Co-creation in effectuation processes: A stakeholder perspective on commitment reasoning

In this article, we seek to contribute to theory on market co-creation through effectuation. To achieve this goal, we examine the different kinds of reasoning behind stakeholder commitments in effectuation processes. Although effectual and causal logics sufficiently account for decision-making in instrumental rationality, scholars have paid little attention to value rationality, and how it might influence stakeholder commitments and behavior. Different commitments may follow different rationales, ranging from instrumentally rational commitments based on causal or effectual logics, to value rational commitments based on state-belief or change-belief. The typology of these four commitment reasoning types provides a framework for analyzing stakeholder behavior based on different perceptions of the commitment decision space. Our typology shows that commitments based on value rationality may be qualitatively different from those driven by instrumental rationality and that value rationality may enable commitments under conditions that preclude instrumentally rational actions. Furthermore, different commitments influence market co-creation processes in different ways. In this article, we examine how different commitments affect (1) conflict and effectual churn and (2) the relative path dependence, or shapability, of the market co-creation space. Based on this typology, we propose avenues for future research on co-creation in effectuation processes, with a special focus on stakeholders.     

Social interaction via new social media: (How) can interactions on Twitter affect effectual thinking and behavior?

Social interaction plays a central role in effectuation processes, yet we know little about the implications for effectuation when an entrepreneur interacts via particular channels such as social media. To address this gap, our paper uses an inductive, theory-building methodology to develop propositions regarding how effectuation processes are impacted when entrepreneurs adopt Twitter. Twitter is a microblogging platform that can facilitate a marked increase in interaction. We posit that Twitter-based interaction can trigger effectual cognitions, but that high levels of interaction via this medium can lead to effectual churn. We also posit that there is one factor, perceived time affordability, that predicts the level of social interaction in which an entrepreneur engages via Twitter. Further, we propose two factors that moderate the consequences of social interaction through Twitter. These factors are community orientation and community norm adherence. Implications for our understanding of effectuation, of social interaction, and of the impact of social media on entrepreneurial firms are discussed.     

Perceived uncertainty and behavioral logic: Temporality and unanticipated consequences in the new venture creation process

In this study, drawing on effectuation theory, we combine analytical strategies for process data to examine inductively and theorize how founder teams' perceptions of uncertainty and behavioral logics develop during new venture creation processes. The results reveal four phases and suggest a possible evolution from a causal conditional relationship between perceived uncertainty and behavioral logics to an integrative relationship. We bring to light the notion of temporality and unanticipated consequences, discuss their central roles in perceived uncertainty, effectuation, and causation, and offer revelatory insights into why and when effectuation is used in relation to uncertainty and entrepreneurial action.     

Corporate effectuation: Entrepreneurial action and its impact on R&D project performance

Innovative products are widely recognized as an important source of competitive advantage. However, many companies have difficulties finding efficient and successful approaches to different types of R&D projects, particularly those that involve a high level of innovativeness. Therefore, the present study moves effectuation theory from the entrepreneurial context to R&D research. First, the characteristics of an effectual approach in the context of R&D projects are developed and differentiated from those of conventional prediction-based strategies (causation). Second, using a thorough qualitative and quantitative scale-development process to capture particularities of effectual and causal dimensions in the R&D context, expert interviews and a pilot study (123 R&D projects), the study develops a multi-factor measurement model of effectuation and causation. These measures are validated in a follow-up study with a larger sample of 400 projects. Third, the new measures are applied to test two central hypotheses: (a) effectuation is positively related to success in highly innovative contexts, (b) causation approaches are beneficial in projects with low levels of innovativeness. Overall, this study moves the effectuation logic from the entrepreneurial to the corporate R&D context, captures its particularities, and investigates its performance outcomes.     

Antecedents and consequences of effectuation and causation in the international new venture creation process

The selection of the entry mode in an international market is of key importance for the venture. A process-based perspective on entry mode selection can add to the International Business and International Entrepreneurship literature. Framing the international market entry as an entrepreneurial process, this paper analyzes the antecedents and consequences of causation and effectuation in the entry mode selection. For the analysis, regression-based techniques were used on a sample of 65 gazelles. The results indicate that experienced entrepreneurs tend to apply effectuation rather than causation, while uncertainty does not have a systematic influence. Entrepreneurs using causation-based international new venture creation processes tend to engage in export-type entry modes, while effectuation-based international new venture creation processes do not predetermine the entry mode.     

