THE ENTREPRENEURIAL DECISION MAKING: USE OF EFFECTUATION AND RELATION WITH PERCEIVED FINANCIAL PERFORMANCEAND INNOVATION IN THE FIRM
Download| Volume 14 Issue 1 2018 | |
|---|---|
| Author(s): |
Subeika Rizvi
Shahid Querishi
ErumZaidi
Muhammad Ali Saeed
|
| Abstract | During the start of the venture, entrepreneurs rely on several techniques and strategies to make decisions. Effectuation and causation are important modes of this decision-making process. The theory on effectuation is advancing from an early to a mature phase globally thus it’s important to understand its dimensions and their influence on the firm’s performance. This study explores the use of this effective logic in micro and small firms operating in Pakistan and its influence on the financial performance and level of innovation in these firms. Although few types of research have been focused on the antecedents and dependents of effectuation none have arrived at a consensus on the appropriate variables. In Pakistan, as it’s a relatively new concept although being applied, there is all the more need to assess the nature of effect these variables could have on some of the important outcomes of the firm. This research contributes to the existing literature by providing a relationship of effectuation with, another important, variable of innovation in the firm. In this empirical study, a sample of 166 micro and small firm entrepreneurs has used all operating businesses within Pakistan. A survey, through a questionnaire, was conducted using snowball sampling. Findings indicate that the use of effectuation is positively correlated with both higher perceived financial performance and level of innovation employed in the firms. Also, not all effectual constructs have a uniform influence on the variables which explains the formative nature of the logic of effectuation. A few implications of this study and future research areas have also been identified. |
| Keywords | Effectuation, firm performance, innovation |
| Year | 2018 |
| Volume | 14 |
| Issue | 1 |
| Type | Short Report |
| Recognized by | Higher Education Commission of Pakistan, HEC | Category | "Y" | Journal Name | IBT Journal of Business Studies | Publisher Name | ILMA University | Jel Classification | L26, G00, G29, O32, Q55 | DOI | http://dx.doi.org/10.46745/ilma.jbs.2018.14.01.02 | ISSN no (E, Electronic) | 2409-6520 | ISSN no (P, Print) | 2416-8393 | Country | Pakistan | City | Karachi | Institution Type | University | Journal Type | Open Access | Type of Review | Double Blind Peer Reviewed | Format | Paper Link | http://ibtjbs.ilmauniversity.edu.pk/journal/jbs/14.1/2.pdf | Page | 10-22 | References | Ansoff, H. I. (1991). Critique of Henry Mintzberg's ‘The design school: reconsidering the basic premises of strategic management’. Strategic management journal, 12(6), 449- 461. Brews, P. J., & Hunt, M. R. (1999). Learning to plan and planning to learn: Resolving the planning school/learning school debate. Strategic Management Journal, 20(10), 889- 913. Berends, H., Jelinek, M., Reymen, I., & Stultiëns, R. (2014). Product Innovation Processes in Small Firms: Combining entrepreneurial effectuation and managerial causation. Journal of Product Innovation Management, 31(3), 616-635. Brettel, M., Mauer, R., Engelen, A., & Küpper, D. (2012). Corporate effectuation: Entrepreneurial action and its impact on R&D project performance. Journal of Business Venturing, 27(2), 167-184. Baker, T., & Nelson, R. E. (2005). Creating something from nothing: Resource construction through entrepreneurial bricolage. Administrative science quarterly,50(3), 329-366. Bhide, A. (1991). Bootstrap finance: the art of start-ups. Harvard business review, 70(6), 109- 117. Dew, N., Read, S., Sarasvathy, S. D., & Wiltbank, R. (2009). Effectual versus predictive logics in entrepreneurial decision-making: Differences between experts and novices. Journal of business venturing, 24(4), 287-309. Chandler, G. N., DeTitenne, D. R., McKelvie, A., & Mumford, T. V. (2011). Causation