Strategy Process

PROCESS STUDY
AND
ENTREPRENEURSHIP
OUR TEAM

ABUBAKAR AHMAD
ANGGA TIRTA FANIA NAOMI H.
2306188153
2306188222 2306188361
AFTER THE VENTURE: THE REPRODUCTION AND
DESTRUCTION OF ENTREPRENEURIAL
OPPORTUNITY
MATTHEW S. WOOD and WILLIAM MCKINLEY
WHAT IS OPPORTUNITY

Opportunities as exogenous phenomena available for

‘discovery’ by enterprising individuals (Gaglio and Katz,
2001; Kirzner, 1979; Shane, 2003).

Opportunities are the product of a construction process

that involves stakeholders, whose collective action builds
markets (Alvarez, Barney, and Anderson, 2013; Mitchell et
al., 2012) and market niches (Luksha, 2008).
OPPORTUNITY DE-
OBJECTIFICATION
 INDIVIDUAL PREDICTORS OF
OPPORTUNITY DE-OBJECTIFICATION
 CONCLUSION

This article highlights the fact that enacted opportunity must be

continually maintained via positive consensus among stakeholders. If
consensus fails, the objectivity of the opportunity is undercut in a
process we have called opportunity de-objectification. As suggested by
the high death rate of new firms (Stubbart and Knight, 2006).
Many ventures do not last much beyond the very early enactment
stage, and the theory developed in this article may clarify some of the
reasons why. Most entrepreneurs are not cognitive or administrative
heroes and, therefore, they will have difficulty continually entraining
stakeholders in support of the entrepreneurial project.
Sustaining Actor Engagement During The
Opportunity Development Process

Yuliya Snihur,Eric Quintane,B. Sebastian Reiche

 RESEARCH
SUMMARY
RECENT ENTREPRENEURSHIP RESEARH HAS EXAMINED HOW
OPPORTUNITIES ARE DEVELOPED, HIGHLIGHTING THE ENGAGEMENT OF
EXTERNAL ACTORS. HOWEVER, WE KNOW LITTLE ABOUT HOW
ENTREPRENEURS SHOULD INTERACT WITH EXTERNAL ACTORS TO SUSTAIN
THEIR ENGAGEMENT. SINCE OPPORTUNITY DEVELOPMENT IS A PROCESS
THAT UNFOLDS OVER TIME, SUSTAINING ACTOR ENGAGEMENT IS CRITICAL
BECAUSE IT ENABLES CONTINUED FEEDBACK AND ACCESS TO ACTORS’
RESOURCES. WE PRESENT A PROCESS MODEL THAT EXPLAINS HOW
ENTREPRENEURS CAN SUSTAIN EXTERNAL ACTOR ENGAGEMENT THROUGH
TWO ITERATIVE PHASES: TRANSLATION AND TRANSFORMATION.
WE ALSO PROPOSE THAT ENTREPRENEURS CAN SUSTAIN ACTOR
ENGAGEMENT BY STRUCTURING THE TIMING OF INTERACTIONS AND BY
MODIFYING ACTORS’ PERCEPTIONS OF THE TIME AVAILABLE FOR NOVEL
OPPORTUNITY DEVELOPMENT.
 MANAGERIAL
SUMMARY
TO DEVELOP BUSINESS OPPORTUNITIES, ENTREPRENEURS REQUIRE
SUPPORT, FEEDBACK, AND OTHER RESOURCES FROM DIFFERENT GROUPS
OF INDIVIDUALS (ACTORS), SUCH AS CUSTOMERS, BUSINESS PARTNERS,
INVESTORS, AND REGULATORS. WE EXPLAIN HOW ENTREPRENEURS
SHOULD CONTINUE TO INTERACT WITH THESE ACTORS THROUGHOUT THE
DEVELOPMENT PERIOD TO SECURE SUSTAINED ACCESS TO RESOURCES.
ENTREPRENEURS NEED TO PRESENT THE BUSINESS OPPORTUNITY TO
ACTORS IN AN ENGAGING WAY, AND SUBSEQUENTLY INTEGRATE THE
FEEDBACK RECEIVED DURING DEVELOPMENT OF THE PROJECT. SUSTAINING
ENGAGEMENT FROM ACTORS INVOLVES AN ITERATIVE PROCESS THROUGH
WHICH THE BUSINESS OPPORTUNITY IS COMMUNICATED AND
TRANSFORMED. ENTREPRENEURS CAN INFLUENCE ACTORS’ ENGAGEMENT
BY CHOOSING HOW AND WHEN TO INTERACT WITH THEM. WE HIGHLIGHT
TIME AND ACTOR FEEDBACK AS IMPORTANT RESOURCES THAT CAN BE
USED BY SKILLFUL ENTREPRENEURS TO INCREASE THE ODDS OF
OPPORTUNITY DEVELOPMENT SUCCESS.
THE MODEL
 OPPORTUNITY DEVELOPMENT AS
INSTITUTED IN MARKET STRUCTURES
IN THIS PERSPECTIVE, OPPORTUNITIES HAVE TO ADHERE TO
SOCIETAL STANDARDS, AT LEAST TO SOME EXTENT (WELTER,
2011; ZAHRA AND WRIGHT, 2011). THIS MEANS THAT WHEN
ENTREPRENEURS INTRODUCE NOVEL PRODUCTS, SERVICES, OR
BUSINESS MODELS, THEY HAVE TO UNDERTAKE THE DIFFICULT
TASK OF ACQUIRING LEGITIMACY (ALDRICH AND FIOL, 1994;
SUCHMAN, 1995; TOST, 201). IN ORDER TO DO THIS,
ENTREPRENEURS PRESENT THE OPPORTUNITY TO ACTORS USING
LINGUISTIC TOOLS SUCH AS ANALOGIES AND METAPHORS
(CORNELISSEN AND CLARKE, 2010; SNIHUR, 2016), STORYTELLING
(LOUNSBURY AND GLYNN, 2001), OR VISUAL SYMBOLS (CLARKE,
2011).
 OPPORTUNITY DEVELOPMENT AS
ARTIFACT CREATION DURING THE
ENTREPRENEURIAL JOURNEY
WHEN OPPORTUNITY DEVELOPMENT IS CONSIDERED FROM THIS
PERSPECTIVE, A SLIGHTLY DIFFERENT VIEW EMERGES. FIRST, IN LINE
WITH TRANSLATION THEORY, THE CREATION OF AN ARTIFACT IMPLIES
AN ACTUAL DEVELOPMENT OF THE OPPORTUNITY OVER TIME, NOT
JUST MODIFICATION OF THE WAY IT IS PRESENTED. AN ARTIFACT IS
DEFINED AS SOMETHING MADE OR SHAPED THROUGH THE ‘ACTIONS
AND INTERACTIONS OF STAKEHOLDERS’ (VENKATARAMAN ET AL.,
2012: 26) THAT IS NOT LIMITED TO PHYSICAL OBJECTS (E.G., A WIND
TURBINE) BUT CAN ALSO INCLUDE A SERVICE, FIRM CAPABILITY, OR
BUSINESS MODEL (SELDEN AND FLETCHER, 2015).

