research have 50 sampels consists of officers who work in work unit local government Demak province. The data was asses used Partial Least Squares (PLS). There are three criterias to evaluate outer model. They were convergent validity, discriminant validity and composite reliability. From the fifth variables in this research (Executive Capability (X1), Organitation Commitment (X2), Financial Support (X3), Legislative Support (X4), and Capacity of Information Technology (Y)) have loading factor value above 0,5. So all aof variables have cover convergent validity test. It is also with Reliability test, all aof variables have Composite Reliability higher than 0.50. So we can suggest that the data were very reliable. Hypothesis Test The following is the result of PLS to test each hypothesis: Table 2 Hipotheses Test Results Entire Mean of Standard T-Statistic Sample subsamples error Estimate Exec_Cap-Capacity_IT 0.091 0.3691 0.1593 3.6109 Commitment- Capacity_IT 0.144 0.1815 0.0972 3.1673 Finance_Suuport- Capacity_IT 0.235 0.0161 0.0869 2.4029 Leg_Support- Capacity_IT 0.215 0.2127 0.0289 2.1633 Exe_Cap*Fin- Capacity_IT 0.107 0.2346 0.0763 3.2021 Com*Fin- Capacity_IT 0.307 0.2346 0.0763 3.4021 Exe_Cap*Leg - Capacity_IT 0.468 0.6022 0.0629 2.8735 Com*Leg- Capacity_IT 0.272 0.0036 0.0418 2.9178 Source: The analyzed primary data 2014 Based on the result of PLS test on tabel 2, we can see that for the first hypothesis until Sixth hypothesis were eccepted. It was support by t–statistik value bigger than t-table value about 1,96. It means that Ho is rejected and Ha is accepted. So it can be seen that variabel Executive Capability (X1), Organitation Commitment (X2), Financial Support (X3), and Legislative Support (X4) have posi t ive effect on Capacity of Information Technology (Y). This research support the previous reserach which conducted by Kim Stuart (2004) mentioned that Executive Capability , Financial Support, and Legislative Support have posi t ive effect on Capacity of Information Technology. It also support Osamd (2006) revealed that organization have commitment posi t ive effect on Capacity of Information Technology. Based on this result we can see that the role of information technology to support implementation of good governance is very big. So, local government has responsibility to maintain their information technology effectively. They have to redesain their IT so it can synergy with implementation of information technology. Local governments have, for a long time, made use of information technology (IT) to manage public services. Applying IT to government has to consider some factors like Executive Capability, Organitation Commitment, Financial Support, and Legislative Support. All of factors is very important for the success of E-Governance. Kim
  • 9. Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 Stuart (2004) added that they also has to mantain organizational and environmental factors, for example the effect of environmental and organizational factors. Pathak. (2008) mentioned that Governments now realize that e-Governance is more than just floating government web sites on the Internet. The definition for the purposes of this paper is to characterize e- Governance as a process to make simpler and improve democratic government and business aspects of governance through an application of electronic means in the interaction between citizens and government and businesses and government and also in internal government operations (Backus, 2001). E-Governance represents a significant opportunity to move forward with qualitative, cost effective government services and a better relationship between citizens and government (Fang, 2002). The potential benefits of using ICT in government include, but go beyond, efficiency and effectiveness. By making available interactive access to and use of information by people who use government services e-Governance initiatives hope to empower citizens (Gage, 2002) and improve relationships between governments and citizens by helping build new spaces for citizens to participate in their overall development (Gasco, 2003). Online systems have not only helped achieve efficiency gains by cutting overall time to process applications but also made transactions more traceable, transparent and easier to access (Bhatnagar, 2003). However, if e- Governance initiatives are to curb corruption then the design of such systems needs an appropriate conceptual framework and needs to be understood by policy makers and public managers (Cisar, 2003; Mahmood, 2004; Tangkitvanich, 2003). CONCLUSION The conclusion of this research are : first, variabel executive capability, organitation commitment, financial support, and legislative support have posi t ive ef fect on capacity of information technology. The second is Good Governance has positive impact significantly on work unit performance in Demak local Government. Thirth, information technology has positive impact significantly on work unit performance in Demak local Government. This limitation of the study are the first, performance variabel is just measured from persption side. It can not reflection of full performance. So the next research expected use others measurement. The second, value of R2 about 20%, means that capacity of information technology variable is effected by four variables (executive capability, organitation commitment, financial support, and legislative support) in this model just 20%. It can be seen that performance variable is effected by other variables in outside of the model like politics, birocration, environment and etc. REFERENCES Agusty Ferdinand. 2000. Structural Equation Modelling Dalam Penelitian Manajemen. Badan Penerbit Universitas Diponegoro. Aimee, F.,dan Carol E., (2004), Aligning Priorities In Local Budgeting Processes. Journal of Public Budgeting, Accounting Financial Management. Boca Raton Summer 2004 Vol. 16, Iss.2; pg 210, 18 pgs. Bambang. 2008. Analisis Potensi Pajak Daerah di Kabupaten Semarang sebagai sumber Pendapatan Asli Daerah (PAD). Unpublished
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