Foreign market entries,exits and re-entries: The role of knowledge,network relationships and decision-making logic

We focus on the following question: how are knowledge, network relationships and decision-making logic interrelated throughout the internationalization process – foreign market entries, exits and re-entries? We contribute to the internationalization literature, network approach and effectuation theory that have not examined these interrelationships during internationalization – especially de- and re-internationalization – in detail yet. Thereby, we provide a more complete view of internationalization. Based on a single punctuated longitudinal case study, we show that lack of knowledge results in mostly effectual (opportunity-driven) decision-making: finding customers via weak ties, trade fairs and unsolicited export orders and experiencing numerous market exits and re-entries due to “experimenting”. Knowledge acquisition leads to more causal (systematic, plan-driven) decision-making and stronger ties, but serendipitous (“by chance”) entries can still occur, and exiting and re-entering foreign markets may continue. We suggest that managers should network and acquire knowledge actively, use both decision-making logics and accept uncertainty as normal during internationalization.     

Universally-enabling and context-binding resources in new venture internationalization: Evidence from venture capital backed start-ups in an emerging market

Integrating institutional and effectuation theories, we examine the relationship between entrepreneurs’ means and internationalization in an emerging market. Results indicate that some means, such as technical expertise or business network membership, transform into valuable internationalization resources despite difficult institutional conditions. Others, however, such as industry or international experience, are best deployed locally. Findings also indicate that means such as entrepreneurial experience and number of founders act as catalysts of internationalization, allowing for other means to transform into internationalization resources. We extend effectuation theory by showing how different means transform into internationalization resources and contribute to research at the intersection of institutional theory and international entrepreneurship by expanding our understanding of universally-enabling and context-binding internationalization resources. In so doing, we identify a boundary condition to international entrepreneurship theories that emphasize the role of individual resources during venture internationalization by revealing a context in which certain traits exhibit nonstandard relationships with internationalization.     

Networks in Entrepreneurship: The Case of High-technology Firms

The value of networks as an integral part of the explanation of entrepreneurial success is widely acknowledged. However, the network perspective does not specify the role of networks in the emergence and early growth of a venture. We have distinguished three entrepreneurial processes in new venture development, i.e. discovery of opportunities, securing resources, and obtaining legitimacy, which are of importance for survival and performance. This paper examines how these processes are influenced by strong and/or weak ties and whether the degree of innovation (incremental versus radical) acts as a contingency factor in the way network ties support entrepreneurial processes. In this explorative study three cases on high technology firms in The Netherlands provide empirical material enabling us to develop a number of propositions on the network effect, in particular the mix of strong and weak ties, on the three entrepreneurial processes.     

Linking international entrepreneurship to uncertainty,opportunity discovery,and cognition

In this paper, we suggest a model of international entrepreneurship that links cognition, noticing opportunities, absorbing uncertainty, and bearing uncertainty, to international entrepreneurial action, which is important because of the increased interest in international entrepreneurship. The ways in which cognition affects opportunity identification are discussed to show how international entrepreneurs’ cognitive processes work in terms of identifying opportunities. We also explore the role of cultural differences, with respect to tolerance for bearing uncertainty, on international entrepreneurship. Finally, the model is used to identify areas for future international entrepreneurship research.     

International network formation,home market institutional support and post-entry performance of international new ventures

Effectuation and causation decision-making logics are noted to be major alternative approaches to international network formation. However, knowledge is lacking on how and the conditions under which the two approaches contribute to post-entry performance of international new ventures (INVs). We integrate the theory of effectuation and institutional development logic to explain how effectuation and causation approaches to international network formation individually and jointly contribute to post-entry performance under varying conditions of home market institutional support. We test our proposed framework on primary data from 228 INVs in a sub-Saharan African economy. Results suggest that greater uses of both effectuation and causation approaches to international network formation are associated with stronger post-entry performance. More interestingly, results show that the joint effect of the two international network formation approaches on post-entry performance is amplified under conditions of low home market institutional support. Our findings provide theoretical and managerial insights on the importance of complementing effectual and causal reasoning in international network formation in weak home market institutional environments.     

