Effectual Logic Research Articles

Unpacking innovation in digital multi-sided platform startups: making sense of path creation in generating two distinct types of innovation

Purpose This study aims to investigate the role of effectual logic as the basis of entrepreneurial action in path creation for influencing the performance of open innovation outcomes within the context of digital multi-sided platform (MSP) startups. Design/methodology/approach We utilize the PLS-SEM method with a sample of 70 Indonesian digital MSP startups that have implemented open innovation practices. Findings The empirical findings indicate a path creation between effectual logic and the open innovation process, particularly through the integration of absorptive capacity and crowds or communities management practices. Absorptive capacity development fosters incremental innovation, whereas crowds or communities management practices lead to radical innovation. Originality/value The research findings suggest that, despite limited resources and experience, young entrepreneurs can successfully implement an open innovation strategy for their digital MSP platforms by utilizing effectual logic principles, which capitalize on the external resources provided by digital platform ecosystem members.

Navigating start-ups: a qualitative exploration of causal and effectual decision-making in entrepreneurial marketing

Purpose This study aims to enrich the field of entrepreneurial marketing (EM) by examining decision-making processes in the unique context of start-up ventures. To do so, it extends research on the distinct EM dimensions to the behavioral context by revealing how causation and effectuation principles shape entrepreneurs’ actions. Design/methodology/approach The study investigates EM behavior through 12 semi-structured interviews with 10 start-up founders and two founder associates in Germany. Use of established frameworks of the EM dimensions and causation/effectuation principles paves the way for an in-depth analysis. This methodology uncovers a distinct pattern of decision-making behaviors characterizing various activities within start-ups. Findings The findings show that causal logic prevails in start-ups’ EM, and effectual reasoning serves a complementary role. On the dimensional level, the findings reveal a predominant goal-driven focus on customer intensity and value-creation processes. Predictive logic guides opportunity focus, proactiveness and risk management, with nonpredictive behaviors providing adaptability. The principle of affordable loss is also evident in risk management. Finally, start-ups exhibit a blend of causal and effectual logic in innovativeness and resource-leveraging. Originality/value To the best of the authors’ knowledge, this study is the first to illuminate the interplay of behavioral logics in start-up firms’ EM by exploring the nuanced principles underpinning the decision-making processes of entrepreneurs. In doing so, it advances understanding of the marketing–entrepreneurship interface and enriches decision-making literature.

Exploring the affordable loss principle: a systematic literature review

Objective: This article investigates how academic research in business and management approaches the Affordable Loss Principle (ALP) concept. We identify what researchers observed from the ALP lens, what they found, and which conclusions they reached to develop a future research agenda. Method: This study analyzes 51 recent research articles through a systematic literature review to evaluate the current state and developments in the domain of ALP. Main Results: Using the VOSviewer software, the articles are clustered into three groups of primary subjects. The Performance cluster examines how ALP and effectuation influence company performance. The Motivation cluster delves into the motivational aspects behind decision-making processes in businesses. The Assessment cluster focuses on validating measurement scales for effectuation logic, particularly in the context of ALP. Relevance / Originality: The study underscores the critical role of ALP in fostering resilient and adaptive entrepreneurial strategies in uncertain business environments. It highlights the distinctive approach of ALP in encouraging entrepreneurs to engage in risk management strategies that focus on potential losses rather than maximum possible gains. Theoretical / Methodological Contributions: This article contributes significantly to the scholarly understanding of effectuation logic by providing a comprehensive framework of the current research landscape around ALP. It aids emerging researchers by mapping the existing literature and suggesting future research directions. In addition, it offers practical insights into implementing effectuation principles, particularly ALP, in entrepreneurial practices, thereby enhancing decision-making in dynamic and unpredictable markets.

