Entrepreneurs Usage of Effectuation and Causation: Contrasting expert and novice entrepreneurs

Christina Zacho Woetmann

Student thesis: Master thesis

Abstract

Background: This thesis strives to add new empirical research to decision-making theories within the field of entrepreneurship. In 2001, Dr. Saras Sarasvathy introduced the theory of effectuation, which she refers to as “the elements of expertise”, because she discovered that 89% of experts used effectuation more frequently than causation. Whereas her later research showed that novice entrepreneurs used causational thinking processes 81% of their time. Causation and effectuation are two alternative decision processes contrasting each other in regards to whether the perception of the future is predictable or not. Causationists believes the future is truly predictable and opportunities thus found through forecasting necessary actions in order to maximize expected return. In contrast, effectuatuators believes the future is truly unpredictable and instead focus on controlling the means available to control future outcomes, thus opportunities are made by oneself (Sarasvathy, 2001). This thesis’ overall purpose is to add additional rigor into understanding how experts and novice entrepreneurs differs in their preference between causational and effectual decision-makings. Furthermore, this thesis’ findings will be compared with Sarasvathy’s previous discoveries to enlighten the tendencies and differences. Research Strategy: As Sarasvathy did in her research, I will conduct protocol analysis of both experts and novice entrepreneurs. These protocols will be collected from 15 novice entrepreneurs attending Copenhagen School of Entrepreneurship, and from 15 expert entrepreneurs all nominated on EY’s list “Entrepreneur of The Year”. To simplify the comparison between Sarasvathy’s and my findings I will reuse her coding scheme which is constructed as a null hypothesis investigating my overall research question of how experts and novice differ in their decision-making in relation to causation and effectuation. The coding scheme consists of three possible beliefs about the predictability of the future: analysis (ANL), Bayesian analysis (BAN), and effectuation (EFF). Results and Discussions: All my findings rejected the null hypothesis revealing preferences between ANL, BAN and EFF. Overall; novice entrepreneurs favor causational processes whereas experts prefer using effectual decision-making when pursuing new opportunities. However, my results did vary from Sarasvathy’s findings, as I also discovered internal differences within the groups. Some of the reasons why our studies do have differences can be due to cultural differences, that effectuation is still in the initial research phase or that some of my assumptions might not reflect how the reality works. Conclusion and Perspectives: As effectuation is still in a development stage, I suggest further research within the field; especially executing research with other assumptions than used in this thesis. I do believe we should acknowledge that experts more frequently use effectuation than novice entrepreneurs do and by that ensure that effectuation is taught to entrepreneurial scholars to help them prosper. Additionally, I advise further research of how the processes of causation and effectuation can support and strengthen each other instead of just focusing on their differences.

EducationsCand.merc.smc Strategic Market Creation, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2014
Number of pages127