The Impact of Environment Uncertainty and Effectual Flexibility on Entrepreneurial Resource Combination: The Moderating Effect of Entrepreneurial Self-efficacy

Entrepreneurial resource combination is widely recognized as a key enabling factor to a new venture’s survival and growth, but how and why resources are integrated remain elusive. Borrowing from the theory of resource combination proposed by Sirmon, Hitt and Ireland (2007), this study empirically examines how environmental uncertainty impacts entrepreneurial resource combination. We also examine the mediating effect of effectual flexibility on the relationship between environmental uncertainty and entrepreneurial resource combination to see how new ventures utilize flexibility to neutralize the threat of environmental uncertainty. The moderating effect of entrepreneurial self-efficacy is also examined to see how entrepreneurs’ self-cognition affects these relationships. Examining data from 287 new ventures, we find that both environmental dynamism and environmental hostility have significantly positive influence on entrepreneurial resource combination (including entrepreneurial resource cohesion and entrepreneurial resource coupling). We also find that flexibility mediates the relationship between environmental uncertainty (including environmental dynamism and environmental hostility) and entrepreneurial resource combination. Empirical studies also show that entrepreneurial self-efficacy positively moderates the relationship between environmental dynamism and flexibility but negatively moderates the relationship between environmental hostility and flexibility. Theoretical and practical implications are discussed.     

Towards a theory of entrepreneurial teams

This article examines the role of entrepreneurial teams in processes of entrepreneurial discovery. It addresses two main questions. The first investigates the implications of economic theory for the possibility of team entrepreneurship. Because leading economic theories focus almost exclusively upon individual decision-makers, we propose a broader notion of entrepreneurship that includes enterprising teams as well as individuals. We define entrepreneurship as a profit-seeking problem-solving process that takes place under conditions of structural uncertainty.The second question examines the conditions that are conducive to joint entrepreneurial action and the formation of entrepreneurial teams. We suggest that bounded structural uncertainty and perceived strong interdependence arising from common interest can jointly “prime” team entrepreneurship.     

Organising new business in a turbulent context: Opportunity discovery and effectuation for IJV development in transition markets

Research on entrepreneurship has suggested entrepreneurial phenomena to take place in a wide variety of contexts that deal with new venture emergence. Opportunity discovery and effectuation are seen as the essence of entrepreneurship. The present study examines entrepreneurial behaviour in the organising of an international joint venture (IJV) in Polish transition markets. The paper aims to answer the following question: How is an international joint venture organised in turbulent context through opportunity-discovery and effectuation behaviours? Based on theoretical analysis and a longitudinal case study, we illustrate the organising of an international joint venture in transition markets through specific behaviours of opportunity discovery and effectuation. We show especially the relationship-based nature of all the behaviours. The study advances international entrepreneurship research by emphasising the intertwinedness of the entrepreneurial behaviours with the drastic developments in the transition markets and the evolution of the IJV partnership.     

Ecological rationality and entrepreneurship: How entrepreneurs fit decision logics to decision content and structure

During new venture creation, entrepreneurs make decisions in a variety of areas from seeking funding to hiring employees. When and why entrepreneurs use effectual or causal logics to make such decisions is poorly understood. In this study, we integrate ecological rationality theory and effectuation theory to examine how the nature of decisions influences entrepreneurs' use of decision logics. In a qualitative study with 41 entrepreneurs across 290 decisions, we explore how decision content (what the decision is about) and decision structure (what information about a decision is represented in the decision-maker's mind) influence entrepreneurs' use of effectual or causal logics. We extend our findings in an experiment with 224 entrepreneurs where we manipulate decision structure. Our results suggest that decision content influences entrepreneurs' mental representations of decision structure. In turn, the combination of two elements of decision structure — decision complexity and the perceived costs of implementing different options — drives entrepreneurs' use of decision logics. We contribute to the effectuation literature by integrating it with ecological rationality theory, introducing the concept of decision fit as a driver of decision logics, and developing our understanding of hybrid decision-making (the simultaneous use of effectuation and causation).     

Costly Ties: Social Capital as a Retardant of Network‐Level Entrepreneurial Orientation

Challenging social capital research, we argue that network top management teams (TMTs) established to support entrepreneurship in strategic multipartner networks should be careful in developing ties to outside organizations and networks. We suggest that such ties limit the network TMT's ability to engage in the strategy‐making processes needed to facilitate entrepreneurial orientation on a network level. Based on five‐year panel data from 53 formalized networks of small and medium‐sized enterprises, we demonstrate that homogenous and highly educated network TMTs can compensate the negative effects of TMT ties to other organizations, but not the negative effects of interlocking directorates.     

