Effectuation

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.[1] Situations of uncertainty are situations in which the future is unpredictable, goals are not clearly known and there is no independent environment that serves as the ultimate selection mechanism.[2]

Founding

Effectuation is a principle introduced by Saras Sarasvathy in 2001. Since 1997 Sarasvathy conducted a research among 27 expert entrepreneurs. Sarasvathy interviewed the entrepreneurs and let them solve cases in order to see how they think and where they start. It appeared that 89% of the expert entrepreneurs used effectuation more often than causation. Causation is the opposite of effectuation. Where effectuation is used in situations of uncertainty, causal reasoning is used when the future is predictable.[2] With causal reasoning, entrepreneurs will determine goals to achieve and look for the resources to do so. At the opposite with effectuation, entrepreneurs will determine goals according to the resources in their possession.

Principles of effectuation

There are five core principles that define Effectual Logic. These are:[1][3]

An example

The most simple and clear example Saras Sarasvathy gives to describe effectual reasoning and to distinguish effectual reasoning from causation is about a chef cooking a meal.[2] By using causation, the client chooses a menu in advance and the chef prepares this menu by looking for the right ingredients and following the recipes to make the dishes. In the effectual process, the approach would be rather different. The client would not ask for a specific menu, but he asks the chef to make something with the ingredients available. The chef chooses one of the many different meals he is able to make with the available ingredients.

The most important difference between causal reasoning and effectuation is therefore that an entrepreneur using causation has a given goal and searches for means to reach his goal. If the entrepreneur uses effectuation instead, he will start with the means he has and from this point he looks at possible goals.

See also

Causal reasoning

References

  1. 1 2 Society for Effectual Action (2012). "Principles". Batten Institute, Darden School of Business. Retrieved 2014-01-26.
  2. 1 2 3 Saras Sarasvathy; et al. (2001). "EFFECTUAL ENTREPRENEURIAL EXPERTISE: EXISTENCE AND BOUNDS". pennState: 46. CiteSeerX: 10.1.1.110.2635.
  3. ↑ Saras Sarasvathy (2001). "What makes entrepreneurs entrepreneurial?" (PDF). Harvard Business Review: 9. Retrieved 2014-01-26.

Further reading

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