TOPIC 5 - Effectuation (Yen Hau)

 Can effectuation also be used in companies? Or is it useful only for entrepreneurship?

Effectuation is a way of thinking and decision making that is based on how entrepreneurs is able to create future opportunities by taking action with resources at hand. Effectuation is not limited only for entrepreneurship and can be used in companies too even though its mainly applicable for entrepreneurs instead of companies. However, there is still merit to it such as getting to optimize resources by leveraging their resources at hand to create new opportunities and value for the company. They can start building and expand their business without relying on external resources to build from the ground up. It is also helpful due to the fact that is promotes an agile mindset, because by having quick decision grants the flexibility and ability to adapt in dynamic environments.

What is the key difference between effectuation and other approaches in entrepreneurship?

Effectuation emphasize on agile thinking and being able to adapt in dynamic environment to create new opportunities. Other approaches on the other hand, focuses on a specific goal in mind and relies on planning and logic reasoning before taking an approach. the key difference between them is effectuation is adaptive and are able to embrace to the uncertainty of a dynamic environment whereas other approaches relies on predicting the future with logical reasoning to perform their decisions based on the predicted outcome.

Are effectual approach and the tradition (casual) approach mutually exclusive?

Both of the approaches are not mutually exclusive as they are different types of mindset to approach something. But the combination of using both can certainly help in entrepreneur's journey.

Does effectuation mean: "not planning"?

Effectuation doesn't mean "not planning", it simply means one have to be flexible and adapt to the uncertainties in a dynamic environment and quickly switch up plans according to the current situation. The planning will not be as detailed as the traditional approach, but the versatility of effectuation can allow quick planning on the spot to mitigate risks.

Are Effectuation and Lean Startup compatible?

Effectuation and Lean Startup are compatible since they complement each other by promoting agile thinking. Lean startup aims to shorten a product development cycles and discover if its viable and effectuation can adapt quickly to different dilemma imposed during the product development cycle and rapidly come up with a solution to find if the product is viable. Both of them pair well together and bring a strong competitive advantage over others.


References:

Racat, M., Ricard, A. & Mauer, R. Effectuation and causation models: an integrative theoretical framework. Small Bus Econ 62, 879–893 (2024). https://doi.org/10.1007/s11187-023-00787-x

Gabriela, Catalina, Parra, Jorquera. (2022). Effectuation. 285-309. doi: 10.4324/9780429346033-19

Joshua, D., Wright. (2023). First Principles Entrepreneurial Effectuation. doi: 10.1109/temsmet56707.2023.10150055

Li, Y., Zou, B., Guo, F. et al. Academic entrepreneurs’ effectuation logic, role innovation, and academic entrepreneurship performance: an empirical study. Int Entrep Manag J 18, 49–72 (2022). https://doi.org/10.1007/s11365-020-00702-w

EDITED BY TAN YEN HAU (TP071849)

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