Strategies for digital entrepreneurship success: the role of digital implementation and dynamic capabilities

PurposeTo augment sales revenue, B2B digital start-ups aim to create and sustain commercial relationships with industry incumbents. However, since these incumbents have traditionally struggled with implementing disruptive digital artifacts, most studies have almost exclusively concentrated on their challenges, leaving the digital start-ups' side underexplored. Therefore, this study seeks to understand how digital start-ups navigate digital implementation (DI) hardships to ultimately achieve digital entrepreneurship success.Design/methodology/approachAn abductive explanatory multi-case study of four industries that pose a variety of implementation challenges for B2B digital start-ups (agriculture, insurance, real estate and construction, and healthcare) was conducted using data collected from 40 interviews with Israeli experts and relevant digital data observations.FindingsThis study articulates two main observations. (1) Throughout their journeys, digital start-ups have utilized newly created and/or refined dynamic capabilities (DC) to successfully implement their digital artifacts. Simultaneously, successful DI has enabled digital start-ups to create new DC or sustain and evolve current DC. (2) We provide empirical evidence outlining how digital start-ups using continuous learning have combined causation and effectuation logic throughout their DI journeys.Originality/valueThis study answers a call to explore more explicit digital-related drivers (i.e. DI) for digital entrepreneurship success by studying a highly-ranked country on the Global Entrepreneurship Index (GEI) to achieve this. Moreover, it illustrates how digital start-ups evolve throughout their commercial relationships with industry incumbents, thereby enabling an effective approach for successful DI. Such an approach can be considered very valuable for both practitioners and policymakers. Consequently, it advances digital entrepreneurship as an independent research topic.

Internationalisation Process of A Coffee Producer: Born Global and Effectuation Logic

The entrepreneurial process of young exporters in the coffee industry in Indonesia lacks investigation. This study examines how a young company in the coffee industry is able to enter international markets early and rapidly since its inception called a born global company. Effectuation theory was employed to understand how entrepreneurs in the coffee industry made decisions and behaved in pursuing international opportunities. Data was collected through an exploratory case study of a born global firm in the coffee industry in Aceh, Sumatra, Indonesia by doing a semi-structured interview with the CEO of a co-operative. The study's findings revealed that a born global company applied the effectuation logic both in the new venture creation and in the early stage of the internationalisation process. According to the effectuation theory, the entrepreneur's network of domestic partners and prior experience allowed the business to quickly join the international market. The results showed that serendipity discovery was a key factor that enabled early internationalisation to occur. Moreover, serendipity discovery played a role as a base of a cognitive source of opportunity discovery and entrepreneurial acquisition of knowledge of international opportunities.

Customer search strategies of entrepreneurial telehealth firms – how effective is effectuation?

PurposeThe demand for healthcare innovation is increasing, and not much is known about how entrepreneurial firms search for and sell to customers in the highly regulated and complex healthcare market. Drawing on effectuation perspectives, we explore how entrepreneurial digital healthcare firms with disruptive innovations search for early customers in the healthcare sector.Design/methodology/approachThis study uses a qualitative, longitudinal multiple-case design of four entrepreneurial Nordic telehealth firms. In-depth interviews were conducted with founders and senior managers over a period of 27 months.FindingsWe find that when customer buying conditions are highly flexible, case firms use effectual logic to generate customer demand for disruptive innovations. However, under constrained buying conditions firms adopt a more causal approach to customer search.Practical implicationsManagers need to gain a deep understanding of target buying environments when searching for customers. In healthcare sector markets, the degree of flexibility customers have over buying can constrain them from engaging in demand co-creation. In particular, healthcare customer access to funding streams can be a key determinant of customer flexibility.Originality/valueWe contribute to effectuation literature by illustrating how customer buying conditions influence decision-making logics of entrepreneurial firms searching for customers in the healthcare sector. We contribute to entrepreneurial resource search literature by illustrating how entrepreneurial firms search for customers beyond their networks in the institutionally complex healthcare sector.

Struggling and Thriving: Effectuation in Social and Economic Stress

How do citizens respond when provisioning systems are severely changed and curtailed? We apply effectuation theory from the entrepreneurship literature to address a socio-economic issue. We used an online survey and collected data from 1014 citizens in Iran to investigate how an effectual logic of thinking as a psychological framework enables some citizens of a non-Western country to address the uncertainties caused by international economic sanctions and sustain their well-being. We find that optimistic members of society use their effectual logic to enhance their satisfaction with life and social and economic sustainability in the medium-longer run. This study contributes to the multifactorial view of quality of life as well as effectuation theory and enhances our understanding of social sustainability and how it can be cultivated. Implications for policymakers are provided.

