Effectuation and causation, firm performance, and the impact of institutions: A multi-country moderation analysis

Abstract

Entrepreneurs employ various behavioral logics in the venture creation process, including effectuation and causation. Where prior studies suggest that both causal and effectual approaches are positively related to firm performance, the extant literature has not examined how the institutional context influences this relationship. This study explores how country-level institutions moderate the link between causal and effectual behaviors and firm performance. Using survey data collected from a large crosssectional sample of new ventures from 24 countries, the findings indicate that the effectiveness of causation and effectuation logics is influenced by the level of development of regulatory, normative, and cultural-cognitive institutions. The theoretical benefits of better understanding the context of entrepreneurial decision-making are highlighted.