The impact of effectuation, causation, and resources on new venture performance: Novice versus expert entrepreneurs

Abstract

Effectuation theory offers new ways of understanding entrepreneurial decisions and it is opposed to the traditional, rational, and so-called causal approach. A significant portion of the effectuation literature is rooted in the idea of entrepreneurial experience and expertise, with conclusions suggesting that novice and expert entrepreneurs apply effectual and causal logics differently when making decisions about their ventures. Further, resources are seen as critical to deployment of effectual vs. causal behaviors. The main goal of this paper is thus to evaluate whether the roles of effectuation and causation in performance differ for experts and novices, and how these logics interact with resource availability. Based on data from a sample composed of 178 New Technology-Based Firms (NTBFs), our analyses show that causation seems to be determinant of firm performance in experts’ ventures only, whereas effectuation is relevant for both experts and novices. Moreover, the availability of resources seems to interact only with causation in their relationship to performance.