ChatGPT for Founding Teams: An Entrepreneurial Pedagogical Innovation

ChatGPT is taking the world and the education sector by storm. Many educators are still hesitant to integrate it within their curricula, owing to the limited practical and theoretical guidance on its applications, despite early conceptual studies advocating for its potential benefits. This pedagogical innovation applied an effectual logic to implement ChatGPT for a founding team activity within an entrepreneurship course. Composing a founding team is an inundating task in venture creation, with long-lasting consequences. So far, there is yet to be an ideal approach proposed in literature or observed in real-life for doing it. In this pedagogical innovation, three student teams with varying business ideas prompted ChatGPT using different keywords and levels of details, to get recommendations on essential team members, their roles and equity split. Each team presented their findings, and then the classroom engaged in a collective discussion. The students were surveyed afterwards to assess the reception and effectiveness of the intervention. Their feedback showed an overwhelming favoritism of ChatGPT, as a convenient and resourceful learning tool. The study establishes the potential value of ChatGPT as a heutagogical tool that supports student-centric entrepreneurial learning across educational institutions and the entrepreneurship ecosystem that extends to the venture creation process.

Exploring the Behaviours of Small Business Entrepreneurs in the Gastro-Dining Industry: Risks, Relationships and Gourmet Chefs in Action

Abstract A growing number of chefs are setting up their own businesses to offer a gastro-dining experience in places without an extensive gastro-dining tradition. In this context, our purpose is to explore the behaviours of entrepreneurs of small businesses in the newly developing Turkish gastro-dining market. We adopted a qualitative research design to gain insight into the perceptions of ten entrepreneurs. Our findings demonstrate that the participants’ entrepreneurial behaviour can be explained through effectuation logic. This manifests itself through control over consumption, learning and improvising within the flow of life as well as the exchange of informal and positive relationships with stakeholders. Furthermore, we discovered that those entrepreneurs with gastronomy training also exhibited entrepreneurial behaviour in terms of aiming to become a brand, with a causation logic along with effectuation.

Combination of causal and effectual logics of entrepreneurs in the Provence wine region

Combination of causal and effectual logics of entrepreneurs in the Provence wine region

Combination of causal and effectual logics of entrepreneurs in the Provence wine region

Combination of causal and effectual logics of entrepreneurs in the Provence wine region

Marketing intelligence and small firms' performance: the role of entrepreneurial alertness and effectuation

Purpose Knowledge of how entrepreneurial alertness (EA) and effectuation impact small firms' performance in uncertain markets is limited. Suggesting effectuation as a mediation mechanism between EA and small firms' performance, the authors explore how entrepreneurs of small firms apply effectual logic to translate their individual alertness to market opportunities into firms' performance.Design/methodology/approachA set of hypotheses is tested by partial least squares analysis of survey data collected from small firms in New Zealand.FindingsThe results show that effectuation works as a mechanism that mediates a positive association between founders'/managers' alertness to market opportunities and small firms' performance.Originality/valueIntegrating EA with the effectuation theory, the authors contribute to the literature on new market opportunity development and firm performance. The authors argue that entrepreneurs concentrate on action and resources to further develop their marketing intelligence in developing new market opportunities. The authors also enhance the understanding of entrepreneurial marketing decision-making by small firms in a relatively small economy in the Asia–Pacific region.

Causal foreign market selection and effectual entry decision-making: The mediating role of collaboration to enhance international performance

Foreign market selection and entry are important decisions for internationalizing small and medium-sized enterprises (SMEs) because they involve uncertainty, and influence performance. While it is inherent in effectual foreign market entry (FME) decision-making to rely on international partners and relationships to develop international markets, causal foreign market selection and business relationships/networks have frequently been presented as alternative ways to expand abroad. We conceive SMEs’ foreign market selection and entry as international business decisions and build on causal and effectual logic, and business network theory, to propose a model explaining SMEs’ international performance. We contribute to international business and SME literature by uncovering two different paths (causal and effectual) to FME collaboration and international performance. FME collaboration mediates the relation between causal foreign market selection and effectual entry decision-making and international performance. Our theoretical explanation for the mediating mechanism through which international performance can be enhanced is the network approach.

