Research Papers

Title sort ascending Status Journal Authors Abstract

Worldmaking

2012 Published
  • Saras D Sarasvathy

This chapter outlines a general framework for studying the entrepreneurial method. Simply put, what the scientific method has afforded us in terms of understanding the actual world we live in, the entrepreneurial method enables us in terms of making new ones.

MAZES without minotaurs: Herbert Simon

2012 Published
  • Saras D Sarasvathy

In this essay, I remember Herbert Simon as author of Sciences of the Artificial and my thesis advisor and collaborator. Even for a lifetime of deep insights into human behavior and its role in shaping the world we live in, Simons insight into the need for a whole new class of sciences is an astonishing one.

Failing firms and successful entrepreneurs: Serial entrepreneurship as a temporal portfolio.

2012 Published
  • Saras D Sarasvathy
  • Anil Menon

A detailed review of four literatures, namely, (1) Industrial organization, (2) Population ecology, (3) Labor and micro economics, and (4) Entrepreneurship, suggests that entrepreneurial performance is almost always confounded with firm performance. Serial entrepreneurial experience is at best seen as one of the inputs into firm performance.

Without judgment: An empirically-based entrepreneurial theory of the firm.

2011 Published
  • Saras D Sarasvathy
  • Nicholas Dew

Austrian ideas about the firm have grown rather naturally out of the central body of Austrian thought with its focus on entrepreneurship, subjectivism and market processes. In this paper we critically evaluate some Austrian ideas on the firm, with particular attention to the concept of entrepreneurial judgment.

Entrepreneurship as Method: Open Questions for an Entrepreneurial Future

2011 Published Entrepreneurship Theory and Practice
  • Saras D. Sarasvathy
  • Sankaran Venkataraman

In this essay, we outline the provocative argument that in the realm of human affairs there exists an “entrepreneurial method” analogous to the scientific method spelled out by Francis Bacon and others with regard to the natural realm.

On the Entrepreneurial Genesis of New Markets: Effectual Transformations Versus Causal Search

2011 Published Journal of Evolutionary Economics
  • Nicholas Dew
  • Stuart Read
  • Saras D. Sarasvathy
  • Robert Wiltbank

The generation of new markets is an emerging area of interest among researchers working in the traditions of evolutionary economics. And true to those traditions, the current study incorporates empirical evidence from psychology and cognitive science to develop micro-foundations for evolutionary theories of new market generation.

What Effectuation is Not: Further Development of an Alternative to Rational Choice

2010 Published Academy of Management Conference
  • Robert E. Wiltbank
  • Saras D. Sarasvathy

The theory of effectual reasoning advanced by Sarasvathy (2001a) proposes a decision process employed by entrepreneurs that differs substantially from the rational choice paradigm. This paper seeks to clarify this distinctive point of view on entrepreneurial decision-making by pointing to nine things that effectuation is not.

Three Views of Entrepreneurial Opportunity

2010 Published
  • Saras D Sarasvathy
  • S.Ramakrishna Velamuri
  • Nicholas Dew
  • Sankaran Venkataraman

Every invention engenders opportunities for the creation of several possible economic (as well as other types of socially significant) effects. In the foregoing sections we have examined three sets of views with regard to how these effects come to be.

Beyond hubris: How highly confident entrepreneurs rebound to venture again

2010 Published
  • Mathew L.A. Hayward
  • William R. Forster
  • Saras D. Sarasvathy
  • Barbara L. Fredrickson

This article outlines why highly confident entrepreneurs of focal ventures are better positioned to start and succeed with another venture; and therefore why overconfidence in one's capabilities functionally persists and pervades amongst entrepreneurs. By combining cognitive perspectives on confidence in decision making with Fredrickson's [Fredrickson, B.L. 1998.

The Coevolution of Institutional Entrepreneurship: A Tale of Two Theories

2010 Published Journal of Management
  • Desirée F. Pacheco
  • Jeffrey G. York
  • Thomas J. Dean
  • Saras D. Sarasvathy

This article provides a review and analysis of institutional entrepreneurship research with a focus on the emergence of this literature within two largely divergent streams: sociology-based institutional theory and economics-based institutional economics.

