Making strategic decisions in early-stage start-ups: An exploratory study of novice entrepreneurs and the use of effectual logic as a means to overcome Knightian uncertainty of early-stage entrepreneurship

Stephen Gregory Lutsch & Magnus Tranum Mortensen

Student thesis: Master thesis


In this exploratory thesis, we seek to expand upon current effectuation literature by analyzing qualitative interviews of a sample of nine novice entrepreneurs. We center the interviews on recent strategic challenges, and, through a coding scheme invented for the purpose, analyze the entrepreneurs’ underlying logic of dealing with uncertainty in strategic decision-making processes. Within the relatively new field of entrepreneurship research, the theory of effectuation puts forth a ‘logic of experts’ for entrepreneurs in dealing with the uncertainty of early-stage entrepreneurship (Sarasvathy, 2001). We argue that this uncertainty is not risk, as traditional management literature views it, but, in fact, Knightian uncertainty (unknown unknowns). With effectual logic, it is suggested that novice entrepreneurs use causal logic while expert entrepreneurs use effectual logic. Our analysis resulted in the unexpected findings of effectual logic use among all novices in the sample, even to a higher extent than the expert entrepreneurs from Sarasvathy original effectuation literature. The implications of these findings for future effectuation research are discussed by looking at the interpretation of early wins, pattern-recognition and potential business education bias of the sample. We discuss these implications and suggest further effectuation research, specifically exploring the novice entrepreneurs’ educational background, decision-making logic and interpretation in early-stage entrepreneurial decision-making.

EducationsMSocSc in Organisational Innovation and Entrepreneurship , (Graduate Programme) Final Thesis
Publication date2013
Number of pages200