Weaving network theory into effectuation: A multi-level reconceptualization of effectual dynamics

This paper positions effectuation as a network-driving and network dependent phenomenon and suggests that understanding networks and network processes is essential to understanding the dynamics of effectuation. We argue that the implementation of effectuation is influenced by the nodal, relational, and structural characteristics of pre-existing and emerging networks, and by the processes through which these networks come about. We use these arguments to develop a multi-level, multi-theoretical reconceptualization of effectuation that provides for distributed agency and collective cognition of network members. We allow for the simultaneous and interactional use of effectual and causal logics, as well as the co-construction of knowledge, identity, and social capital within and across network levels. Our model also addresses changing uncertainty as opportunities develop, nuances of effectual interactions, and evolving market dynamics. Our propositions and reflections offer directions for further studies at the intersection of network and effectuation research.Executive summaryThere is little doubt that effectuation is reshaping how we think about entrepreneurial cognition and behavior. A core argument is that under conditions of uncertainty, entrepreneurs can co-create opportunities by collaborating with other willful agents. This moves us away from classical views of entrepreneurship and positions effectuation as a network-driving and network-dependent phenomenon. Yet, recent debate highlights that effectuation research has paid insufficient attention to the network of external parties involved. As a result, although the extant model of effectuation recognizes the importance of networks, our understanding of the relationship between effectual logic and entrepreneurial networks is far from complete.Several theoretically important and practically relevant questions arise from this knowledge gap. For example if we think about network development, how are potential stakeholders brought to mind and persuaded to commit if end-points and stakeholder preferences are both unknowable? What are the characteristics (i.e. structure, content and governance) of the networks that emerge through these commitments? Reciprocally, how do the characteristics of the emerging network influence effectual processes and outcomes?In this paper, we begin to address this line of questioning by considering effectuation not only at the level of the individual but also through lenses reflective of the three levels of analysis commonly adopted in network research: i) dyadic relationships, ii) the entrepreneurial network, and iii) the market more generally. While we attend to pre-existing networks (the constitution of which is likely to affect the probability of adopting effectual logic), our focus is on linking the individual and emerging networks across these levels.At the level of the individual, we break from prior effectuation research and ascribe new and influential roles to entrepreneurial ideas and instrumental mindsets in focusing an entrepreneur's attention on particular relationships (i.e. the cognitive activation of a cohesive network involving interested and persuadable individuals). At the level of the dyad, we suggest the very nature of interactions between actors can influence individual choice of logic. We specify that stakeholders will expect signs of process legitimacy (e.g. cognitive flexibility on the part of the entrepreneur) before making effectual commitments. We also move away from assumptions about altruistic behavior to suggest that power and influence will accrue to stakeholders whose resources are at risk and/or perceived by others to resolve uncertainty. At the level of the entrepreneurial network, we link effectuation to a brokerage orientation (tertius iungens) that enhances inclusiveness surrounding means and collective cognition. Moreover, we move beyond the narrow view of facilitating and constraining factors portrayed in the effectuation literature to argue that (e.g.) i) with respect to network content, resource specificity will shape possible futures; ii) with respect to governance, trust, supported by social mechanisms will predominate; and, iii) with respect to structure, specific network characteristics will be more supportive of certain aspects of effectuation than others (e.g. cohesive networks are more supportive of collaboration, but may limit the flexibility needed to embrace contingencies). At the market level, we posit that on the one hand, institutions will shape effectual processes. On the other hand, effectual processes are more likely than causal processes to create new institutions and/or supplant existing institutions.Overall, our study contributes to the understanding of both effectuation and networks by offering a multi-level, multi-theoretical re-conceptualization of the dynamics of effectuation. Our arguments should spur research in at least three interdependent areas: i) uncertainty and individual cognition; ii) network processes surrounding interactions and commitments; and iii) the contingent effects of network characteristics on effectuation. For practitioners, our insights should help shape thoughts about i) who to interact with in the face of uncertainty; ii) what stories to tell and how to deal with image management; iii) what to expect during negotiations; iv) how to broker relationships to enhance the ‘co’ in ‘co-creation’; and moreover, v) what network characteristics might facilitate or constrain their efforts.     

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).     

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.     

‘Expect the unexpected’: Implications of effectual logic on the internationalization process

International entrepreneurship literature has indicated that entrepreneurs often increase international activities along unexpected lines of reasoning without having a precise goal, resulting in “unplanned” internationalization. We argue that “unplanned” internationalization does not necessarily involve non-logical decisions; but, entrepreneurs can follow an effectual rather than causal logic and may base their decisions on the affordable loss principle rather than on the maximization of expected returns. Based on five case-studies, we discuss the implication of effectual decision-making on the internationalization process. We find that switching from causal to effectual logic allows firms to rapidly increase the level of commitment in the foreign market and could assist in overcoming liabilities of outsidership and, therefore, successfully increase the level of commitment in the foreign market.     

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.     

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.     