The entrepreneur–environment nexus: Uncertainty, innovation, and allocation

2010 Published Journal of Business Venturing
  • Jeffrey G. York
  • Sankaran Venkataraman

We build upon a recent stream of research that has proposed entrepreneurship as a solution to, rather than a cause of, environmental degradation. Our proposition is that under certain conditions entrepreneurs are likely to supplement, or surpass, the efforts of governments, NGOs and existing firms to achieve environmental sustainability.

Siding with the Angels - Business Angel Investing: Promising Outcomes and Effective Strategies

2009 Published NESTA / British Angels Business Association
  • Robert E. Wiltbank

After entrepreneurs develop an opportunity, and use up their own resources, they often turn to business angel investors for early investment to keep the venture growing. At this point in the development of new ventures the risk of failure is significant; many aspects of the business including customer relationships, pricing strategy, talent, and other key factors are quite unclear.

Prediction and Control Under Uncertainty: Outcomes in Angel Investing

2009 Published Journal of Business Venturing
  • Robert E. Wiltbank
  • Stuart Read
  • Nicholas Dew
  • Saras D. Sarasvathy

Venture investing plays an important role in entrepreneurship not only because financial resources are important to new ventures, but also because early investors help shape the ventures' managerial and strategic destiny.

Affordable Loss: Behavioral Economic Aspects of the Plunge Decision

2009 Published Strategic Entrepreneurship Journal
  • Nicholas Dew
  • Saras D. Sarasvathy
  • Stuart Read
  • Robert E. Wiltbank

Affordable loss involves decision makers estimating what they might be able to put at risk and determining what they are willing to lose in order to follow a course of action. Using the entrepreneur’s new venture plunge decision, this article combines insights from behavioral economics to develop a detailed analysis of the affordable loss heuristic.

Related Debates in Ethics and Entrepreneurship: Values, Opportunities and Contingency

2009 Published Journal of Business Ethics
  • Saras D Sarasvathy
  • R Edward Freeman
  • Susan S Harmeling

In this paper, we review two seemingly unrelated debates. In business ethics, the argument is about values: are they universal or emergent? In entrepreneurship, it is about opportunities – are they discovered or constructed? In reality, these debates are similar as they both overlook contingency. We draw insight from pragmatism to define contingency as possibility without necessity.

Marketing under uncertainty: The logic of an effectual approach.

2008 Published Journal of Marketing
  • Saras D Sarasvathy
  • Nicholas Dew
  • Robert Wiltbank
  • Stuart Read
  • Michael Song

How does one approach marketing in the face of uncertainty, where the product, the market and the traditional details involved in market research are unknowable ex ante?

Designing Organizations that Design Environments: Lessons from Entrepreneurial Expertise

2008 Published
  • Saras D Sarasvathy
  • Stuart Read
  • Nicholas Dew

Entrepreneurship has traditionally been viewed as an individual characteristic. Besides investigating personality traits and attributes, studies have examined gender differences (Carter, Gartner, Shaver, & J., 2003), risk aversion (Miner, Smith, & Bracker, 1994) and even sociopathy as possible traits or characteristics of entrepreneurs (Winslow & Solomon, 1987).

Immortal Firms in Mortal Markets? An Entrepreneurial Perspective on the Innovator’s Dilemma.

2008 Published
  • Saras D Sarasvathy
  • Nicholas Dew

“The Innovators’ Dilemma” consists in the fact that by doing the right thing – i.e., listening to current customers, leading firms often end up losing their markets to upstart newcomers. Therefore, understanding how entrepreneurs successfully create such upstart firms and new markets ought to have direct implications for strategic management theorizing about this dilemma.

Opportunities as Existing and Created: A Study of Entrepreneurs in the Swedish Mobile Internet Industry

2007 Published Journal of Enterprising Culture
  • Henrik Berglund

The notion of opportunities is fast becoming a central theme in the field of entrepreneurship research. As part of this growing interest, the ontological status of opportunities has been scrutinized with researchers tending to view them as either objectively existing or socially created.

Returns to Angels In Groups

2007 Published
  • Robert E. Wiltbank
  • Warren Boeker

Entrepreneurs and investors regularly wonder what the returns are in angel investing. The completion of this research project provides robust data on this subject that has never before been available. Our findings in this study are based on the largest data set of accredited angel investors collected to date, with information on exits from 539 angels.

