RWTH Aachen University
Question
Asked 9 July 2016
Why should effectuation be applied to established firms and how?
Sarasvathy, the researcher behind the model of effectuation, stated the gap between effectuation used by entrepreneurs and the application of this model at established firms. How does the logic of the model, the effectual logic, in a most effective way can be applied at etablished firms and what benefits would this bring? Are there any possible downsides? And lastly: are there any recent findings on this topic or actual cases, from which new knowledge can be drawn?
The research im basing my assesment on:
Brettel, M, Mauer, R, Engelen, A, Küpper, D. 2012. Corporate effectuation: Entrepreneurial action and its impact on R&D project performance. Journal of Business Venturing 27: 167-184.
Reymen, IMMJ, Andries, P, Berends, H, Mauer, R, Stephan, U, van Burg, E. 2015. Understanding dynamics of strategic decision making in venture creation: A process study of effectuation and causation. Strategic Entrepreneurship Journal 9: 351-379.
Sarasvathy, S. 2001. Causation and effectuation: toward a theoretical shift from economic inevitability to entrepreneurial contingency. Academy of Management Review 26(2): 243-263.
Thanks a lot in advance!
Daniel Klaus
Most recent answer
Hey Daniel,
you can also have a look at our new publication in Journal of Business Economics where we investigate the topic of business model innovation and effectuation in a german incumbent manufacturing company in a qualitative single case study:
Brenk, Sebastian, et al. "Learning from failures in business model innovation: solving decision-making logic conflicts through intrapreneurial effectuation." Journal of Business Economics (2019): 1-51.
The fifth paper of this special issue is by Sebastian Brenk, Dirk Lüttgens, Kathleen Diener, and Frank Piller entitled “Learning from failures in business model innovation: Solving decision-making logic conflicts through intrapreneurial effectuation”. The authors base their analysis on a longitudinal single case study in the context of the digital transformation of a manufacturing company shifting from a product-based to a smart service model. Their results reveal different logic conflicts that emerge from this business model change. The authors conclude that alternative business models need to be separated when another value creation logic contradicts the original innovation decision-making reasoning.
Popular answers (1)
ESCP Business School
You can also have a look at a publication by Werhahn et al. (2015), who created an Effectuation Orientation scale to measure a strategic/behavioral posture on a corporate level:
Werhahn, D., Mauer, R., Flatten, T. C. and Brettel, M. (2015) ‘Validating effectual orientation as strategic direction in the corporate context’, European Management Journal, vol. 33, no. 5, pp. 305–313.
3 Recommendations
All Answers (5)
ESCP Business School
You can also have a look at a publication by Werhahn et al. (2015), who created an Effectuation Orientation scale to measure a strategic/behavioral posture on a corporate level:
Werhahn, D., Mauer, R., Flatten, T. C. and Brettel, M. (2015) ‘Validating effectual orientation as strategic direction in the corporate context’, European Management Journal, vol. 33, no. 5, pp. 305–313.
3 Recommendations
University of San Diego
You ask a good question. The idea of effectuation with respect to new firms is a logic of thinking (at an individual level) that reverses the standard model of entrepreneurship. In the effectuation view, opportunities are created by the interaction of the entrepreneur's actions with the external environment, and are exploited through constraint satisfying strategies. This reverses a more standard view that opportunities are external, are discovered, and are pursued with optimal strategies.
This difference is relevant to your question. The standard view of corporate strategies also suggests opportunities that are external to the firm and that should be approached with optimum seeking strategies. This gives you the opportunity to explore corporate strategies as constraint satisfying pursuits of opportunities that are created by the actions of the firm as it interacts with its external environment.
That would be a good contribution as you would move effectuation from the individual to the organizational level of analysis.
Good Luck!
1 Recommendation
Algonquin College
There is a whole bunch of literature out there on entrepreneurial versus mature companies and the differences between the two states of corporate existence. Without going into the details, you may want to search for articles by Tamas Koplyay (and myself for a few of them) here on Researchgate that look at the corporate life cycle. Some articles look at the Firm and the Market in broader perspective, while others look at specific issues or topics relating back to life-cycle like decision making and marketing functions.
Now, lifecycle seems to have been superseded by other management theories in the mainstream, but in the entrepreneurial world, and especially high-tech, it still very much applies as firms are going through the lifecycle moving from entrepreneurial small companies to larger and larger firms.
But touching back to using effectuation in larger mature firms; I'm not sure how that would work - unless you examine firms that have taken a strategic turn such as GE and IBM changing their core businesses and doing fairly well in that undertaking.... Effectuation may not work either - re: Jacques Nasser and his tenure at Ford as CEO where he diverged into peripheral businesses and tried to change the culture (didn't work). You may also want to look at business models - Branson and his Virgin brand have been associated with a wide spectrum of goods and services, but he is a "brand-renter" where it's usually not all his money in the game (Singapore Airlines owns 49% of Virgin Atlantic).
Please keep this question going as I'm very interested in the discussion!
Thanks,
Brian
3 Recommendations
Middle East Technical University
Hi,
The question is two-years old but I wanted to reply anyway :)
In my dissertation (I will submit soon), I have a section which I discuss similar points as in your question. I've come to the conclusion that effectuation serves for different purposes for a novice entrepreneur and experienced entrepreneurs (mature companies). For the first group, it basically serves as a coping mechanism for resource constraints, for the second it can be useful to enter into new domains characterized by visionary decisions.
Best of luck!
RWTH Aachen University
Hey Daniel,
you can also have a look at our new publication in Journal of Business Economics where we investigate the topic of business model innovation and effectuation in a german incumbent manufacturing company in a qualitative single case study:
Brenk, Sebastian, et al. "Learning from failures in business model innovation: solving decision-making logic conflicts through intrapreneurial effectuation." Journal of Business Economics (2019): 1-51.
The fifth paper of this special issue is by Sebastian Brenk, Dirk Lüttgens, Kathleen Diener, and Frank Piller entitled “Learning from failures in business model innovation: Solving decision-making logic conflicts through intrapreneurial effectuation”. The authors base their analysis on a longitudinal single case study in the context of the digital transformation of a manufacturing company shifting from a product-based to a smart service model. Their results reveal different logic conflicts that emerge from this business model change. The authors conclude that alternative business models need to be separated when another value creation logic contradicts the original innovation decision-making reasoning.
