Effectual Logic Research Articles

The entrepreneurial logic of startup software development: A study of 40 software startups

Software startups are an essential source of innovation and software-intensive products. The need to understand product development in startups and to provide relevant support are highlighted in software research. While state-of-the-art literature reveals how startups develop their software, the reasons why they adopt these activities are underexplored. This study investigates the tactics behind software engineering (SE) activities by analyzing key engineering events during startup journeys. We explore how entrepreneurial mindsets may be associated with SE knowledge areas and with each startup case. Our theoretical foundation is based on causation and effectuation models. We conducted semi-structured interviews with 40 software startups. We used two-round open coding and thematic analysis to describe and identify entrepreneurial software development patterns. Additionally, we calculated an effectuation index for each startup case. We identified 621 events merged into 32 codes of entrepreneurial logic in SE from the sample. We found a systemic occurrence of the logic in all areas of SE activities. Minimum Viable Product (MVP), Technical Debt (TD), and Customer Involvement (CI) tend to be associated with effectual logic, while testing activities at different levels are associated with causal logic. The effectuation index revealed that startups are either effectuation-driven or mixed-logics-driven. Software startups fall into two types that differentiate between how traditional SE approaches may apply to them. Effectuation seems the most relevant and essential model for explaining and developing suitable SE practices for software startups.

Entrepreneurial Logics in International Entry Mode Decisions

The aim of this paper is, through a two-staged literature review, to identify the role and impact of causation, effectuation, and bricolage logics during internationalization and, in particular, in entry-mode choice. The results show that entrepreneurs in their internationalization decisions can follow one, a combination, or a sequence of logics depending on the venture's or its international lifecycle and experience, the (perceptions of) internal and external context, and network relations. Likewise, entry modes such as JVs, strategic alliances, and export can be driven by different logics or their combination, while foreign direct investment is predominantly driven by causation logic. Bricolage has received little attention in extant work and, thus, is a future avenue for research. Research, although growing in importance, falls short of longitudinal studies, which are necessary to identify shifts, and, importantly, performance consequences of different decision-making logics.

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

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.

Motivadores da imersão em redes e abordagens empreendedoras causal e effectual

Research aim: To describe possible distinct effects between the causation and effectuation approach regarding the perception of factors that motivate business networking.Method/Approach: We present a quantitative research carried out through convenience sampling, a type of non-probabilistic sampling. We conducted a factor analysis and analysis of variance (ANOVA).Originality/Relevance: There are only a few studies that associate the engagement of entrepreneurs in networks with entrepreneurial actions guided by the two different logics: causation, which emphasizes the selection of means to create the desired effect; and effectuation, which emphasizes possible effects to be created through the means available.Main findings: The findings show that there are significant differences between causal and effectual approaches to entrepreneurship and factors that motivate the participation in networks. The causal and effectual logic are not mutually exclusive; however, the intensity in each one entailed differences in the factors that motivate entrepreneurs to engage in networks. The research shows that causal and effectual entrepreneurs were motivated to participate in networks focusing mainly on benefits for the company.Theoretical/Methodological contributions: This research contributes not only to network studies, but also to entrepreneurship, considering that it highlights possible differences among the factors that motivate the insertion in networks by causal and effectual entrepreneurs. In addition, our study also explored the effect of different control variables on the perception of benefits from networking; these variables, however, had no influence on the perception of such benefits.

Linking Entrepreneurial Innovation to Effectual Logic

The terms “innovation” and “effectuation” are frequently used but not in the same thought. In this order, publications linking innovation to effectuation are presented and discussed through a methodology based on the publish and perish tool. In the last two decades, effectuation has become an active criterion in entrepreneurship research. However, previous studies do not interconnect effectuation to the different innovation approaches. In order to overcome this gap, this paper focuses on studying innovation in an effectual context and linking different innovation approaches to effectual logic. Indeed, effectuation is a way of thinking that serves entrepreneurs in the processes of opportunity identification and new venture creation. Effectuation includes a set of decision-making principles expert entrepreneurs are observed to employ in situations of uncertainty (as defined in Society for Effectual Action). This article outlines the four most-studied innovation approaches from the date of their apparitions until January 2021: frugal innovation, disruptive innovation, lean start-up, and design thinking. In this context, effectuation as the essence of innovation must be clarified as a method that has similarities and differences with frugal and disruptive innovation, lean start-up, and design thinking. To validate the proposed theorical model, a bibliometrics tool, named “Harzing publish” or “perish”, is used. The main finding of this research affirms that the two most linked innovation approaches to effectuation are “lean start-up” and “design thinking”, compared to “frugal innovation” and “disruptive innovation”. In an entrepreneurial innovation context, design thinking and lean start-up are flexible tools that can stimulate and validate the effectual cycle.

