Big Names and Fragmented Experiences: Deductive and Inductive Sensemaking

Abstract

The origins of strategy have received limited research attention to date Gavetti and Rivkin (2007). Using an inductive theory-building case study, our study examines the process of strategy making in nascent firms. Specifically, we seek to understand how entrepreneurs converge on a set of choices among a vast set of possibilities. The abundance of possibilities is a characteristic of the ambiguity surrounding early strategy formulation, as multiple aspects of strategy are undefined. In ambiguity, entrepreneurs engage in sensemaking as they try to construct choices for their strategies. We observe two distinct modes of sensemaking that have differential affects on attention and choice. A deductive reasoning process stabilizes attention and analysis. An inductive reasoning process generates new options and possibilities, thereby diverting attention and postponing choice. These findings have important implications for understanding the specific sensemaking processes in start-ups under ambiguity and their effects on strategy formation.