The analysis of the impact of Causation and Effectuation approaches on decision-making of IT startups

2016

Olessya Vorontsova

This dissertation investigates the impact of two alternative ways of thinking: effectuation and causation logics on decision-making and strategic management in startup companies that operate in IT sector. Based upon the theory of effectuation introduced by Sarasvathy (2001), this study provides a critical examination of five effectual principles: bird-in-hand, affordable loss, patchwork quilt, lemonade and pilot-in-the-plane at the edge of their effect on new venture performance. Using a multiple case-study methodology, this study aims to provide an in-depth analysis of the following research issue of effectual reasoning deliberated through the primary data and, answers following research question How do entrepreneurs perceive the contribution of an effectuation logic in defining a viable and successful strategy when compared to a traditionalplanned or causal logic? The findings suggest that effectuation and causation logics are often combined to overcome startup’s top challenges throughout a lifecycle; while there are still some stages where adoption of effectuation reasoning might enhance startup success. We also provided a startup typology with regards to the level of favorability to effectual reasoning and opened a discussion towards the results and hypotheses of prior studies on effectuation and entrepreneurial expertise, market newness level. Overall, the theoretical insights derived from the process-and-context analysis of this study have important practical implications for entrepreneurs looking for adequate and efficient decision-making strategy.

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