The influence of an industry’s capital-intensity on the decision-making of entrepreneurs with regards to effectuation and causation: an empirical analysis

2016

Manuel Ernst

The concept of effectual and causal thinking in entrepreneurial decision-making has been an emerging field for theoretical and empirical considerations in the past 15 years. Since the original introduction by Sarasvathy (2001), literature has proven that different approaches of decision-making have been observed in different people, depending on both external (environmental) and internal (cognitive) influences. In this analysis, a distinct focus is set on the influence of financial risk in entrepreneurial decisions, whether entrepreneurs follow one specific decision-making logic when particularly exposed to questions regarding risk. This paper takes the idea that environmental factors affect an entrepreneur’s notion in decision-making and analyzes the particular influence of the industry in which the venture operates. Industries are distinguished by the capital that is required in order to enter them and to start with operational activities. The analysis is conducted with a sample of 69 German entrepreneurs than founded their companies not longer than five years ago. Within both capital-intensive and less capital-intensive industries, a clear propensity towards one specific decision-making approach could be identified; yet, the same approach for both industry types. A univocal tendency towards one logic within an industry type would lead to the assumption that the industry is influential, however, none of the examined industry types shows a considerably stronger tendency towards causation than the other. Therefore, the industry of a venture cannot be identified as the driving influence in decision-making processes. It is expected that other factors have an influence on the decision-making logic of an entrepreneur as well.

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