Effectuation and strategic evolution for sustainable longevity: the case of a 19th-generation family firm

PurposeThis article explains the causal mechanism supporting sustainable longevity by analysing the last three generations of one of the oldest family firms in Latin America.Design/methodology/approachAn explanatory single-case qualitative research based on critical realism explores why and how this family firm has been able to maintain its multigenerational longevity.FindingsLos Lingues's evolutionary strategy, driven by transgenerational entrepreneurship under effectuation, has supported this family firm's sustainable longevity. Its effectual logic emerged mainly from the richness of the firm's historical resources embedded in its identity, knowledge and social capital and priority to preserve socioemotional wealth.Originality/valueThis study integrates socioemotional wealth and effectuation theory to explain a family firm's ability to survive through generations and sustain longevity. The study demonstrates the relevance of effectual logic in the entrepreneurial dynamics of a multigenerational family firm. Effectual logic drives the firm evolution and adaptation for sustainable longevity.

Combining effectuation and causation approaches in entrepreneurship: A 20+ years review

Objective of the study: This paper gathers, and reviews published empirical or theoretical articles in which the entrepreneurial logics of causation and effectuation, coined by Sarasvathy in 2001, are discussed to answer the research question of “Under what circumstances do firms combine effectuation with causation?”. Methodology/approach: The research is based on a systematic literature review of top-tier journals over a 20-year period. Main results: Findings suggest causation and effectuation logics can be applied simultaneously or in sequence, depending on factors at the micro (the entrepreneur), meso (the firm), and macro levels (business context—institutional and situational). Theoretical/methodological contributions: It delivers a compiled, synthesized, and contrasted set of past work for future researchers to build upon and a preliminary conceptual matrix for further testing and refinement, not to mention an in-depth discussion at the micro, meso and macro level. Relevance/originality: Over 20 years after Sarasvathy’s seminal work, most literature investigating decision-making still focuses on contrasting the logics of causation or effectuation, not fully understanding the conditions under which each prevails or when they are combined. Social/management contributions: At the micro level, this research can help entrepreneurs better understand their profile and the benefits of considering both logics throughout their decision-making process. At the meso level, companies can benefit from understanding how logics relate at each life stage. Finally, at the macro level, policymakers and educators can help entrepreneurs navigate uncertain and turbulent environments if different logics and circumstances are more broadly acknowledged.

Linking Effectuation Logic with Business Model Innovation: An Investigation in the Context of Swiss Startups

Over the last decades, business model innovation and effectuation have been widely discussed in the literature. While effectuation represents a behavioural approach for entrepreneurs using available means for founding a start-up, business model innovation represents an approach to creating a business model with long-term competitive advantages. Designing a business model requires to focus on four dimensions: customer, value proposition, value chain and revenue mechanism. A business model innovation is referred to when an innovative characteristic can be attributed to two of the four dimensions. Both effectuation and business model innovation are valuable for entrepreneurs who are pursuing growth in dynamic and uncertain business environments. This paper elaborates on effectuation and its potential effects on business model innovation. The addressed research questions are: Is the effectuation logic a facilitating aspect of business model innovation? And to what extent do entrepreneurs apply effectuation logic and design innovative business models? The underlying data consists of business plans of 25 finalists of a Swiss innovation competition with more than 100 startups from different business sectors every year. First, the chosen sample is reviewed on the extent of the application of effectuation based on selected behavioural criteria. Second, the sample is analysed for evidence of business model innovation based on the above-mentioned business model dimensions and their innovative potential. Third, the link between the two approaches is highlighted to gain insights into the potential influence of the applied decision logic to develop innovative business models, thus providing an understanding of how entrepreneurs could leverage the advantages of effectuation in the context of innovating the business model. Further research will focus on examining critical success factors of entrepreneurial behaviour in the applied business model types and their correlations with business performance.