National culture,effectuation, and new venture performance: global evidence from student entrepreneurs

Studies examining the relationship between national culture and entrepreneurial activity have largely ignored the influence of culture on individual decision-making. Recent years have witnessed considerable interest in cognitive logics employed by entrepreneurs. A growing body of literature examines factors contributing to the relative reliance on causal and effectual reasoning as entrepreneurs attempt to launch and grow new ventures, with evidence suggesting expert entrepreneurs engage more heavily in effectual reasoning than do novice entrepreneurs. The present study examines the mediating role of cognitive logic in explaining venture performance in differing cultural contexts. A series of hypotheses are tested using a sample of 3411 new ventures started by student entrepreneurs from 24 countries based on the Global University Entrepreneurial Spirit Students’ Survey. The findings indicate that both venture cognitive logics have positive effects on new venture performance and serve as mediators in the culture-performance relationship. Based on these findings, we conclude entrepreneurial reasoning is shaped not only by personal characteristics of entrepreneurs but also by aspects of the cultural context.     

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.     

Action! Moving beyond the intendedly-rational logics of entrepreneurship

Entrepreneurial action is central to entrepreneurship theory, and is broadly seen to arise as a consequence of intendedly rational logics (whether causal or effectual), reflecting reasoned judgment. But, is this always the case? While entrepreneurial action may often be the result of a judgmental decision (between alternative courses of action/inaction), the presumption that reasoned judgment encompasses all the motives, modes and mechanisms leading to entrepreneurial outcomes seems dubious. Building on an emerging literature that seeks to address the boundaries of reasoned entrepreneurial action, we develop the notion that non-deliberative impulse-driven behavioral logics can also be the basis for business venturing. Our framework offers a complementary perspective to the intendedly-rational, deliberate logics perspective, opening novel pathways for future research and theory-building.     

Designing transformative learning experiences for managerial transition to integrative CSR

Business leaders have increasingly committed to redefining corporate purpose in terms of corporate social responsibility (CSR). The challenge now is to enact this commitment. This article argues that to do so, managers must adopt a new cognitive frame (or mental lens). Specifically, managers must disengage from their existing instrumental frames, under which they consider CSR only instrumentally as a means to drive profit and pay only peripheral attention to external stakeholder goals, and instead engage with an integrative frame, in which CSR goals are intrinsic to business plans and are considered equivalent to, and simultaneously with, the firm’s financial goals. To enable managerial transition from the established instrumental frame to a novel, challenging, integrative frame, this article presents a transformative learning experience (TLE). In the TLE, managers first are immersed in a business initiative explicitly designed to expose the inadequacies of the instrumental frame for the redefined corporate purpose. This activates disorienting dilemmas in which the instrumental frame no longer applies but a new frame is not yet apparent. In the second phase, firms provide managers with heuristics such as metaphorical reasoning to enable experimentation with an integrative frame. This article provides guidelines for the structure in which this process should be embedded, how this process can be activated, and the process and learning outcomes to measure.     

Stakeholder theory: A process-ontological perspective

Advocates of stakeholder theory have long known that grasping its key insights requires a specific worldview that is, unfortunately, still not prevalent within the community of strategic management scholars. We argue that this worldview encompasses a process ontology that is radically different from the substance-ontological outlook typical of the mainstream approaches to strategic management. The unquestioned commitment of strategic management scholarship to a substance ontology leads to the viewing of corporations as macro-entities comprising aggregations of discrete autonomous actors each relying on individual choice and instrumental rationality. In contrast, within a process-ontological worldview, corporations and their stakeholders are seen to be sustained and attenuated through social practices and relationships involving interlocking chains of coping actions taken in everyday interactions. We show that adopting a process-ontological worldview presents a much-needed step that may help strategic management scholars reach a better understanding of how stakeholder theory deals with three problems of today's capitalism, those value creation and trade, ethics of capitalism, and managerial mindsets. On this basis, we discuss how to process ontology may lead stakeholder theory to further refine its understanding of business strategy, corporate social responsibility, and the common ground between the firm and stakeholders.     

Predictive and effectual decision-making in high-tech international new ventures – A matter of sequential ambidexterity

This study investigates the international opportunity exploration and exploitation processes of high technology international new ventures (INVs) operating in the global medical devices sector. Drawing upon the effectuation and causation perspectives, we contribute to the micro-foundations of international entrepreneurship research in the early innovation development space by focusing on decision-making logics of techno-entrepreneurs of INVs. Specific focus is afforded to the phases of their exploration and exploitation of international opportunities leading to international new venture creation. In the pre-start-up and start-up stages of international new ventures, we find that sequential ambidexterity applies to how the subject firms manage the exploration and exploitation of opportunities in the delivery of their innovations to global markets.This research advances prior international entrepreneurship studies by focusing on the opportunity and innovation processes on the individual level. We identify different decision-making logics in the different phases and contrary to earlier findings in the international entrepreneurship (IE) area, we found causation logic to dominate the initial stages of exploration and effectuation logic, in the latter stages. Prior commercial experience presented itself as a key determining factor in the decision-making path chosen by international techno-entrepreneurs. Our study further extends the view of organizational ambidexterity by offering empirical insights into the relevance of sequential ambidexterity for understanding the processes of innovation exploration and exploitation in high-tech INVs and the decision-making logics driving these processes.     

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.     

