Abstract

Inspired by Schumpeter’s (1934) seminal analysis of the importance of entrepreneurs carrying out “new combinations” for economic development, later research has documented that young and small firms is a key source of new product innovations in the economy, and increasingly so (Acs & Audretsch, 2003). However, new and small firms may approach product innovation in different ways, some of them being markedly more innovative than others. Differences may be a result of different strategies or logics adopted by the entrepreneurs in creation and further development of their ventures. This study is motivated by recent research which has suggested that causation and effectuation represent two fundamentally different approaches for how new firms come into existence (Sarasvathy, 2001). Causation process takes a particular effect as given and focuses on selecting between means to create that effect while effectuation process refers to the choice between possible effects that can be created with given means. The purpose of this paper is to further examine the intersection between product innovation, and the logic entrepreneurs follow during business creation.

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