Capturing the Many Splendored Entrepreneurial Beast: Observing the Decision-Laden Journey from Novice to Effectual Expert

Abstract

Effectuation emerged in the early 2000s as an alternative to the neoclassical economic strategy of segmenting, targeting, and positioning within the entrepreneurship literature. The original study by Sarasvathy (2001) was based on the decision-making of 27 male expert entrepreneurs as they navigated a hypothetical scenario called “Venturing”. The study found that effectual entrepreneurs take their existing means, skills, and relationships as a given and form companies based on their available means. A causal approach, taught in business schools around the world, suggests that entrepreneurs identify an opportunity in the market and assemble necessary resources to execute on a detailed plan. Existing research has shown evidence to support the effectiveness of both approaches. However, what is not yet known is how and when each should be used and whether characteristics of the entrepreneur suggest utilization at certain times. In theory, development researchers suggest that effectuation ought to be prevalent early and causation late as the firm formalizes (Sarasvathy, 2001; Fisher, 2012; McKelvie et al., 2020). This study observes the entrepreneurial journey from nascency to scale through the eyes of the company’s founder to explore the usage of effectual and causal logic in the entrepreneurial decision-making process. Using a novel dataset and coding/analysis process, the author extends existing effectuation research by shedding light on who (novice vs. experienced) might employ causal vs. effectual strategies and during which stage of a company’s life cycle (Conception, Gestation, Launch, Growth, & Exit) each may prove most useful. Findings suggest that the experienced entrepreneurs in this sample, regardless of previous levels of success, are largely causal at the outset of their new firms, while novice entrepreneurs are decidedly effectual early in their journey. Patterns also emerged to support the switch from effectuation to causation as the firm grows and formalizes, and a switch back to effectual processes in times of uncertainty.