How Entrepreneurs Think: Why Effectuation and Effectual Logic May be the Key to Successful Enterprise Entrepreneurship

Abstract

Recent research into effectuation and effectual logic show that entrepreneurs think and make decisions dramatically different than typical enterprise managers. One of the major issues in applying entrepreneurship and innovation to corporations is likely the misunderstanding and failed application of these core concepts to management practices. Thus, those studying intrapreneurship and innovation would find great value from this paper's discussion of effectuation and effectual logic as it explains its major differences between entrepreneurs and typical enterprise manager views as they pertain to: Goal setting, risk taking, resource selection and gathering, dealing with setbacks, building networks, and management control. To dive deeper into these valuable concepts, effectuation and its core principles were applied to the product development process and systems development process. This includes applying them to: Screening of ideas, business analysis, development, product validation, and the market launches phase of product development. This article should help those applying entrepreneurship practices to their organizations and result in more innovative managers and employees, or as the authors term it "enterprise entrepreneurs."

Effectual thinking and music education: One view of creative adaptation in an underserved urban middle school

“…Effectuation is more a thought process than a method, and its primary purpose is to help explain how truly entrepreneurial thinkers make decisions and create value in highly uncertain environments (Duening et al, 2012). The notion that classroom decisions could be made based on what might be sacrificed (“affordable loss”) versus what might be gained seems anathema to foundational educational doctrine.…”

Proces izgradnje legitimiteta startup poduzetnika kroz crowdfunding

“…Upravo je u toj najranijoj fazi u razvoju startup poduzetnika naglasak na stjecanju legitimiteta među vanjskim dionicima kako bi se olakšao proces pribavljanja resursa te vrednovanja i eksploatacije inicijalnog koncepta startup poduzetnika. Okolnosti poduzetničkog djelovanja, kao što su, nelinearnost, iterativnost, eksperimentiranje, rizičnost te primjena efektualne logike nasuprot kauzalnoj (Alsos et al, 2020, Lindholm-Dahlstrand et al, 2019, Kerr et al, 2014, Duening et al, 2012, Goel, Karri, 2006, Davidsson, 2005, Sarasvathy, 2001, naglašavaju stratešku važnost procesa stjecanja i održavanja legitimnosti za poduzetnike, posebice u okolnostima startup poduzetnika, kako bi se inicijalna inovativna ideja transformirala u izvedivu i održivu poslovnu priliku. Nedostatak legitimnosti povezan je s rastom vjerojatnosti organizacijskog neuspjeha i mortaliteta novoosnovanih poduzeća (Newbert, Tornikoski, 2004, Shane, Foo, 1999.…”

“…Koncept stjecanja legitimiteta nudi koristan okvir za percepciju i interpretaciju poduzetničkog ponašanja i poduzetničkog procesa. Općenito se može zaključiti kako poduzetnički proces nosi značajke nelinearnosti, iterativnosti, eksperimentalnosti, rizičnosti te primjenu efektualne logike nasuprot kauzalnoj (Alsos et al, 2020, Lindholm-Dahlstrand et al, 2019, Kerr et al, 2014, Duening et al, 2012, Goel, Karri, 2006, Davidsson, 2005, Sarasvathy, 2001. Shane i Venkataraman (2000) koncipiraju poduzetništvo kao otkrivanje, vrednovanje i eksploatiranje poduzetničke prilike, naglašavajući tri njegova temeljna segmenta; otkrivanje, evaluaciju i eksploataciju poduzetničke ideje/prilike.…”

Effectuation vs. Causation: Can Established Firms Use Start-Up Decision-Making Principles to Stay Innovative?

“…New Product Development Applying to enterprises and especially for the development process of products and systems (Duening, Shepherd, & Czaplewski, 2012) Product Innovation Applying to small companies and especially for the development process of products (Berends et al, 2014) Business strategy Staying competitive in a constantly changing environment (Wiltbank et al, 2006) Manufacturing Challenging the uncertainty of mass customization and steps towards virtual production (Brettel, Bendig, Keller, Friederichsen, & Rosenberg, 2014) Marketing Handling the uncertainty und unknowable elements of market research (Read, Dew et al, 2009) R&D Projects R&D projects with a particularly high innovativeness level (Brettel et al, 2012) Venture Creation Strategic decisions in venture creation process (Reymen et al, 2015) (Harms & Schiele, 2012) As it can be seen in Table 1 prior researchers have been exploring several different possible applications of effectuation. For instance, in relation to new product development, product innovation and R&D projects in the technology and innovation field; venture creation, business strategy and marketing in the overall management function; or even in the operations and manufacturing area.…”