Effectual Logic Research Articles

Entrepreneurial Action: Redefining the Sense and Building Resilience as Coping Strategies for SMEs and Traditional Enterprises Facing the New Digital and Crises Environment

The new digital environment and the COVID-19 crisis, having drastically increased the amount of teleworking and e-commerce, seem to have benefited GAFAM and digital platforms. Under the current conditions, SMEs and traditional businesses are forced to look for adaptive strategies. Some researchers (e.g. A. Carmeli and G.D. Markman) argue that they SMEs and traditional businesses need to build entrepreneurial and organizational resilience . And it is in this respect, in particular, that psychology can be usefully mobilized to analyze new forms of economic competition. On these grounds, the authors of the paper defend the idea that the SMEs and traditional businesses will be able to exist and assert themselves against their new competitors. In this new interconnected, turbulent and uncertain environment, this self-assertion passes through a strategic and organizational reconfiguration, but also and above all, through entrepreneurial action in its effectual logic which can lead to resilience and, moreover, to antifragility .

Analysis of the entrepreneurial process from effectuation and causation logic: a case study in two companies from Minas Gerais

Objective: The article aimed to analyze how the effectuation and causation logics were used in the entrepreneurial process of two companies from Minas Gerais. The effectuation logic is based on issues related to the entrepreneur's decision making and contrasts with the causation logic - which refers to traditional methods of the entrepreneurial process based on planning and determined sequences. Methodology: A qualitative comparative study was carried out in two companies from Minas Gerais. The evidence was obtained from interviews with the founding partners, in addition to observation and documents, and the data analysis was performed using content analysis. Results: The results showed that in the two cases analyzed, the entrepreneurs relied on effectuation logic for setting up the businesses, with little use of causation logic but as the businesses consolidated and moved beyond the initial founding phase, the entrepreneurs took different attitudes, basing their decisions and actions on greater planning and systematic analysis of the context. Limitations: Some studies show that cultural differences can have an influence on the entrepreneurial process and how entrepreneurs make decisions. This variable was not contemplated in this study, which represents a limitation. Additionally, the study analyzed the entrepreneurial process of two companies from Minas Gerais, which does not allow for generalization. Originality/contributions: the work contributes to the national studies on the entrepreneurial process, mainly from the principles that compose the effectuation logic, seeking to identify and classify the decisions and actions of entrepreneurs in the causation and effectuation logics.

Accelerated Internationalization Among Inexperienced Digital Entrepreneurs: Toward a Holistic Entrepreneurial Decision-Making Model

This study explores accelerated internationalization among inexperienced digital entrepreneurs who lack resources such as prior experience, knowledge, and networks, which previous research regards as prerequisites for such growth. Following an in-depth qualitative research methodology, the findings reveal three theoretical mechanisms through which inexperienced entrepreneurs can make international commitment decisions with regard to the internationalization of their digital firms. The first is a novel mindset-based approach through which an entrepreneur can make an affective commitment to the international stakeholders within a digital community. Entrepreneurs do that by applying pull-based tools in digital communication to build interest among potential network contacts. The second mechanism is a means-based approach following effectuation logic resulting in an effectual form of commitment to international stakeholders in the digital community. The mechanism relies on applying push-based tools for digital communication to facilitate interactions with known network contacts. The third mechanism is continuance commitment to international business that entrepreneurs can foster over time in tandem with accumulated international experiential knowledge. This research provides an entrepreneurial decision-making model that extends effectuation theory and integrates it with extant research. The resulting holistic entrepreneurial decision-making model explains the accelerated internationalization of digital firms.

Non-predictive decision-making, market-oriented behaviours, and smaller-sized firms’ performance

ABSTRACT Owner-managers of smaller-sized businesses often possess limited resources/capabilities affecting their ability to pursue opportunities. Earlier research supports the need to be market-oriented, but such practices can sometimes be time-consuming and expensive. Although owner-managers in the tourism/hospitality industry can estimate broad demand associated with seasonality, they nonetheless face a degree of uncertainty. In fact, they can typically never be sure how many customers will enter their respective businesses on any given day no matter how much they try to anticipate market trends; therefore, predictive decision-making is often ineffective. This study employs a quantitative research design, drawing on data from a survey of 184 smaller-sized firms within the tourism/hospitality industry in New Zealand. The findings contribute to the cross-disciplinary literature positioned at the strategic marketing/entrepreneurship interface. Specifically, unique insights utilising an effectuation lens, illustrate that if managed effectively, decision-makers’ non-predictive effectual logic facilitates market-oriented behaviour, which in turn, enhances firm performance.

