From tensions to synergy: Causation and effectuation in the process of venture creation

Abstract

This article examines previously neglected tensions between causation and effectuation in the process of new venture creation. We studied 41 episodes of new venture creation by entrepreneurs in Finland and Denmark, who we followed applying the diary method.We reveal tense relations between the respective causation and effectuation principles at multiple levels, and identify the corresponding mechanisms for their resolution, which, in turn, lead to the synergy. This study enriches the effectuation research by offering a dynamic perspective on causation-effectuation interplay and categorizing three modes of their interaction, that is, separation, hybrid synergy, and tensions. Managerial Summary: Venture creation is a complex process that involves different decision-making logics. While combining the goal-driven logic of causation and non-goal driven logic of effectuation is essential for the success of a start-up, the road to their synergy can be paved with different tensions. Our study of 41 episodes of new venture creation by entrepreneurs in Finland and Denmark shows that these tensions can occur at the individual, organizational and inter-organizational levels. We also show four different mechanisms of how entrepreneurs can overcome these tensions within their ventures and in relations with other stakeholders.

Synergy of Effectuation and Causation: An Emotional Complexity Perspective

“…Recently, several empirical studies have shown the synergetic effect of causal and effectual logic on venture performance ( Smolka et al, 2018 ; Braun and Sieger, 2021 ; Galkina et al, 2021 ). However, we still know less about how we can get it.…”

“…Causation “takes a particular effect as given and focus on selecting between means to attain this effect” ( Sarasvathy, 2001 , p. 245), which is goal-driven and characteristic of “many-to-one mappings,” effectuation “takes a set of means as given and focus on selecting between possible effects that can be created with that set of means” ( Sarasvathy, 2001 , p. 245), which is non-goal or means driven and characteristic of “one-to-many mappings.” The former prefers to embark on the predictable aspects of an uncertain future, whereas the latter is controllable ( Galkina et al, 2021 ).…”

“…As “the condition of uncertainty is often not stable over time” ( Alvarez and Barney, 2005 , p. 789), the dynamics of the environment may influence the viability of goal-driven/causal logic or means-driven/effectual logic. Thus, the adoption of cognitive strategy of an entrepreneur is neither a single choice between effectuation and causation nor a linear trajectory of development from one to the other ( Galkina et al, 2021 ). An entrepreneur, who recognizes two decision logics as alternative cognitive strategies and adaptably identifies the most appropriate one, is more likely to achieve his entrepreneurial goals.…”

“…In her original works, Sarasvathy (2001) admitted that these two disparate decision logics are not mutually exclusive within an individual. Recently, investigators have observed that entrepreneurs often use causal and effectual combinations during their entrepreneurial process ( Berends et al, 2014 ; Galkina and Lundgren-Henriksson, 2017 ; Galkina et al, 2021 ). They also found that the simultaneous or alternate engagement of two decision logics could contribute to their improved opportunity generation ( Maine et al, 2015 ), business model innovation ( Reymen et al, 2017 ), product innovation ( Berends et al, 2014 ), and the venture performance ( Smolka et al, 2018 ; Yu et al, 2018 ).…”

“…Moreover, we drew from the emotional complexity theory and confirmed the importance of mixed/complex emotion to the metacognitive processes of entrepreneurs, linking the previously unconnected core constructs by theorizing about the underlying theoretical mechanism ( Shepherd and Patzelt, 2017 ). Finally, we advanced the emotional complexity literature by developing and empirically testing a novel theoretical link between emotional complexity and the selection of decision logic of an entrepreneur ( Galkina et al, 2021 ).…”