Facile/LigFerv: Hot Water in Three Seconds, Thirty Years of Entrepreneurial Process

ABSTRACT This teaching case aims to discuss an entrepreneurial process involving the trajectory of an innovative product over thirty years until culminating in a significant event in the change of the company’s business model in the midst of the crisis triggered by the pandemic of the new coronavirus. The case offers opportunities for discussing theories related to the entrepreneurial process - causation and effectuation logic. In addition, in the course of the recent trajectory, in which the company is selected for an acceleration program, a possible change in the business model emerges. Reported from the perspective of the founder, but also supported by materials from secondary sources, the case presents the trajectory of Facile. The teaching strategy consists in enabling the student to learn, first, about the entrepreneur’s decision-making and action, emulating transitions between the causation and effectuation logic throughout the case to explain such behavior. Subsequently, the case inquires about possible alternatives for changing the business model for the company after the acceleration program, in which students will be able to identify more suitable alternatives in the face of both the company’s skills and, not least, the pandemic that changed the behavior of customers and entrepreneurs.

Facile/LigFerv: Hot Water in Three Seconds, Thirty Years of Entrepreneurial Process

ABSTRACT This teaching case aims to discuss an entrepreneurial process involving the trajectory of an innovative product over thirty years until culminating in a significant event in the change of the company’s business model in the midst of the crisis triggered by the pandemic of the new coronavirus. The case offers opportunities for discussing theories related to the entrepreneurial process - causation and effectuation logic. In addition, in the course of the recent trajectory, in which the company is selected for an acceleration program, a possible change in the business model emerges. Reported from the perspective of the founder, but also supported by materials from secondary sources, the case presents the trajectory of Facile. The teaching strategy consists in enabling the student to learn, first, about the entrepreneur’s decision-making and action, emulating transitions between the causation and effectuation logic throughout the case to explain such behavior. Subsequently, the case inquires about possible alternatives for changing the business model for the company after the acceleration program, in which students will be able to identify more suitable alternatives in the face of both the company’s skills and, not least, the pandemic that changed the behavior of customers and entrepreneurs.

Academic entrepreneurs’ effectuation logic, role innovation, and academic entrepreneurship performance: an empirical study

Although decision making lies at the heart of the entrepreneurial process, few studies have focused on academic entrepreneurs’ decision-making logic. Academic entrepreneurs are faced with high uncertainty and resource constraints. Effectuation logic provides four decision-making principles (experimentation, affordable loss, flexibility, and pre-commitments) for academic entrepreneurs to address uncertainty and obtain more resources. At the same time, academic entrepreneurs should introduce entrepreneurial behaviors to their preexisting roles and initiate role innovation to implement effectuation logic. This research focuses not only on the important role of effectuation logic, but also on the interaction between effectuation logic and role innovation that is helpful to achieving academic entrepreneurship performance. This research adopts empirical methods in taking the interaction between academic entrepreneurs’ effectuation logic and role innovation as independent variables and academic entrepreneurship performance as the dependent variable to explore the empirical results. Based on 200 valid samples, we find that academic entrepreneurs’ effectuation logic and role innovation are associated with academic entrepreneurship performance and that the four interactive effects play different roles. This study supplements the research of effectuation theory, expands its application fields, and enriches academic entrepreneurship research. In addition, we provide some practical implications for academic entrepreneurs and discuss limitations and future research suggestions.