The impact of decision-making styles (effectuation logic and causation logic) on firm performance: a meta-analysis

PurposeAs two essential styles of firm decision-making, the relationships among effectuation logic, causation logic and firm performance are unclear. It is helpful to deepen the understanding of reasoning theory and the process of decision-making. The purpose of this paper is to explore the relationship between effectuation logic, causation logic and firm performance.Design/methodology/approachBased on 31 independent empirical studies (including 11,600 samples) published by predecessors, meta-analysis is used to systematically integrate the impact of two decision-making styles on firm performance and explore the potential factors affecting their relationship.FindingsThe results show a positive correlation between two decision-making styles and firm performance and the influence of effectuation decision-making style in firm performance is slightly stronger. However, the application environment is different: in the emerging market, the causation decision-making style is more effective for firm performance management. When the firm chooses the effectuation decision-making style, it is more effective for performance management in the emerging market. In addition, the industry type, firm performance evaluation tools, national development level and firm scale and firm age can significantly moderate the impact of two decision-making styles on firm performance.Research limitations/implicationsBoth decision-making logics are possible ways for firm to success. Still, the future needs to dig deeper into the black box that can unlock the decision-making styles to achieve firm performance or competitive advantage based on other factors of the decision-behavior-outcome business model, more longitudinal data and experiments.Originality/valueTo the best of the authors’ knowledge, this is the first study to explore the impact of decision-making styles (effectuation logic and causation logic) on firm performance using a meta-analysis.

Co-creation in effectuation processes: A stakeholder perspective on commitment reasoning

In this article, we seek to contribute to theory on market co-creation through effectuation. To achieve this goal, we examine the different kinds of reasoning behind stakeholder commitments in effectuation processes. Although effectual and causal logics sufficiently account for decision-making in instrumental rationality, scholars have paid little attention to value rationality, and how it might influence stakeholder commitments and behavior. Different commitments may follow different rationales, ranging from instrumentally rational commitments based on causal or effectual logics, to value rational commitments based on state-belief or change-belief. The typology of these four commitment reasoning types provides a framework for analyzing stakeholder behavior based on different perceptions of the commitment decision space. Our typology shows that commitments based on value rationality may be qualitatively different from those driven by instrumental rationality and that value rationality may enable commitments under conditions that preclude instrumentally rational actions. Furthermore, different commitments influence market co-creation processes in different ways. In this article, we examine how different commitments affect (1) conflict and effectual churn and (2) the relative path dependence, or shapability, of the market co-creation space. Based on this typology, we propose avenues for future research on co-creation in effectuation processes, with a special focus on stakeholders.

Leveraging the Entrepreneurial Method as a Tool for the Circular Economy: The Case of Wood Waste

New global and domestic policy and regulatory initiatives promoting a circular economy have renewed interest in the beneficial repurposing of commercial waste streams. Likewise, consumer trends and customers’ increased understanding of what they purchase, where it comes from, and what happens to it post-consumption have forced firms to consider reducing and reusing their production waste streams. The forest products industry is an exemplar of becoming more adept at reorganising and exploiting repurposed waste streams for beneficial reuse. This paper explores three case studies from the Australian forestry sector that illustrate how wood waste is being profitably repurposed as an input into other products. We use the lens of the entrepreneurial method to explore how firms recognise, strategically access, and exploit the sustainable opportunities that can range from sustainably sourced inputs to environmental-, social-, and governance-driven consumption and investments. Effectual logic allows the reconceptualisation of forestry waste streams into inputs for use in creating new commercial products and provides a theoretical framework. While the repurposing of wood waste is profitable for the forestry firm, we found that social and economic gains reach far beyond the region in which these activities occur. Innovations often stimulate other innovations, resulting in a virtuous cycle within regional Australia’s emerging circular economy.

Synergy of Effectuation and Causation: An Emotional Complexity Perspective.

This study enriches the literature on entrepreneurial decisions by investigating the antecedents of the synergetic use of causal and effectual logic. Based on entrepreneurial metacognition and emotional complexity theories, we argued that the emotional complexity of an entrepreneur, referred to as the granular experience of, or variety in, experienced emotions during the entrepreneurial task, would contribute to the synergetic use of decision logic. With survey data gathered from 218 Chinese entrepreneurs, we found that entrepreneurs with higher emotional complexity are more likely to adopt two types of entrepreneurial logic in tandem, and cognitive flexibility mediates this positive relationship. Thereby, this study helps to unravel some of the complexities behind the choice of decision logic of entrepreneurs.

