Effectuation and causation as decision-making strategies by nascent entrepreneurs in South Africa

Abstract

The study aimed to evaluate the influence of causation and effectuation decision making strategies on the performance of nascent entrepreneurship ventures in South Africa. The study utilised a cross-sectional, quantitative approach. The empirical study was composed of 75 independent samples that were obtained from nascent entrepreneurs in South Africa. The main findings of the study suggest an association between effectuation and venture performance. Evidence was also found to suggest a positive association between the effectuation sub-dimensions of affordable loss, pre-commitment and experimentation. There was, however, no association found between flexibility and venture performance. Contrary to the stated hypothesis, a positive relationship was found between causation and venture performance. Overall the study finds evidence to support the view that entrepreneurs employed both effectuation and causation logics with a certain level of success for the venture. The findings of the study indicate that venture performance was not necessarily influenced by the decision to utilise effectual or causal decision-making strategies. However, effectual decision-making strategies had a greater influence on venture performance when compared to causal decision-making strategies. The findings of the study provide evidence in support of the theoretical arguments put forward by Sarasvathy (2001), that effectuation has a positive impact on the performance of a new venture. The implication for entrepreneurs is that effectuation provides a different method that entrepreneurs can utilise in the formation of new ventures. Should entrepreneurs determine that the environment in which they are operating or the opportunities they are pursuing are characterised by high levels of uncertainty, effectuation is a possible alternative to causation. This research makes a contribution to the discourse about the suitability of effectuation as a decision-making logic that entrepreneurs can apply in emerging economies.