Effectuation Theory

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Dr Saras D. Sarasvathy depicted literature on the entrepreneurial venture creation and entrepreneurial decision-making logic; the casual and effectuation theory, and the effectuation process in (Sarasvathy 2001, 2008), which will represent the foundation framework from the entrepreneurship discipline along with the aid of the tools (to be listed) from the strategic and marketing disciplines. Along with Sarasvathy (2001, 2008), the empirical research of Berends et al. (2013), Nielsen and Lassen (2011), Reymen et al. (2015) that examine her casual and effectuation theory, and effectuation process. They advocate the pivotal influence of uncertainty and risks on which strategic thinking logic “effectuation or causal logic” would the entrepreneur…show more content…
These principles are summarised in table 1 along with the analogous process and its contradiction with the causal reasoning.

Moreover, Nielsen and Lassen (2011) commented that the entrepreneurial identity is a process in itself; they studied ten novice entrepreneurship students and their attempts to recognise their entrepreneurial identity. They dissent the theory assumption of a stable entrepreneurial identify state before entering the process, where they claim that the entrepreneurial identity is dynamic, iterative and continual learning process that depends on the entrepreneur levels of self-reflection and engagement.

Nevertheless, Reymen et al. (2015, p.374) have concluded that “The overall pattern that emerged from our analysis lends support to the expectation that flexible decision making is more prominent in the earlier stages of venture creation, with a transition to more planning-based decision making over time as both the new venture and its market mature (Alvarez and Barney, 2005; Sarasvathy, 2001). Yet, we also qualify this expectation: effectual decision making can reappear in later venture creation phases. Thus, effectuation and causation not only co-occur but also reoccur in different patterns over the venture creation
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The Ansoff matrix articulates deliberate strategies in matured organisations to analyse the potential growth and the associated risks in the context of the market situation. The matrix consists of four quadrants to study the correlation between products and markets. The diversification quadrant resembles the riskiest among the others, where matured organisations are using planning, and prediction to achieve economies of scale to sell new products to new customers, where economies of scale are implicitly attributed to the organisation high performance. Contrarily, startups rely on emergent strategies with high surrounding
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