How young companies can effectively manage their slack resources over time to ensure sales growth: the contingent role of value-based selling

This research aims to bridge the entrepreneurship and marketing/sales literature streams by studying how young firms enable their resource endowments using value-based selling. Drawing on effectuation logic, the authors examine how young firms can achieve sales growth by using human and financial resource slack during the early years of their existence and accounting for the impact of the variability of these resources over time. The integrated framework and hypotheses are tested using unique, multisource (survey and objective archival) longitudinal panel data from 71 young firms covering a seven-year period. As anticipated, the findings show that both financial and human resource slack are negatively related to young firms’ sales growth over time and that financial resource slack variability exerts a positive impact and human resource slack variability exerts a (nonsignificant) negative impact. The results also confirm the importance of value-based selling as a guiding mechanism that significantly alters the effects of both types of resource slack and their variability over time. While value-based selling can help a young firm use slack to grow more effectively, it also has a dark side in that it can stand in the way of risk taking.

Family and non-family sources of knowledge diversity in family firms: The role of causation logics

This article will critically analyse the sources and the role of knowledge diversity in informing causation logics in family firms. Family firms rely on knowledge resources from both intra-family and extra-family sources, which may require different approaches to effectively manage. We argue that as family firms acquire greater knowledge diversity, family-centred effectuation processes become limited and they will increasingly rely on formal causation logics to coordinate these resources. However, we expect this relationship to differ when knowledge diversity is sourced from either family or non-family sources. Empirical analyses of 242 small- and medium-sized family firms indicate that knowledge diversity positively affects a firm’s reliance on causation logics, regardless of the source of that diversity. This suggests that the affinity of family firms to leverage effectuation logics may not be characteristic of family firms in general, but instead may be an artefact of firm reliance on knowledge capital concentrated in family owners.

Brazilian Secrets Hair Case

ABSTRACT This is a case for teaching focused on the internationalization process of Brazilian Secrets Hair (BSH), a company that has considered the world as its target market since its start, and is part of an ever-growing segment: the cosmetics industry. Upon understanding the company’s international expansion, the internationalization theories within the behavioral approach, such as the Uppsala theory, the network theory, the entrepreneurship perspective, and the effectuation logic, can be explored, answering questions related to market selection processes, entry mode choices, and global expansion strategy decisions. This case was based on primary and secondary data from a real company and was originally designed for international business classes of graduate courses.

Effectuation Logic, Role Innovation, and Academic Entrepreneurship Performance

There is an increasing attention on academic entrepreneurship research, however, fewer studies focus on the outcome of academic entrepreneurship, that is academic entrepreneurship performance. What is more important is how to achieve this result, how academic entrepreneurs make decisions and adjust behaviors to achieve academic entrepreneurship performance. Therefore, this study attempts to analyze the impact of academic entrepreneurs’ effectuation logic and role innovation on academic entrepreneurship performance and explore the interaction effects between role innovation and the four dimensions of effectuation logic (experimentation, affordable loss, flexibility and pre-commitments) on academic entrepreneurship performance. based on 200 valid samples, this study finds that effectuation logic and role innovation of academic entrepreneurs are associated with academic entrepreneurship performance and that the four interactive effects play different roles. This study complements the research on academic entrepreneurship and academic entrepreneurship performance, and also enhances our understanding of the role of effectuation logic and role innovation in achieving academic entrepreneurship performance. Practical implications, limitation and future research are also discussed.

The Co-Existence of Causation and Effectuation in Entrepreneurial Network Development

While prior research signals the co-existence of causation and effectuation logics in entrepreneurial network development process, our understanding of when and why either or both logics may dominate the process is limited. Using an in-depth case study, we unpack different types of entrepreneurial contexts, and explore the dynamics of network development and the role of advisor in resolving uncertainty and shaping network development path. We identify two types of advisors and a variety of networking paths among causal, effectual and a combination of both logics. The study contributes to the literature on the intersection between effectuation and entrepreneurial networking development.

Co-Creation in Social Ventures in China: A Missing Link in the Effectual Logic–Performance Relation

The mass entrepreneurship policy has introduced a new era of sustainable development in China. Yet, the policy alone does not describe how individuals and organizations might pursue this new approach to economic expansion. In this paper, we suggest that under this new policy, co-creation between social ventures and donors, beneficiaries, and government agencies serves as a form of organizing that helps social ventures navigate this new era of entrepreneurship policy. Through the lens of effectuation theory, we hypothesize that social ventures that use more effectual logic are better able to co-create social value with their stakeholders, and in doing so, will have higher performance. To test these hypotheses, we used structural equation modeling of data collected from top executives of 172 social ventures in China. The results largely support the hypotheses and the findings provide important implications for co-creation via social ventures as one vehicle for invigorating mass entrepreneurship in China.