Mature Firm Innovation: Can Effectual Logic Be Emulated?

A scholarly article by authors Lee Norris Miller, Rungnapha Khamung, and Kongkidakarn Sakulsinlapakorn, Dissatat Prasertsakul, Heather Lynnine Miller published in The International Journal of Design Management and Professional Practice

Gestation in new technology ventures: Causal brakes and effectual pedals

ABSTRACT Gestation speed has long been acknowledged as an important proximate measure of venture performance. Yet, research into its antecedents remains scarce. Through a longitudinal study of eight new technology ventures, we examine in-depth the relationships between the use of causal and effectual logics and gestation speed. Our data show that heuristics from both logics can act as pedals or brakes on gestation speed. However, we also find that nascent entrepreneurs who apply effectuation as their predominant decision-making logic gestate more quickly than their peers. The inductive model we develop from the findings offers nine mechanisms relating decision heuristics to proximate performance. Additional longitudinal data provide evidence for a positive relationship between higher gestation speed and the probability of long-term success.

How effectuation, causation and bricolage influence the international performance of firms via internationalisation strategy: a literature review

PurposeThis study aims to investigate the antecedents of the internationalisation strategy i.e., effectuation, causation and bricolage on the international performance of the firm.Design/methodology/approachIn total, the study uses 138 peer-reviewed articles on effectuation, causation, effectual/causal decision-making logics and related issues such as the impact of antecedent factors of international strategy (i.e. effectuation, causation and bricolage) on the international performance of the firm.FindingsEven though the theory of effectuation was formulated in 2001, to a large extent it has still not moved away from the realm of small entrepreneurial firms. The development of effectuation logic has accelerated in recent years, but the bulk of the research still focusses on small entrepreneurial firms rather than on the application of the theory in larger, non-entrepreneurial firms. Furthermore, effectuation theory would benefit from being developed into the realm of psychology and sociology.Originality/valueThis study offers a conceptual model on how effectuation, causation and bricolage influence internationalisation strategy, which, in turn, impacts the international performance of the firm. Furthermore, the study discusses the effectual logic for larger firms. The exponential growth of studies on effectuation during recent years, i.e. 2017 to the first quarter of 2020, shows that researchers have responded to calls by leading authors stating that effectuation theory is a field with great potential for further theoretical developments. This study presents a literature review of the critical issue of the engagement of internationalisation strategies with effectuation, causation, bricolage and the international performance of the firm compared to the earlier literature review for the period 2001–2016 by Matalamäki (2017) and Karami et al. (2019) on effectuation and internationalisation.

Effectuation Logic and Early Innovation Success: The Moderating Effect of Customer Co‐creation

AbstractThis research examines whether and how customer co‐creation activities moderate the relationship between effectuation logic and performance in the early stage of the innovation process. Effectuation logic is a promising decision‐making logic for innovation success, but the tools that help translate this approach into innovation performance are under‐researched. Three key dimensions of effectuation logic are examined: means‐driven, partnerships and control. The results of a large‐scale survey‐based study indicate a varied and nuanced role of co‐creation as a means to enhance the contribution of effectuation logic to early innovation success. This research helps increase our understanding of the often abstract principles of effectuation logic by examining its manifestation within the context of innovation and by showing how specific firm practices, here customer co‐creation activities, can accentuate the contribution of effectuation logic to early innovation performance.

Relationships between the Big-5 Model and Effectuation versus Causation Logics of Entrepreneurs in New Ventures: The Estonian IT Sector

This study aims to investigate the influence of the big-5 personality traits on causation and effectuation decision-making logics using the entrepreneurial process theory. This is an empirical study based on 113 surveys of managers/entrepreneurs from the Estonian IT sector. The questionnaire was uploaded onto the online platform of connect.ee and the participants were invited to complete it. The study reveals that only conscientiousness positively and significantly predicts causation logic. However, four of the five factors of personality traits positively and significantly predict effectuation logic, i.e., openness, conscientiousness, extraversion, agreeableness, except for neuroticism. Furthermore, only nine of 25 hypotheses are positive and significant, and of the 11 relationships of the model, three are negative and non-significant for causation logic and eight are negative and non-significant for effectuation logic. Finally, there are another five relationships of the model which are positively but non-significantly related. Managers of IT companies in Estonia should think of shifting to effectuation logic as most personality traits predict effectuation logic, and therefore, there is the possibility of a better performance for IT firms. Eight of the 51 items of the model had standardised regression weights below the threshold of 0.500, but only four were extracted from the final model. The extraction of items from the model indicates the need for the re-identification of the constructs of personality traits using, for example, the six-factor personality traits.