FOR EXAMPLE, IN THEIR COMPARATIVE STUDY OF THE DEVELOPMENT

OF WIND TURBINES IN THE UNITEDSTATES AND DENMARK, GARUD AND
KARNØE (2003: 295) SHOW THAT THE CREATION OF INNOVATIVE
(TECHNOLOGICAL) ARTIFACTS INVOLVES MULTIPLE ACTORS WHO
‘GRADUALLY TRANSFORMED THE EMERGING PATH TO HIGHER
FUNCTIONALITIES.’
 OPPORTUNITY DEVELOPMENT AS A
SOCIAL LEARNING PROCESS
THE SOCIAL LEARNING PERSPECTIVE CONCEPTUALIZES OPPORTUNITY
DEVELOPMENT AS A PROCESS THAT INVOLVES EXTERNAL ACTORS AND
EMPHASIZES THE ENTREPRENEURIAL LEARNING THAT TAKES PLACE
WITHIN IT. DUTTA AND CROSSAN (2005) APPLY THE ORGANIZATIONAL
LEARNING FRAMEWORK DEVELOPED BY CROSSAN, LANE, AND WHITE
(1999) TO CHARACTERIZE OPPORTUNITY DEVELOPMENT THROUGH
FOUR MECHANISMS:
1. INTUITING, IS AN INTRA-INDIVIDUAL PROCESS
2. INTERPRETING,IMPLY LANGUAGE-BASED INTERACTIONS WITH
OTHER ACTORS
3. INTEGRATING, AND IMPLY LANGUAGE-BASED INTERACTIONS WITH
OTHER ACTORS
4. INSTITUTIONALIZING, BUILDING SHARED UNDERSTANDING THAT IS
LATER INSTITUTIONALIZED IN ORGANIZATIONAL ROUTINES.
 TRANSLATION: GAINING ACTOR
ENGAGEMENT
TRANSLATION (WHEN THE ENTREPRENEUR PRESENTS AND ADAPTS AN
OPPORTUNITY TO EXTERNAL ACTORS) IS A PREREQUISITE FOR ACTOR
ENGAGEMENT.
FIRST, TO INITIATE ENGAGEMENT, ENTREPRENEURS MAKE AN
OPPORTUNITY MORE COMPREHENSIBLE BY RELATING IT TO EXISTING
CONTENT AND CULTURAL ARTIFACTS RELEVANT TO THE ACTORS. THE
ENVIRONMENT INTOWHICH AN ENTREPRENEUR AIMS TO INTRODUCE
AN OPPORTUNITY IS TYPICALLY MADE UP OF NORMS,