Effectiveness of Entrepreneurship Education Program in a Large Class

This study investigates the effectiveness of an entrepreneurship education program in a large classroom setting at a research university. Entrepreneurship education is typically delivered through experiential, action-based approaches in small class formats that are not easily scalable. A unique aspect of this study is that the credit-bearing course examined was conducted in a large lecture hall setting with several hundred students from diverse academic disciplines. Our quasi-experiment using difference-in-differences (DID) analysis evaluated the program’s effectiveness. Outcomes of enrolled students were compared to those of a control group of students who had not taken the course. Results show that the program significantly deepened students’ understanding of causation and effectuation logic, which are important elements of entrepreneurship. These results not only generally validate results of earlier studies showing the effectiveness of entrepreneurship education programs. They also demonstrate that, combining various types of content, students’ entrepreneurship mindsets can indeed be fostered, even in a traditional large classroom setting. Consensus is building towards a view that entrepreneurship is important not only for entrepreneurs starting new businesses, but for everyone who might create new opportunities and value in uncertain environments. Research universities are called to provide entrepreneurship education comprehensively to students with various motivations and prior knowledge. Nevertheless, many institutions are constrained by the existing curriculum, physical infrastructure, and a lack of qualified instructors. This paper’s salient contribution is its demonstration that properly designed entrepreneurship education can be provided efficiently to large classes with minimum resources.

Entrepreneurs' Adaptive Toolbox: The Relationship Between Structure and Decision-Making Logics

In the early stages of new venture creation, entrepreneurs have to make decisions in a variety of functional areas within the emerging firm, including hiring, marketing, and financial planning (Shepherd, Williams, & Patzelt, 2015). These decisions are highly heterogenous both in their content, as well as their structure, such as the number of perceived options. In this study, we investigate elements of decision structure as potential antecedents of effectual, causal, and hybrid decision-making logics. We analyze 290 critical decision events across 41 ventures. Our results suggest that two elements of decision structure — decision complexity and the costs of experimenting with different options — explain significant variability in dominant logics adopted by entrepreneurs across distinct decision domains. For decisions that involve high levels of complexity and low costs of experimenting with options entrepreneurs prefer effectual logics, for decisions that involve low levels of complexity and high experimentation costs entrepreneurs tend to use causal approaches, whereas for decisions that are high in both complexity and costs of experimentation, entrepreneurs tend to mix effectual and causal heuristics within their approach. We discuss these findings in relation to how effectual and causal heuristics fit the cognitive demands of decisions combining these two elements of decision structure.

Use of effectuation by established micro businesses: short-term gain, long-term pain?

PurposeThe purpose of this study is to investigate the efficacy and impact of effectual logic used by owner-managers of established micro firms when making buying decisions.Design/methodology/approachSemi-structured interviews were conducted with 13 owner-managers of micro firms, concerning their decision-making processes when selecting suppliers. Interviews were transcribed verbatim, then analysed thematically.FindingsThis study contributes to the literature in respect of effectuation by considering its use by a micro firm owner-manager to develop relationships with trusted suppliers. The findings suggest effectuation positively promotes flexibility and reduces loss potential, thus positively affecting the price that the owner-manager is willing to pay. Furthermore, it also appears to necessitate effectual selling, with an ongoing iterative process, in which effectual selling leads to effectual buying. In contrast to extant literature, this study suggests that application of effectual logic to buying and selling decisions, by a micro firm owner-manager can create, rather than reduce, uncertainty.Research limitations/implicationsThis study is based on single interviews with a sample of owner-managers of micro firms that operate within the same industry and within a single country. The subjective nature of qualitative research, homogeneity and size of sample may prevent generalisation of the findings.Practical implicationsEffectual buying and selling appears to provide a micro firm with the ability to engage with flexible suppliers so as to offer a heterogeneous array of products and services to its customers, thus promoting sales success. Yet, the lack of homogeneity of customer needs and need for supplier flexibility may lead to overall costs being greater than those that could be achieved if the micro firm specialised in a smaller range of products and services and developed internal resources to meet the needs of its customers.Originality/valueIn contrast to extant literature that states that effectuation is a way to reduce uncertainty to a level at which a decision can be made, this study suggests that continual use of effectual logic by owner-managers of micro firms when making buying and selling decisions can instead create more uncertainty in the longer term.