Decision-making Logic, Learning from Failure and Enterprises’ Digital Transformation Performance

In the background of digital transformation, the validity of decision-making logic is not only related to the formulation and implementation of digital transformation, but also the key to stand out among of the many enterprises. As the two bases of decision-making logic, causation refers to the enterprise advocates low cost and high yield, and avoids risks reasonably to complete established goals; effectuation emphasizes the process in which the enterprise uses its own resources to find the possible results in the continuous trial and adjustment in the unpredictable environment. In the process of digital transformation, causation and effectuation have their own advantages and disadvantages. This study aims to address the gap that despite the relationship between decision-making logic and enterprise performance has already been confirmed, limited research has been dedicated to understanding how digital transformation performance would perform under causation and effectuation logic. Therefore, it’s necessary to clarify the mechanism and boundary conditions of decision-making logic and digital transformation performance.Based on the effectuation theory and the situational characteristics of digital transformation, this study constructs a theoretical model of decision-making logic and digital transformation performance, in which learning from failure plays a mediating role and environmental dynamics play a moderating role. Using 247 samples for empirical test, the results show that:（1）Causation and effectuation logic have a positive impact on digital transformation performance respectively.（2）Learning from failure plays a mediating role in the relationship between decision-making logic and digital transformation performance.（3）Environmental dynamics play a negative moderating role in the relationship between causation logic and learning from failure, and play a positive moderating role in the relationship between effectuation logic and learning from failure. Through comparative analysis, it is found that effectuation logic is more significant when the environment is more dynamic.This study has the following theoretical contributions: First, it extends the applied range of the effectuation theory to the digital transformation situation, and provides a new perspective for future. Second, based on the effectuation theory and combining with the characteristics of trial and error in the context of digital transformation, the transmission mechanism between decision-making logic and digital transformation performance is deeply explored. Third, through discussing the effect of causation and effectuation logic on learning from failure under different degrees of environmental dynamics, it deepens the cognition and understanding of the two kinds of decision-making logic.

Cross-Border Health Care Services as Inward Internationalization

Purpose: The research aimed at investigating the pre-conditions and the decision-making process by which physician-entrepreneurs adopt CBHCS as part of their business. Method: The study uses the case method of investigation. Main results: Results showed that, in the cases studied, international experience and international networking are relevant characteristics of the physician-entrepreneur, besides country reputation, cultural and language similarities, and physician reputation. In addition, the decision processes of the physician-entrepreneurs in these organizations are based on an effectual logic. The offer of cross-border health care services was a combination of given means and contingencies, which helped the entrepreneurs to discover, or to create, the opportunity, and then develop it. Relevance/originality: The research combines the literatures on effectuation and inward internationalization to study the decision-making process of adopting CBHCS by medical clinics. Theoretical contributions: The study contributes to the literature by identifying certain pre-conditions and providing an in-depth analysis of the use of effectual logic by physician-entrepreneurs in their decision-making process of adopting CBHCS.

The moderating role of polycentric institutions in the relationship between effectuation/causation logics and corporate entrepreneur's decision‐making processes

AbstractResearch SummaryThis study analyzes how firms respond to institutional polycentrism, a governance system that emerges from multiple and independent centers of power that interact to determine and regulate an evolutionary overarching comprehensive social system of rules. We propose that institutional polycentrism moderates corporate entrepreneurs' decision‐making processes. We conducted a case study at a multinational corporation over four decades of internationalization using process data analysis. We found that institutional polycentrism determines a calibration between causation and effectuation logics. The study offers two contributions: (a) expanding the explanatory power of institutional polycentrism by understanding how it moderates the corporate entrepreneur's decision‐making process in polycentric institutional contexts and (2) proposing a relatively novel contingency dimension of the effectuation versus causation and establishing new boundary conditions of the effectuation versus causation.Managerial summaryThis study analyzes the decision‐making process of corporate entrepreneurs of a multinational steel producer throughout its internationalization trajectory. The article highlights that decisions based on rules established with past experience are unsuitable in contexts characterized by a multiplicity of foreign institutional forces. The joint interaction of these forces on the firm induces corporate entrepreneurs to respond to such pressures under a new, more flexible, and experimental approach. Finally, the results indicate that institutional multiplicity generates a kind of calibration between these decision‐making approaches, contributing to innovation processes in the company.

