Corporate Effectuation in the Digital Age: the Role of Absorptive Capacity and Digital Skills

Abstract

Effectuation has become a highly influential decision-making logic for entrepreneurs. While most studies have viewed effectuation as an approach to managing resource constraints in the new venture context, few of them have directly investigated the effects of effectuation as an approach to absorptive capacity (AC) in the corporate context. Specifically, the relationship between the usage of an effectual logic and its impact on the knowledge of individuals remains underexplored in corporate entrepreneurship (CE), i.e., entrepreneurship in incumbent organisations. Moreover, in a digital world characterised by the growing proliferation of digital technologies, digital skills can support the learning and knowledge absorption process of individuals in incumbent organisations facilitating the development of corporate innovation. By using the survey data from employees of an incumbent firm, we test hypotheses developed to examine the relationship between effectuation and entrepreneurial orientation (EO) as well as the mediating role of AC and the moderator role of digital skills in this relationship. The empirical results generally support our hypotheses by showing that (i) effectuation positively influences AC, and (ii) digital skills have a positive moderating effect on the relationship between effectuation and AC. No significant results emerged concerning hypothesis (iii) AC mediates the relationship between effectuation and EO. Drawing upon the findings of this study, we reframe effectuation as a concrete activity that enhances knowledge absorption and enlarges the scope of opportunities, and in turn fosters entrepreneurial actions in organisations. In doing so, we advance the extant understanding of corporate effectuation in the digital era, providing also managerial implications.