and effectuation processes: A validation study. Journal of business venturing, 26(3), 375- 390. Fredrickson, J. W. (1984). The comprehensiveness of strategic decision processes: Extension, observations, future directions. Academy of Management journal, 27(3), 445-466. Gabrielsson, J., & Politis, D. (2011). Career motives and entrepreneurial decision-making: examining preferences for causal and effectual logics in the early stage of new ventures. Small Business Economics, 36(3), 281-298. Garonne, C., Davidsson, P., & Steffens, P. R. (2010). Do strategy choices matter for nascent firms? A study on effectuation and causation impacts on new ventures outcomes. Proceedings of the 7th AGSE International Entrepreneurship Research Exchange. Harms, R., & Schiele, H. (2012). Antecedents and consequences of effectuation and causation in the international new venture creation process. Journal of international entrepreneurship, 10(2), 95-116. Kraaijenbrink, J., Ratinho, T., & Groen, A. (2011). Planning effectual growth: a study of effectuations and causation in nascent firms. Loch, C. H., Solt, M. E., & Bailey, E. M. (2008). Diagnosing unforeseeable uncertainty in a new venture. Journal of product innovation management,25(1), 28-46. Mintzberg, H. (1990). The design school: reconsidering the basic premises of strategic management. Strategic management journal, 11(3), 171-195. McKelvie, A., DeTienne, D. R., & Chandler, G. N. (2013). What is the appropriate dependent variable in Effectuation Research? Babson College Entrepreneurship Research Conference. McKelvie, A., Haynie, J. M., & Gustavsson, V. (2011). Unpacking the uncertainty construct: Implications for entrepreneurial action. Journal of Business Venturing, 26(3), 273- 292. Perry, J. T., Chandler, G. N., & Markova, G. (2012). Entrepreneurial effectuation: a review and suggestions for future research. Entrepreneurship Theory and Practice, 36(4), 837-861. Politis, D., & Gabrielsson, J. (2006). Entrepreneurial Decision Making: Examining Preferences for Casual and Effectual Reasoning in the New Venture Creation Process. Lund Institute of Economic Research, Lund University. Porter, 1980. Porter M. E. Competitive strategy. New York: Free Press, 1980. Read, S., Song, M., & Smit, W. (2009). A meta-analytic review of effectuation and venture performance. Journal of Business Venturing, 24(6), 573-587. Read, S., & Sarasvathy, S. D. (2005). Knowing what to do and doing what you know: Effectuation as a form of entrepreneurial expertise. The Journal of Private Equity, 9(1), 45-62. Sarasvathy, S. D. (2001). Causation and effectuation: Toward a theoretical shift from economic inevitability to entrepreneurial contingency. Academy of management Review, 26(2), 243- 263. Sarasvathy, S. D. (2001, August). Effectual reasoning in entrepreneurial decision making: existence and bounds. In Academy of management proceedings (Vol. 2001, No. 1, pp. D1-D6). Academy of Management. Sarasvathy, S. D. (2009). Effectuation: Elements of entrepreneurial expertise. Edward Elgar Publishing. Sarasvathy, S. D. (2003). Entrepreneurship as a science of the artificial. Journal of Economic Psychology, 24(2), 203-220. Shane, S., & Venkataraman, S. (2000). The promise of entrepreneurship as a fie ld of research. Academy of management review, 25(1), 217-226. Simon, M., Houghton, S. M., & Aquino, K. (2000). Cognitive biases, risk perception, and venture formation: How individuals decide to start companies. Journal of business venturing, 15(2), 113-134. Smolka.K.M., Verheul.I., Lamp.K.B. (2015). Successful Entrepreneurs do both: Effectuation and Causation and relation with Firm Performance. Academy of Management Annual Meeting 2015. Ottawa, Canada. Venkataraman, S., & Sarasvathy, S. D. (2001). Strategy and entrepreneurship: Outlines of an untold story. Wiltbank, R., Dew, N., Read, S., & Sarasvathy, S. D. (2006). What to do next? The case for non- predictive strategy. Strategic management journal, 27(10), 981-998. |