A meta-analysis of the determinants of organic sales growth

We present the results of a meta-analysis on drivers of organic sales growth conducted using a Hierarchical Bayes estimation technique. Based on a comprehensive review of a diverse set of literatures on organic sales growth, we identify eleven drivers of organic sales growth performance of firms: (i) innovation, (ii) marketing orientation (iii) advertising (iv) interorganizational networks, (v) entrepreneurial orientation, (vi) management capacity, (vii) firm age, (viii) firm size, (ix) competition, (x) munificence, and (xi) dynamism. Among the variables under a manager's control, innovation, advertising, market orientation, interorganizational networks, entrepreneurial orientation and managerial capacity serve as positive drivers of organic growth. Older firms and firms operating in dynamic and competitive environments face constraints in terms of organic growth. We find that the omission of marketing variables in empirical models biases the elasticities of eight of the drivers of organic growth. Three study design characteristics impact the magnitude of elasticity of organic growth drivers: using cross-sectional data instead of panel data, using growth rates instead of absolute change as operationalization of growth and using market share instead of sales as a measure of revenues.     

Causation and effectuation processes: A validation study

We develop and validate measures of causation and effectuation approaches to new venture creation and test our measures with two samples of entrepreneurs in young firms. Our measure of causation is a well-defined and coherent uni-dimensional construct. We propose that effectuation is a formative, multidimensional construct with three associated sub-dimensions (experimentation, affordable loss, and flexibility) and one dimension shared with the causation construct (pre-commitments). As specified by Sarasvathy (2001), we also show that causation is negatively associated with uncertainty, while experimentation, a sub-dimension of effectuation, is positively correlated with uncertainty. The major contribution is the resulting validated scales that measure causation and effectuation.     

Career motives and entrepreneurial decision-making: examining preferences for causal and effectual logics in the early stage of new ventures

The influence of entrepreneurs’ career motives is examined on two alternative modes of decision-making logic; causation and effectuation. Based on Sarasvathy’s (Acad Manage Rev 26(2):243–288, 2001) seminal study, causation is defined as a decision-making process that focuses on what ought to be done given predetermined goals and possible means, and effectuation as a decision-making process emphasizing the question of what can be done given possible means and imagined ends. Analysis suggests that entrepreneurs who identify themselves with linear or expert career motives have a higher preference for causal decision-making logic. Entrepreneurs who identify themselves with spiral or transitory career motives have a higher preference for effectual decision-making logic. In addition, indications that prior start-up experience moderates the relationship between career motives and effectual decision-making logic for spiral-minded entrepreneurs is found. The overall results give ample support for the assumption that entrepreneurs’ career motives influence their decision-making.     

The entrepreneurial journey as an emergent hierarchical system of artifact-creating processes

Entrepreneurial ‘process’ perspectives explain the events of an entrepreneurial journey in terms of mechanisms, such as ‘effectual logic’, ‘bricolage’, ‘dynamic creation’, ‘opportunity tension’ and ‘enactment’. Process theorists, however, have not as yet developed an analytical framework that explains an entrepreneurial event in relation to the entrepreneurial journey as the unit of analysis. Building on Sarasvathy's (2003, 2008) and Venkataraman et al.'s (2012) conception of entrepreneurship inquiry as a ‘science of the artificial’ (Simon, 1996), we explain how this research gap can be addressed by conceptualizing the entrepreneurial journey as an ‘emergent hierarchical system of entrepreneurial artifact-creating processes’. From this perspective, entrepreneurial events can be explained in relation to the endogenous dynamics of prior patterns of artifact emergence. We discuss some research implications of focusing on artifact emergence as a key unit of analysis in process theory development.     

Effectuation under risk and uncertainty: A simulation model

Effectuation was first proposed as an expert entrepreneur's decision-making framework under uncertainty, but the applications of effectuation beyond the condition of uncertainty have seen less attention. Using an agent-based simulation model, this paper investigates the effectiveness of effectuation relative to causation in uncertain and risky contexts. The simulation overcomes the shortcomings of think aloud protocols typically used in effectuation research. The results suggest that effectuation outperforms causation in both risky and uncertain contexts until the entrepreneur can predict the future correctly > 75% of the time. This suggests expanding the boundary of effectuation from uncertainty to whenever predicting the future is challenging.