The paper conceptualizes a project’s governance configuration as centralization/decentralization of two classes of project decision rights decision control rights (DCRs) and decision management rights (DMRs). The theory development introduces the central mediating concept of decision rights exercise effectiveness, building on Jensen and Meckling’s (1992) model to conceptualize two types of governance-knowledge fit. Fit between the client department’s technical knowledge and DCR decentralization enhances the effectiveness with which project activities encompassed by DCRs project ratification and monitoring are accomplished, which in turn influences ISD efficiency. Fit between the IT unit’s business application domain knowledge and DMR centralization influences the effectiveness with which project activities encompassed by DMRs implementation and resource utilization are accomplished, which in turn influences ISD effectiveness. Data from 89 ISD projects in 89 firms strongly support the proposed ideas.