The impact of following a causation versus an effectuation approach on the survival of nascent entrepreneurial ventures in dynamic industries

Abstract

This study determines the influence of causation versus effectuation on entrepreneurial firm survival in high and low dynamism industries. Causation approaches a problem with the end in mind while effectuation’s point of departure is the means. Causal logic predicts a best case future scenario and then gathers the necessary resources to realize that scenario. This is contrasted by effectual logic that attempts to “control” the future by making use of the resources in hand (and those that can be borrowed) while trying to achieve the best possible result. The study consists of a means analysis testing for firm survival in highly dynamic industries per “pure” causal or effectual approach and of a variance analysis, testing for survival as a function of the mixed use of causation and effectuation in both high and low dynamism industries. The product of the means analysis indicates that only two entrepreneurs out of a cohort of 1771 follow a “pure” causal or “pure” effectual approach. As a result of this finding the incidence of “pure” causal or effectual approaches in either high or low dynamism industries is negligible. The output from the variance analysis indicates that causation is a significantly better predictor of entrepreneurial survival than effectuation in both high and low dynamism industries at a 99% confidence level. Below is a summary of the survival probabilities for both high and low dynamism industries across the causal/effectual decision spectrum.This study determines the influence of causation versus effectuation on entrepreneurial firm survival in high and low dynamism industries. Causation approaches a problem with the end in mind while effectuation’s point of departure is the means. Causal logic predicts a best case future scenario and then gathers the necessary resources to realize that scenario. This is contrasted by effectual logic that attempts to “control” the future by making use of the resources in hand (and those that can be borrowed) while trying to achieve the best possible result. The study consists of a means analysis testing for firm survival in highly dynamic industries per “pure” causal or effectual approach and of a variance analysis, testing for survival as a function of the mixed use of causation and effectuation in both high and low dynamism industries. The product of the means analysis indicates that only two entrepreneurs out of a cohort of 1771 follow a “pure” causal or “pure” effectual approach. As a result of this finding the incidence of “pure” causal or effectual approaches in either high or low dynamism industries is negligible. The output from the variance analysis indicates that causation is a significantly better predictor of entrepreneurial survival than effectuation in both high and low dynamism industries at a 99% confidence level. Below is a summary of the survival probabilities for both high and low dynamism industries across the causal/effectual decision spectrum. Copyright