Effectuation

Effectuation is a set of decision-making principles expert entrepreneurs are observed to employ in situations of uncertainty. The alternative to effectuation is causality, which describes decision-making heuristics rooted in prediction. The two logics can be contrasted as follows:

Causation: If I can predict the future, I can control it.

Effectuation: If I can control the future, I do not need to predict it.

Effectual principles

View of the future: The future is a result of co-creation, (as described by marketing's service-dominant logic, at least in part) by willful agents that may include investors, partners, and customers who make a precommitment to the new product, startup company, or new market.

Basis for taking action: Goals emerge by imagining courses of action which start from available means of who I am, what I know, and whom I know.

View of risk and resources: Pursue satisfactory opportunities without investing more resources than stakeholders can afford to lose. Limit downside potential.

Attitude toward outsiders: Share what you have with committed players, as partnerships (particularly with shared rewards) shape the trajectory of the opportunity.

Attitude toward unexpected events: Surprise is good. Imaginative re-thinking of possibilities transforms the unexpected into innovation and new opportunities.

References

  • Read, S., Sarasvathy, S., Wiltbank, R., Dew, N. & Ohlsson, A. (2010) "Entrepreneurship" Abingdon/New York: Routledge
  • Faschingbauer, M. (2010) Effectuation: "Wie erfahrene Unternehmer denken, entscheiden und handeln" Stuttgart: Schäffer-Poeschel
  • Dew, N., Read, S., Sarasvathy, S., & Wiltbank, R. (2009) "Effectual versus predictive logics in entrepreneurial decission making: differences between experts an novices" Journal of Business Venturing 24-4
  • Sarasvathy, S., Dew, N., Read, S., and Wiltbank, R. (2009) "Effectual Reasoning in Entrepreneurial Expertise: Existence and Bounds" (in press at the Journal of Business Venturing)
  • Read, S., and Song, M. (2009) "Non-Predictive Strategy and New Venture Performance: A Meta-Analysis" Journal of Business Venturing
  • Dew, Nicholas, Saras Sarasvathy, Stuart Read and Robert Wiltbank (2009) "Affordable Loss: Behavioral Economic Aspects of the Plunge Decision" Strategic Entrepreneurship Journal (3)
  • Read, S., Sarasvathy, S., Song, M. Dew, N. and Wiltbank, R. (2009) "Marketing Under Uncertainty: An Effectual Approach" Journal of MarketingMay 2009, Vol 73, No 3; p. 1.
  • Robert Wiltbank, Stuart Read, Nicholas Dew, Saras D Sarasvathy (2009) "Prediction and control under uncertainty: Outcomes in angel investing" Journal of Business Venturing. Vol. 24, Iss. 2; p. 116
  • Sarasvathy, S. (2008): Effectuation: Elements of Entrepreneurial Expertise (Cheltenham: Edward Elgar.)
  • Smit, Willem, and Read, S. (2008) "Framed by Yesterday " (Academy of Management Best Paper Proceedings)
  • Ranjan Karri, Sanjay Goel (2008) "Effectuation and Over-Trust: Response to Sarasvathy and Dew" Entrepreneurship Theory and Practice. Waco: Jul 2008. Vol. 32, Iss. 4; p. 739
  • Saras Sarasvathy, Nicholas Dew (2008) "Effectuation and Over-Trust: Debating Goel and Karri" Entrepreneurship Theory and Practice. Waco: Jul 2008. Vol. 32, Iss. 4; p. 727
  • Saras D Sarasvathy, Nicholas Dew (2008) "Is Effectuation Lachmannian? A Response to Chiles, Bluedorn, and Gupta" Organization Studies. Vol. 29, Iss. 2; p. 239
  • Nicholas Dew, Saras D. Sarasvathy, Stuart Read, Robert Wiltbank. "Immortal firms in mortal markets?; An entrepreneurial perspective on the "innovator's dilemma" European Journal of Innovation Management. Vol. 11, Iss. 3; p. 313 (Emerald Literati Award, 2009)
  • Nicholas Dew, Stuart Read, Saras D Sarasvathy, Robert Wiltbank (2008) "Outlines of a behavioral theory of the entrepreneurial firm" Journal of Economic Behavior & Organization. Vol. 66, Iss. 1; p. 37
  • Saras D Sarasvathy, Nicholas Dew, Stuart Read, Robert Wiltbank (2008) "Designing Organizations that Design Environments: Lessons from Entrepreneurial Expertise" Organization Studies. Vol. 29, Iss. 3; p. 331
  • Nicholas Dew, Stuart Read (2007) "The more we get together: Coordinating network externality product introduction in the RFID industry" Technovation. Vol. 27, Iss. 10; p. 569
  • Nicholas Dew, Saras D Sarasvathy (2007) "Innovations, Stakeholders & Entrepreneurship" Journal of Business Ethics. Vol. 74, Iss. 3; p. 267 (17 pages)
  • Robert Wiltbank, Nicholas Dew, Stuart Read, Saras D Sarasvathy (2006) "What to do next? The case for non-predictive strategy" Strategic Management Journal. Vol. 27, Iss. 10; p. 16
  • Saras D. Sarasvathy, Nicholas Dew (2005) "New market creation through transformation" Journal of Evolutionary Economics. Vol. 15, Iss. 5; p. 533
  • Stuart Read, Saras D Sarasvathy (2005) "Knowing What to Do and Doing What You Know: Effectuation as a Form of Entrepreneurial Expertise " The Journal of Private Equity. Vol. 9, Iss. 1; p. 45 (18 pages)
  • Saras D Sarasvathy (2004) "Making It Happen: Beyond Theories of the Firm to Theories of Firm Design" Entrepreneurship Theory and Practice. Vol. 28, Iss. 6; p. 519
  • Nicholas Dew, S. D. Sarasvathy, S. Venkataraman (2004) "The economic implications of exaptation" Journal of Evolutionary Economics. Vol. 14, Iss. 1; p. 69
  • Saras D Sarasvathy (2003) "Entrepreneurship as a science of the artificial" Journal of Economic Psychology. Vol. 24, Iss. 2; p. 203
  • Saras D Sarasvathy (2001) "Causation and effectuation: Toward a theoretical shift from economic inevitability to entrepreneurial contingency" Academy of Management. The Academy of Management Review. Vol. 26, Iss. 2; p. 243 (21 pages)

:Category:Entrepreneurship :Category:New Ventures :Category:Prediction

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