Research on the Project Selection Path of Counseling Graduate Students' Entrepreneurship Plan Driven by TRIZ Resource Analysis

Taking the entrepreneurship plan project as the carrier to cultivate college students' innovative and entrepreneurial thinking and ability is core content of college’ entrepreneurship education in China. Facing the background of the dynamic development of policy, economy, society and technology, there is an urgent need to break the discipline limitations and scientific methods to identify the entrepreneurial opportunities. Although the existing entrepreneurial management theory provides a basis for the source of entrepreneurial opportunities, the counseling practice shows that college students still have difficulties to break through the thinking constraints and innovation bottlenecks in the selection process of entrepreneurial plan project. Based on the perspective of effectual logic, this study introduces TRIZ "9 windows" resource analysis tool, combines it with PEST model, designs the selection path of entrepreneurship plan project, and applies it to the process of tutoring college students' Entrepreneurship plan project. Through the counseling practice of College Students' innovation and Entrepreneurship Program in 2021, the effectiveness of the design path of this study is tested.

Four Mindsets of Designer-Entrepreneurs

Literature from the business and design disciplines describes two important subprocesses of the entrepreneurial journey: new venture creation and new product development. This study uses evidence from qualitative research with Designer-entrepreneurs (D-entrepreneurs) to describe a third important subprocess, which we refer to as the Designer’s Mindset Transition (DMT), which can either hinder or propel the other subprocesses. Thirty-seven participants, including eleven D-entrepreneurs in product-based start-ups, participated in the study. Four designer-entrepreneurs’ mindsets were identified within the DMT subprocess: The Artisan, the Configurator, the Opportunity Seeker, and the Design Leader. They followed a progression that moves the Designer-entrepreneur from the effectual logic (means-oriented) towards a causal logic (goal-oriented). Evidence from the study demonstrates that designers starting from the Artisan mindset were not always driven by their purported user-centric approach. Instead, key drivers were their priorities, interests, and beliefs, established at the outset of the venture.

Effectual learning toward causal competence –a POMDP model of decision-making sequences

Effectuation is often viewed as more preferable to causation for managing uncertainty. Introducing process theory’s perspective on sequencing, we challenge this view by arguing that entrepreneurs navigate better under uncertainty by interpolating between decision logics. We show that the rate of dynamic switching between decision logics (causal versus effectual) increases as entrepreneurs approach the plunge decision. To unpack the evolution of entrepreneurs’ decision-making sequences in the lead-up to new venture creation, we conducted 3 studies. From a sample of 389 decision events identified from the narratives of 30 successful entrepreneurs, in Study 1, we derive model parameters for a partially observable Markov decision process (POMDP) solution. In Study 2, we analyse the decision-making pattern where effectual logics predominate up until the ‘plunge’ decision and proceeds recursively until that plunge decision results in a ‘go’ or ‘abandon’ decision. Finally, in Study 3, we examine the conditions under which the rate of switching between decision logics becomes more dynamic. We conclude by exploring possible explanations for these findings in the qualitative data.

Internationalization performance effects of causation and effectuation: a contingency approach

Our study addresses a fundamental research question at the heart of IB and IE research: what specific configurations of internal (organizational) characteristics, external contingencies and entry mode choice drive organizational performance? We incorporated insights from the literature on cognitive micro-foundations in the internationalization process model that allowed us to include effectuation logics in the analysis of entry mode decision making of MNEs and performance of an internationalizing firm. We also explored the combined and simultaneous effects of endogenous and exogenous factors on the firm’s performance, such as the decision-making logic (effectuation and causation), the actual entry mode decision, entrepreneurial and international experience of the decision makers as well as exogenous factors such as the psychic distance of the host country. Examined through fuzzy set Qualitative Comparative Analysis (QCA), we look at the simultaneous effect of the endogenous and exogenous variables on a firm’s performance offering a holistic view and a more nuanced understanding of the possible configurations that lead to superior performance.