Innovations, stakeholders and entrepreneurship.

2007 Published Journal of Business Ethics
  • Saras D Sarasvathy
  • Nicholas Dew

modern societies entrepreneurship and innovation are widely seen as key sources of economic growth and welfare increases. Yet entrepreneurial innovation has also meant losses and hardships for some members of society: it is destructive of some stakeholders wellbeing even as it creates new wellbeing among other stakeholders.

What to do next? The case for non-predictive strategy.

2006 Published
  • Saras D Sarasvathy
  • Stuart Read
  • Robert Wiltbank

Two prescriptions dominate the topic of what firms should do next in uncertain situations:planning approaches and adaptive approaches. These differ primarily on the appropriate roleof prediction in the decision process. Prediction is a central issue in strategy making owing tothe presumption that what can be predicted can be controlled.

Optimal Inertia: When organizations should fail

2006 Published
  • Saras D Sarasvathy
  • Nicholas Dew
  • Brent Goldfarb

We challenge the premise that the CEO’s job is to keep the corporation alive and thriving at all costs and under all circumstances. We briefly review the differing normative views of strategic management theorists and organizational theorists about organizational inertia.

Entrepreneurial logics for a technology of foolishness

2005 Published
  • Saras D Sarasvathy
  • Nicholas Dew

Several years ago Professor March pointed out that rational choice involves two guesses, a guess about uncertain future consequences and a guess about uncertain future preferences, and called for the development of a technology of foolishness to complement the technologies of intelligence that have been developed to improve the first guess.

New market creation as transformation.

2005 Published
  • Saras D Sarasvathy
  • Nicholas Dew

Is newmarket creation a search and selection process within the theoretical space of all possible markets? Or is it the outcome of a process of transformation of extant realities into new possibilities? In this article we consider new market creation as a process involving a new network of stakeholders.

Investment Practices and Outcomes of Informal Venture Investors

2005 Published Venture Capital: International Journal of Entrepreneurial Finance
  • Robert E. Wiltbank

This study explores a model of venture investing developed from the literature on formal venture capital research in the setting of angel investing in the United States. The model explores the role of venture stage, due diligence, deal flow, co-investing, and post investment participation on the distribution of returns to angel investors.

The Role of Prediction in New Venture Investing

2005 Working
  • Robert E. Wiltbank
  • Richard Sudek

Early stage investors openly discount/ignore the predictions that entrepreneurs show in their business plans as they pitch to investors. At the same time, many predictions about the venture continue to anchor investor evaluations.

The questions we ask and the questions we care about.

2004 Published
  • Saras D Sarasvathy

Both history of science and creativity research have shown that reformulating the questions we ask can lead to breakthroughs more often than trying harder to search for more rigorous answers. In such a spirit of creative play, I suggest we throw away our obsession with dividing the world intoentrepreneurs and nonentrepreneurs and focus instead on categories within entrepreneurs.

Integrating evolution, cognition, and design: Extending ‘Simonian’ perspectives to strategic organization.

2004 Published Strategic Organization
  • Saras D Sarasvathy
  • Mie Augier

Several streams of research in strategic management and organizational theory build upon the early work of Herbert Simon. Yet, as content analyses of articles published in leading management journals show, key ideas from his later years are for the most part either neglected or misinterpreted.

When Markets are Grue

2004 Working Journal of Evolutionary Economics
  • Saras D. Sarasvathy
  • Nicholas Dew

Is new market creation a search and selection process within the theoretical space of all possible markets? Or is it the outcome of a process of transformation of extant realities into new possibilities? We draw upon Goodman’s (1983) Grue paradox to explain the dynamics of a new network of stakeholders.

The Economic Implications of Exaptation

2004 Published
  • Nicholas Dew
  • Saras D. Sarasvathy
  • Sankaran Venkataraman

Accounts of economic change recognize that markets create selective pressures for the adaptation of technologies in the direction of customer needs and production efficiencies. However, non-adaptational bases for technological change are rarely highlighted, despite their pervasiveness in the history of technical and economic change.

Integrating Cognition, Evolution, and Design: Extending Simonian Perspectives to Strategic Organization

2004 Published Strategic Organization
  • Mie Augier
  • Saras D. Sarasvathy

Several streams of research in strategic management and organizational theory build upon the early work of Herbert Simon, in particular, and the ideas of James March, Richard Cyert and the behavioral model developed by the Carnegie School in general.