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

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.

Italian entrepreneurial decision-making under lockdown: the path to resilience

PurposeThis study addresses current research gaps by integrating resilience literature with crisis management theories, focussing on SMEs. Specifically, the authors examine how the entrepreneurial decision-making process, via the interplay of causation and effectuation logic, impacts a firm's ability to respond to unpredictable events. This paper aims to present an investigation that seeks to unearth the potentially complex interplay between causation and effectuation logic in fostering organisational resilience, particularly in the face of unprecedented disruptions such as the COVID-19 pandemic.Design/methodology/approachThis study includes the responses of 80 Italian entrepreneurs operating in the hospitality sector. The paper deployed a joint analysis through a partial least squares structural equation modelling technique (PLS-SEM) and a necessary condition analysis (NCA) to assess how the decision-making logics impact the entrepreneurs' decision when reacting to the pandemic.FindingsThe findings show that how entrepreneurs make decisions influence how they react to the crisis. Causation was found as a direct cause of resilience and preparedness, and effectuation was a direct cause of resilience and agility. Moreover, causation indirectly caused resilience through preparedness, and effectuation indirectly caused resilience through agility. Finally, both preparedness and agility are direct causes of resilience.Practical implicationsThis research generated insights into why and how some SMEs respond more effectively to uncertainty than others. It provides actionable strategies that business owners and managers can employ to enhance their ability to withstand and recover from crises.Originality/valueThis study's originality and novelty lie in its empirical investigation of the roles of causation and effectuation logic in entrepreneurial decision-making and, consequently, their influence on SME resilience. Focused on the Italian hospitality sector, it provides unique insights into resilience strategies under severe, real-world conditions, contributing to theoretical development and practical applications in crisis management.

Subjective well-being in university students: Two psychosocial skills complementing entrepreneurial attitudes

Wide entrepreneurship education (EE), based on constructivist pedagogies and effectual logic, emphasizes the inclusion of entrepreneurial attitudes and personal development as central EE components. Hence, the main aim of this study is examining how entrepreneurial attitudes and subjective well-being (SWB) are related with two additional personal resources necessary to thrive in an unpredictable and demanding labour market. Following constructivist educational recommendations, a full structural equation model was proposed and tested relating entrepreneurial attitudes, psychological capital, and self-care with SWB in a sample of 324 undergraduates. The findings revealed that self-care is a significant mediator, explaining 75.3% of SWB, and fully mediates the impact of psychological capital on SWB. However, self-care did not mediate the relationship between entrepreneurial attitudes and SWB. Intriguingly, a negative effect of entrepreneurial attitudes on SWB was observed. The study suggests mitigating this adverse impact by encouraging activities that foster self-care and psychological capital in university students.

The role of effectuation and causation for SME survival amidst economic crisis

PurposeEconomy-wide crises create major challenges for small and medium enterprises (SMEs). Existing studies emphasize the crucial role of contrasting behavioral strategies, effectuation and causation in SMEs' adaptation to crisis conditions. Yet, prior literature concentrated predominantly on exploring the impact of effectuation and causation on firm performance rather than survival. The authors present and empirically test a theoretical model explaining how behavioral strategies affect SME survival during an economy-wide crisis under different levels of environmental dynamism.Design/methodology/approachThe authors propose a theoretical framework based on the combination of the effectuation literature and the emerging variance-based perspective on entrepreneurial actions. The theoretical model is then tested using a sample of Russian SMEs during a period of economic adversity and recovery (2015–2019).FindingsThe empirical results reveal that causation reduces the probability of firm survival in dynamic environments, while effectuation increases the chance of survival irrespective of the state of the environment. In a nutshell, the study provides evidence that the effectuation logic serves a viable way for SMEs to increase the chances of survival through the economic shock and subsequent recovery period.Originality/valueFor the first time in the literature, the authors demonstrate the role of behavioral strategy (effectual and causal) as a crucial antecedent of SME survival in the short and medium term, particularly during an economy-wide downturn. Furthermore, the study demonstrates the power of variability-based theorizing for explaining and predicting the survival/failure implications of entrepreneurial actions.