Abstract

Effectuation theory suggests that entrepreneurs focus primarily on the resources under their control, and then develop their new ventures in an iterative way. They do this by selecting different potential goals that can be accomplished with the resources at hand based on a focus on affordability of loss rather than maximal return on the capital invested, and the use of precommitments from self-selected stakeholders (Sarasvathy, 2001, 2008; Sarasvathy et al., 2005, 2006). In contrast to the effectual logic, a causational logic starts from a specific goal and then focuses on selecting the resources needed to achieve those goals. Relatively little empirical research has looked at the conditions under which an entrepreneur will use either a causation or an effectuation logic in the new venture formation process, or whether both logics are used at the same time (Sarasvathy, 2003). In this study, therefore, our main research question is: what factors determine whether entrepreneurs use causational and/or effectuation processes in forming their ventures? As strategies require a “fit” between organizational resources and the environment of the firm (Grant, 2008; Eisenhardt & Martin, 2000), we developed hypotheses that were interested in both the resources available to the entrepreneur and the external environment that influence the adoption of causation and/or effectuation strategies. With respect to the environment, we look at the effect of different sources of uncertainty. When studying the impact of resources, we examine the effect of human capital, social capital and organizational slack.

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