The impact of effectuation on small firm buying decisions

Abstract

Purpose-This study considers the effect of effectuation logic on the buying intentions of small firm owner-managers. Design/methodology/approach-Literature relating to organisational buying, marketing and personal selling and entrepreneurial decision making was synthesised. Findings-This paper presents a conceptual model based on propositions relating to how effectuation logic may explain the predilection of small firm owner-managers to select trusted suppliers from within personal and business networks, and to engage on flexible terms. It suggests that supplier relationship decisions made using effectuation logic may enable wider choice of suppliers than the formal processes of large firms. Research limitations/implications-The findings were developed from a narrative review of literature and are yet to be empirically tested. Originality/value-By synthesising research findings on small firm buyer behaviour, the IMP Interaction approach and effectuation, it has been possible to develop a predictive model representing buyer-seller relationships in the context of small firms which suggests that owner-managers select suppliers in line with the principles of effectuation means and effectuation affordable loss.

The dark side of effectuation in a key account management relationship

“…Hitherto the study of KAM relationships has primarily focused upon those between large customers, resource requirements assumed to be a barrier to small suppliers entering into such relationships (Ivens & Pardo, 2016). However, while a small supplier may lack resources (McGowan, 2018), entering into a KAM relationship may be made possible through effectuation (McGowan, 2020b). Effectuation theory contrasts with causal logic (which includes goal setting, prediction and planning) because it starts by considering available means and then follows an emergent process through which goals develop (Sarasvathy, 2009).…”

“…In terms of wider public policy, effectual buying and effectual selling clearly holds potential to facilitate firm creation (McGowan, 2018), facilitating economic development in deprived regions and developing countries. Indeed, in respect of the current COVID19 crisis, small firms "are tasked with the driving economic recovery globally, in contribution to economic growth" (Beynon, Jones, & Pickernell, 2020, p. 15).…”

“…Extant literature suggests the use of effectuation may positively impact inter-firm buyer-supplier relationships (McGowan, 2018(McGowan, , 2020bRead et al, 2009;Sarasvathy, 2009). This suggests application by small suppliers could be appropriate and facilitate entry into KAM relationships, to undertake new product development (hereafter NPD) to create sales opportunity with larger customers (McGowan, 2018;Ortega et al, 2017;Sarasvathy, 2009;Wu et al, 2020). Effectuation is, however, different from causal logic, which is more readily used in large firms (Sarasvathy, 2009).…”

“…Personal means (both possessed and acquirable), skills and knowledge are combined to create an opportunity or solution (Sarasvathy, 2009). Extant literature suggests use of effectuation may positively impact inter-firm buyer-supplier relationships (McGowan, 2018(McGowan, , 2020bRead, Dew, Sarasvathy, Song, & Wiltbank, 2009;Sarasvathy, 2009). This suggests application by small suppliers could be appropriate and facilitate entry into KAM relationships, to undertake New Product Development (hereafter NPD) to create sales opportunity with larger customers (McGowan, 2018;Ortega, García, & Santos, 2017;Sarasvathy, 2009;Wu, Liu, & Su, 2020).…”

Use of effectuation by established micro businesses: short-term gain, long-term pain?

“…Extant buying literature identifies the differences between the procurement practices of large and micro firms (Ellegaard, 2006(Ellegaard, , 2009); yet, little is known about the decision-making logic of micro firm owner-managers with respect to buying. Accordingly, this paper seeks to extend the work of McGowan (2018), published in Volume 12 of the IMP Journal, and responds to his call for empirical investigation into the impact of the use of effectual logic by micro firm owner-managers in determining buying decisions.…”