THE ECONOMIC IMPLICATIONS OF EXAPTATION

2004 Published
  • Saras D Sarasvathy
  • S. Venkatraman
  • Nicholas Dew

Accounts of economic change recognize that markets create selective pressures for the adaptation of technologies in the direction of customer needs and production efficiencies. However, non-adaptational bases for technological change are rarely highlighted, despite their pervasiveness in the history of technical and economic change.

Constructing Corridors to Economic Primitives: Entrepreneurial Opportunities as Demand-side Artifacts

2004 Published Research on Management and Entrepreneurship
  • Saras D. Sarasvathy

The idea is to model entrepreneurial opportunities as pathways to the edifice of economic primitives such as preferences, demand functions, production functions, and so on -- things that economic theory typically takes as "given".

What makes entrepreneurs entrepreneurial

2004 Published
  • Saras D Sarasvathy

How good are you at putting together large jigsaw puzzles? If you can quickly begin to predict what the picture will look like and then fi t the pieces together, you have a pretty good idea what entrepreneurs do–at least, that is the prevailing myth about entrepreneurship.

The Questions We Ask and the Questions We Care About

2003 Working Journal of Business Venturing
  • Saras D. Sarasvathy

The questions we ask often prevent us from asking the questions we really care about. This paper examines some key questions in current research in entrepreneurship and reformulates them into issues that we actually care about investigating and understanding.

Management as a Science of the Artificial

2003 Published Journal of Economic Psychology
  • Mie Augier
  • Saras D. Sarasvathy

In some of his final papers on organization economics, Simon suggested building a new theoretical edifice of organizations and markets based on a “full-bodied” theory of the firm, as opposed to the “skeletal” view currently embraced by economics.

Founding Moral Reasoning on Evolutionary Psychology: A Critique and an Alternative

2003 Published Science and Business Ethics
  • Saras D. Sarasvathy

In this paper I develop a critique of the strong adaptationist view inherent in the work of Leda Cosmides and John Tooby, as presented at the Ruffin Lectures series in 2002. My critique proceeds in two stages.

Founding moral reasoning on evolutionary psychology: A critique and an alternative.

2003 Published
  • Saras D Sarasvathy

At the heart of economics is an ethical story. From Adam Smith’s invisible hand (Smith, 1976) to Vilfredo Pareto’s innovation on the notion of optimality (Pareto, 1980) and Amartya Sen’s basic capability equality (Sen, 1998), economists do indeed preach the ethics of creative freedom and allocative justice.

Entrepreneurship as a science of the artificial

2003 Published
  • Saras D Sarasvathy

This essay connects four key ideas from Herbert Simons ‘‘Sciences of the Artificial’’ to recent research on entrepreneurial expertise: (1) natural laws constrain but do not dictate our designs (2) we should seize every opportunity to avoid the use of prediction in design (3) locality and contingency govern the sciences of the artificial; and (4) near-decomposability is an essential feature

Founding moral reasoning on evolutionary psychology: A critique and an alternative.

2003 Published
  • Saras D Sarasvathy

In this paper I develop a critique of the strong adaptationist view inherent in the work of Leda Cosmides and John Tooby, as presented at the Ruffin Lectures series in 2002. My critique proceeds in two stages.

Effectual Networks: A Pre-commitment Approach to Bridging the Gap Between Opportunism and Trust

2003 Working Academy of Management Conference
  • Nicholas Dew
  • Saras D. Sarasvathy

One of the theoretical puzzles concerning how organizations and markets come to be has to do with our fundamental behavioral assumptions. While economic theories are built on assumptions of opportunism, organizational and sociological theories either look for existing structures of trust as ways to overcome opportunism, or emphasize the role of a third-party arbiter.

Entrepreneurship As a Science of the Artificial

2003 Published Journal of Economic Psychology
  • Saras D. Sarasvathy

This essay connects four key ideas from Herb Simon's "Sciences of the Artificial" to recent research on entrepreneurial expertise: (1) Natural laws constrain but do not dictate our designs; (2) We should seize every opportunity to avoid the use of prediction in design; (3) Locality and contingency govern the sciences of the artificial; and, (4) Near-decomposability is an essential f

Business Angel Network

2003 Published
  • Saras D Sarasvathy

Informal venture capital (VC) – i.e., angel investing -- is the largest single source of private equity capital in new venture development. Angel investors are so named because in the early 1900s wealthy individuals provided capital to help launch new theatrical productions.

