The influence of effectuation and causation strategies on corporate innovation in conditions of increased industry uncertainty

Abstract

Located in the nexus of corporate strategy and entrepreneurship, this study aims to improve the decision making of corporate organisations regarding innovation, when faced with uncertainty. This research is motivated by the question; What can decision makers and managers, in corporate organisations, learn from entrepreneurs? With the assertion that traditional approaches to corporate strategy do not account for unexpected changes, the entrepreneurial, non-predictive decision making logic of effectuation is considered. The study finds evidence that causation and effectuation can coexist in an innovative organisation, but that effectuation is associated with relatively higher levels of innovation than causation. Based on the results observed, the study goes on to argue for the treatment of industry uncertainty as a formative construct, consisting of multiple components. This follows the observed polarised impact of generalising uncertainty which could lead to the wrong strategy, whether causal or effectual. A framework of this interaction was provided. Ultimately, the context of the uncertainty facing the organisation should determine the correct strategy to follow for corporate innovation, or even whether to increase the focus on innovation. The findings of this research were found to also have implications for the application of effectuation to corporate strategy, as currently conceptualised and measured. Adaptation of this theory to the corporate context may be necessary, providing recommendations for further research.