Understanding informal volunteer behavior for fast and resilient disaster recovery: an application of entrepreneurial effectuation theory

PurposeExamine and understand how an informal volunteer’s goals and actions develop from the moment they first learn about a disaster.Design/methodology/approachWe examine informal volunteerism (the activities of people who work outside of formal emergency and disaster management arrangements) through the theoretical lens of entrepreneurial effectuation to explain informal volunteer behavior and cognition and gain insight on how they develop their disaster relief ventures.FindingsWe find that informal volunteers follow an effectual logic, relying on available means to take advantage of opportunities as they are recognized or created. Application of effectuation vs causation processes depended on whether the informal volunteers were categorized as traditional, emergent or extended volunteers.Practical implicationsInformal volunteers’ disregard for the Affordable Loss Principle task governments and disaster relief organizations with the important challenge of managing and assuring the safety and well-being of informal volunteers. Their entrepreneurial behavior also invites the establishment of formal processes to counsel and guide informal volunteers, helping them fill out the necessary paperwork and funding applications to develop their efforts.Social implicationsThrough their experimentation and flexibility, informal volunteers accelerate disaster recovery, recognizing opportunities, working around bureaucracy and other roadblocks that hinder the efforts of established organizations. They also demonstrate entrepreneurial behavior that helps revitalize and jumpstart the local economy, making for stronger and more resilient communitiesOriginality/valueThis study borrows from Effectuation Theory from the entrepreneurship field in order to bring a much needed theoretical lens to the topic and greatly assists informal volunteerism research, moving from past efforts that simply define and categorize the concept.

An effectual approach to innovation for new ventures: The role of entrepreneur’s prior start-up experience

ABSTRACT Evidence suggests that ventures often constitute sources of innovation despite their newness and smallness. Such firms are rarely able to invest in formalized processes, following instead alternative pathways to generate innovation. In this study, we suggest that new ventures may proceed with innovation by engaging in effectuation processes. Specifically, we posit that experimentation, affordable loss, flexibility and pre-commitments are positively related to new venture innovation. We also argue that entrepreneur's prior start-up experience positively moderates these relationships. With the exception of pre-commitments, our findings support our hypotheses. The study provides new understanding into the longstanding question of how new ventures faced with important resource constraints and high degrees of uncertainty manage to innovate. Practice-wise, it highlights the ways through which new ventures may be related to innovation outcomes, indicating that those willing to enhance innovation should adopt an effectual logic.

When do domestic networks cause accelerated internationalization under different decision-making logic?

Purpose Given the unresolved question about which causal conditions contribute to accelerated internationalization among small and medium enterprises (SMEs) from weak institutional environment, this paper aims to combine theoretically relevant antecedents of domestic networks relationships (weak or strong domestic ties) and decision-making logic (effectuation or causation) to explore the configurations that are the most promising for explaining accelerated internationalization. Design/methodology/approach This study uses fuzzy-set qualitative comparative analysis (fsQCA) to examine the accelerated internationalization of 33 contrarian cases of SMEs located in weak institutional environment. The data set has been collected through in-depth interviews with managers in Colombia (21 cases) and Peru (12 cases). Building on the findings, an integrative model for accelerated internationalization is presented. Findings The authors found that the combination of weak domestic ties and effectuation logic accelerated the internationalization of SMEs with fewer resource constraints. In contrast, strong domestic ties and causation behavior lead to accelerated internationalization of SMEs with greater resource constraints. They propose a model to help enrich the existing literature about the causal configurations for achieving accelerated internationalization in SMEs from weak institutional environment. Originality/value The contribution of this study is to provide empirical evidence to address three shortcomings in the literature. First, the mixed results regarding the impact of strong and weak domestic ties and decision-making logic in the accelerated internationalization of SMEs; second, the limited research on domestic networks; and third, the scarce investigation in weak institutional environment, where the emphasis on constrained resources is higher.