Accounting for the Future: Psychological Aspects of Effectual Entrepreneurship

2003 Working Journal of Applied Psychology
  • Saras D. Sarasvathy
  • Nicholas Dew
  • Stuart Read
  • Robert E. Wiltbank

Recent attempts to study entrepreneurship as a form of expertise, rather than a collection of traits and abilities have led to the development of the theory of effectuation. Effectuation is a sequence of non-predictive strategies in dynamic problem-solving that is primarily means-driven, where goals emerge as a consequence of stakeholder commitments rather than vice versa.

Value Creation Through Entrepreneurship: Reconciling the Two Meanings of the Good Life

2003 Working Academy of Management Review
  • Saras D. Sarasvathy
  • Andrew C. Wicks

Ethicists and economists have always highlighted the tension between the individual and social meanings of the pursuit of the “good” life. Recently, entrepreneurship scholars too have acknowledged this as a key problem in value creation.

Making It Happen: Beyond Theories of the Firm to Theories of Firm Design

2002 Published Conference on Entrepreneurial Cognition
  • Saras D. Sarasvathy

Current theories of the firm fail to distinguish between firm and entrepreneur and provide no explanation for entrepreneurial success except in terms of firm success. Even in current theories of the entrepreneur (psychological and otherwise) he or she is entirely cast as a bundle of traits or behaviors or heuristics and biases that serve to explain firm performance.

Causation and Effectuation: Toward a theoretical shift from economic inevitability to entrepreneurial contingency.

2002 Published
  • Saras D Sarasvathy

In economics and management theories, scholars have traditionally assumed the existance of artifacts such as firms/organizations and markets.I argue that an explanation for the creation of such artifacts requires the notion of effectuation. Causation rests on a logic of prediction, effectuation on the logic of control.

Learning Strategies of Nascent Entrepreneurs

2002 Working University of Haifa
  • Benson Honig
  • Per Davidsson
  • Tomas Karlsson
  • Saras D. Sarasvathy

This research utilizes a longitudinal methodology to study the entrepreneurial learning strategies of a representative sample (n=171) of nascent entrepreneurs in Sweden. We examine Sarasvathy’s theory of effectuation with respect to six different learning strategies and their effect on the progression of start-up processes.

Selection and Return in Angel Investments

2002 Working Babson Conference
  • Robert E. Wiltbank
  • Saras D. Sarasvathy

In this paper, we argue that the decision processes used by angels and VCs differ in their cognitive content and overall logic, and that this difference impacts their returns differentially. More precisely, while VCs tend to use a causal approach based on predictive rationality, angels are more effectual and make their choices based on the logic of non-predictive control.

Simon on Altruism, Near Decomposability, and Design: Extensions on a Behavioral Theory of Strategic Management

2002 Working LINKS Conference Copenhagen
  • Mie Augier
  • Saras D. Sarasvathy

This paper develops a view of strategic management that is based on the ideas of Herbert Simon in particular, and insights from the behavioral theory of the firm in general. Building on certain well-received elements of his work in strategy, we add implications from his other (rather under-studied) work, especially on altruism, near-decomposability, and design.

The Essence of Strategic Leadership: Managing Human and Social Capital

2002 Published Journal of Leadership and Organizational Studies
  • Michael A. Hitt
  • R. Duane Ireland

A new type of strategic leadership is required to help firms successfully navigate the dynamic and uncertain environment in which they compete today. The strategic leadership needed in 21st century firms is involved with building company resources and capabilities with an emphasis on intangible human capital and social capital.

Failing Firms And Successful Entrepreneurs: Serial Entrepreneurship As A Simple Machine

2002 Published Management Science
  • Saras D. Sarasvathy
  • Anil Menon

A detailed review of four literatures, namely, (1) Industrial organization, (2) Population ecology, (3) Labor and micro economics, and (4) Entrepreneurship, suggests that entrepreneurial performance is almost always confounded with firm performance. Serial entrepreneurial experience is at best seen as one of the inputs into firm performance.

