Recent streams of causation and effectuation research (Sarasvathy 2008, Wiltbank et al., 2011, Fisher, 2012, Chandler et al., 2011) have continued along a trajectory established by Sarasvathy (2008) who theorizes “…causal and effectual approaches as a strict dichotomy” (:22). Although she acknowledges that “Empirically, entrepreneurs use both causal and effectual approaches, in a variety of combinations” (:22), researchers remain focused on the two constructs as antithetical or unrelated.

We contribute to the literature by addressing two significant gaps. First, we theoretically and empirically examine the integration of causation and effectuation processes rather than treating them as mutually exclusive. Second, we consider how a real-options approach moderates the beneficial aspects of causation and effectuation processes.

Our hypothesized model posits that, in the midst of high uncertainty, effectuation processes independently exert a positive effect on new venture performance, as does careful and thoughtful planning (a causation process). By contrast, forecasting (also a causation process) exerts a negative effect on performance, due to Knightian uncertainty. We further theorize, however, that continuous validation of key assumptions, through a process known as real-options stepping-stone strategies (MacMillan & McGrath, 2002), moderates the negative effect of causation (forecasting) on new venture performance.