Struggles in organizational attempts to adopt new branding logics: the case of a marketizing university

Recent research underlines that strong branded identities are created through co-creational processes in which multiple stakeholders are actively involved and brand identities are matched with cultural, political, and economic forces in society. However, there is a lack of in-depth research into how organizations attempt to adopt new branding logics. To address this research gap, we conduct a study of a university that is rebranding itself in accordance with a new market-oriented, service-dominant logic. While harmonic value co-creation between the brand and stakeholders is emphasized in an earlier literature, our study shows that attempts to adopt these logics trigger contradictory and adversarial interpretations among stakeholders about the role and identity of the focal actor vis-à-vis their own. We conclude that adopting new branding logics involves struggles and dynamics of power and resistance, which have passed unnoticed in earlier research. Resistance is not only targeted toward the brand's symbolic meanings and conducted by marginal consumer groups to enhance their own identities. Rather, it can also be targeted toward the tangible resource roles that stakeholders are expected to assume vis-à-vis the brand, and conducted by various stakeholder resistors – with the outcome of undermining and shifting the essence of the brand itself.     

Co-creating stakeholder and brand identities: Introduction to the special section

This article introduces the special section on reciprocal co-creation of stakeholder and brand identities. Branding research and practice traditionally focus on the managerial creation and implementation of brand identity. Based on recent paradigmatic shifts from managerial to co-creative branding and from consumer to multi-stakeholder approaches in marketing, this special section develops a dynamic, process-oriented perspective on brand identity. Brand identity continuously emerges as a dynamic outcome of social processes of stakeholder interaction. Reciprocally, brand identity plays a potentially important role in ongoing interactive identity development processes of stakeholders. The special section contributes to deepening the understanding of this reciprocal co-creation of stakeholder and brand identities, through a series of conceptual and empirical articles. The Introduction reviews four articles as well as related commentaries and discusses their contributions towards establishing a new dynamic paradigm of co-created and reciprocal brand and stakeholder identities.     

If you can’t beat them, let them join: The development of strategies to foster consumers’ co-creative practices

Faced with the challenges of consumer resistance due to the separation of roles between producer and consumer, as well as overpowering marketing tools and techniques, a company can resolve the problem by letting consumers join in the process of value co-creation. Advocating the consumer-oriented perspective, this article explains how and why consumers co-create, which leads to the development of a typology of consumers’ co-creative practices. Four interrelated categories (participation-for-self, creation-for-self, participation-for-others, creation-for-others) are illustrated with the proposed four Cs strategies—choice, complement, cause, and communality—to foster these different practices accordingly. From well-established to newly-developed, these consumer-oriented strategies work to enhance deeper consumer involvement yielding a possibility to attain continual and interconnected benefits for a company. However, implementation is based on a company's readiness and willingness to achieve different degrees of commitment. This article promotes collaborative efforts between consumers and companies, and highlights mutuality of benefits which leads to sustainable relationships.     

Organizing for Society: A Typology of Social Entrepreneuring Models

In this article, we use content and cluster analysis on a global sample of 200 social entrepreneurial organizations to develop a typology of social entrepreneuring models. This typology is based on four possible forms of capital that can be leveraged: social, economic, human, and political. Furthermore, our findings reveal that these four social entrepreneuring models are associated with distinct logics of justification that may explain different ways of organizing across organizations. This study contributes to understanding social entrepreneurship as a field of practice and it describes avenues for theorizing about the different organizational approaches adopted by social entrepreneurs.     

Instrumental and Integrative Logics in Business Sustainability

Prior research on sustainability in business often assumes that decisions on social and environmental investments are made for instrumental reasons, which points to causal relationships between corporate financial performance and corporate social and environmental commitment. In other words, social or environmental commitment should predict higher financial performance. The theoretical premise of sustainability, however, is based on a systems perspective, which implies a tighter integration between corporate financial performance and corporate commitment to social and environmental issues. In this paper, we describe the important theoretical differences between an instrumental and integrative logic in managing business sustainability. We test the presence of each logic using data from 738 firms over 13 years and find evidence of integrative logic applied in business.     

Reconstructing the corporate social responsibility construct in Utlish

The charged debate on the 'C-S-R-ization' of organizational practices seems to have produced two opposing and seemingly incompatible explanations for why organizations should engage in corporate social responsibility (CSR): one, the normative rationale based on an appeal to ethics; and the other, the instrumental rationale, based on an appeal to business pragmatism. This paper argues that a missing link in this debate is the failure to recognize that the normative and instrumental approaches to corporate social responsibility are underpinned by substantively, differentiating, relative logics of emotional rationalism on the one hand, and instrumental rationalism on the other. The paper makes a case that for CSR as a management practice to be practicable and actionable within a sustainable business agenda, it will need to be stripped of its current normative undertone and reconstructed in the instrumentally, pragmatic ( utlish ) language of business. Otherwise, the whole concept of CSR may continue to dwell in the realm of abstract theorizing without yielding many beneficial and practicable outcomes. The paper concludes that such an approach that situates CSR within a pragmatic business lingua, rather than a non-business lingua, will help in legitimizing CSR as a 'neutral' management practice.