Immortal Firms in Mortal Markets? How Entrepreneurs Deal with "The Innovators' Dilemma"

2001 Working Strategic Management Journal
  • Nicholas Dew
  • Saras D. Sarasvathy

“The Innovators’ Dilemma” consists in the fact that by doing the right thing – i.e., listening to current customers, leading firms often end up losing their markets to upstart newcomers. Therefore, understanding how entrepreneurs successfully create such upstart firms and new markets ought to have direct implications for strategic management theorizing about this dilemma.

What Makes Entrepreneurs Entrepreneurial?

2001 Published Darden Business Publishing
  • Saras D. Sarasvathy

Saras's concise 9-pager introduction to effectuation. A key paper to download and read to grasp the foundations of effectuation.

Effectual reasoning in expert entrepreneurial decisions: Existence and bounds

2001 Published
  • Saras D Sarasvathy

Recent theorizing in entrepreneurship has proposed effectuation as a dominant decision model in entrepreneurial decision making.

Strategy and Entrepreneurship: Outlines of an untold story.

2001 Published
  • Saras D Sarasvathy
  • S. Venkatraman

In his book “Invention,” Professor Norbert Wiener (1993), commenting on the relative importance accorded to individuals and institutions in historical narratives of science and inventions, asks us to imagine Shakespeare’s “Romeo and Juliet” without either Romeo or the balcony. The story is just not the same.

Causation and Effectuation: Toward a Theoretical Shift From Economic Inevitability to Entrepreneurial Contingency

2001 Published Academy of Management Journal
  • Saras D. Sarasvathy

In economics and management theories, scholars have traditionally assumed the existence of artifacts such as firms/organizations and markets. It is argued that an explanation for the creation of such artifacts requires the notion of effectuation. Causation rests on a logic of prediction - effectuation on the logic of control.

Strategy and Entrepreneurship: Outlines of an Untold Story

2001 Published Handbook of Strategic Management
  • Saras D. Sarasvathy
  • Sankaran Venkataraman

In their 1994 book, Rumelt, Schendel, and Teece identify four fundamental issues that comprise a research agenda in strategic management: (1) How do firms behave? (2) Why are firms different? (3) What limits the scope of the firm?

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2001 Published
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Effectual Reasoning in Entrepreneurial Decision Making: Existence and Bounds

2001 Published Academy of Management Journal
  • Saras D. Sarasvathy

That entrepreneurs create firms is a simple fact. But that entrepreneurs often create firms in the absence of markets is an idea that is recently gaining ground with researchers (Shane & Venkataraman, 1999).

Effectuation in the Management of Knightian Uncertainty: Evidence From the RealNetworks Case

2001 Published Research on Management and Entrepreneurship
  • Saras D. Sarasvathy
  • Suresh Kotha

This study investigates how entrepreneurs in the Internet economy manage Knightian uncertainty during the early stages of the new venture creation process (Knight, 1921).

Entrepreneurship as Economics with Imagination

2001 Published Business Ethics Quarterly
  • Saras D. Sarasvathy

To date, economics has failed to develop a useful theory of entrepreneurship because of its inability to break out of the static equilibrium framework and the modeling of success/failure as a 0-1 variable. Entrepreneurship research also has not achieved this task due to its preoccupation with the quest for "the successful entrepreneur" and/or the successful firm.

Perceiving and Managing Business Risks: Differences Between Entrepreneurs and Bankers

1998 Working Journal of Economic Behavior and Organization
  • Saras D. Sarasvathy
  • Herbert A. Simon
  • Lester Lave

We compared entrepreneurs with bankers in their perception and management of a variety of risks. Problems included financial risk, risk to human life and health, and risk of a natural disaster. Cluster analysis and content analysis of think-aloud protocols revealed surprising details.

How do Firms Come to Be? Towards a Theory of the Entrepreneurial Process

1998 Published Frontiers of Entrepreneurship Research
  • Saras D. Sarasvathy

The paper presents a model of the pre-firm -- defined here as the entity that transforms an idea into a firm. The entrepreneur who undertakes the pre-firm process creates the firm through a set of entrepreneurial decisions that arise out of four interconnected decision domains.