Entrepreneurial innovation processes: Adding a spatial dimension to effectuation theory

Abstract

Effectuation theory has gained much attention recently in entrepreneurship studies. Nonetheless, also critique has been presented, pinpointing limitations in effectuation theory concerning global applicability, contextual differences and non-expert entrepreneurs. Adding to this conversation, we study four cases of entrepreneurial innovation processes. The cases are similar to the extent that they are not expert entrepreneurs and they aim for innovations in low-income markets. However, two cases are developed in resource-intense contexts while the other two stem from resource- constrained contexts. In this paper, we study the impact of contextual factors on entrepreneurial innovation processes, and we analyze the context as a spatial dimension. The physical and cultural distance between the realities of the firm and end user revealed new dimensions for the effectuation theory. Effectual entrepreneurial action is typically described through cycles that increase available resources and networks to further ever-evolving entrepreneurial goals. We found that in situations where the entrepreneurial innovation process involves overcoming considerable distances - cognitive, organizational, geographical, institutional, social - the effectual action needs to be adjusted and entrepreneurs engage in what we call compensations rounds. These activities are undertaken to compensate for lacks in critical proximities. Adding this spatial dimension to effectuation theory helps to explain why certain entrepreneurial innovation processes are longer and more demanding, and how contextual factors influence the processes.