SECOND, TRANSLATION HELPS ACTORS CHANGE THEIR EXPECTATIONS

OF AN OPPORTUNITY. TRANSLATION INVOLVES DESCRIBING POSSIBLE
FUTURE VERSIONS OF AN OPPORTUNITY (I.E., NOVEL PRODUCTS,
SERVICES,BUSINESS MODELS, ETC.)
 TRANSFORMATION: SUSTAINING ACTOR
ENGAGEMENT

ENTREPRENEURS GAIN ACTOR ENGAGEMENT DURING

TRANSLATION; SUSTAINING ACTOR ENGAGEMENT IS
CONTINGENT ON TRANSFORMING THE OPPORTUNITY
AS A RESULT OF ACTOR FEEDBACK. IF ACTOR
FEEDBACK IS IGNORED, ACTORS ARE MORE LIKELY TO
DISENGAGE FROM OPPORTUNITY DEVELOPMENT.

TRANSFORMATION IS THE PROCESS THROUGH WHICH

ENTREPRENEURS COMBINE (POSITIVE OR NEGATIVE)
ACTOR FEEDBACK WITH THE EXISTING FEATURES OF
AN OPPORTUNITY, DEVELOPING IT FURTHER.
 SUSTAINING ACTOR ENGAGEMENT
THROUGH THE ITERATION OF
TRANSLATION AND TRANSFORMATION
WHILE IT IS POSSIBLE FOR AN OPPORTUNITY TO BE DEVELOPED
THROUGH A SINGLE CYCLE OF TRANSLATION AND
TRANSFORMATION, IN MOST CASES BOTH OCCUR ITERATIVELY,
OFTEN IN A NONLINEAR WAY OVER TIME. CONSECUTIVE CYCLES
OF TRANSLATION AND TRANSFORMATION (FOR INSTANCE WITH
VENTURE CAPITALISTS OR CUSTOMERS) NOT ONLY HELP REFINE
THE OPPORTUNITY BASED ON ACTOR FEEDBACK, BUT ALSO
HELP SUSTAIN ACTOR ENGAGEMENT. THROUGH REPEATED
ITERATIONS, AN OPPORTUNITY CAN BE NUDGED CLOSER TO
WHAT THE ACTORS CONSIDER APPROPRIATE BY REDUCING THE
RELATIVE NOVELTY OF THE OPPORTUNITY WITH REGARDS TO
THE ACTORS AND BY DEVELOPING, OR EVEN ALTERING, ACTORS’
BELIEFS IN AND INTERPRETATIONS OF THE OPPORTUNITY.
 SUBJECTIVE PERCEPTION OF TIME AND
ACTOR ENGAGEMENT
WE ARGUE THAT ENTREPRENEURS CAN CHANGE ACTORS’
PERCEPTION OF THE TIME REMAINING (LONG OR SHORT) UNTIL
OPPORTUNITY IMPLEMENTATION, SUCH AS THE MANUFACTURING
OF A NEW PRODUCT OR THE LAUNCH OF A NEW BUSINESS
MODEL, IN ORDER TO FOSTER CONTINUED ENGAGEMENT. THAT
IS, THEY CAN USE ACTORS’ SUBJECTIVE PERCEPTION OF TIME AS
A STRATEGIC RESOURCE TO ACQUIRE VALUABLE FEEDBACK AND
ENGAGE ACTORS’ INTEREST, AND, IN THE BEST CASE, GENERATE
ACTORS’ COMMITMENT TO AN OPPORTUNITY.

INCREASING ACTORS’ SUBJECTIVE PERCEPTION OF THE TIME

AVAILABLE UNTIL THE END STATE OF THE DEVELOPMENT (E.G.,
THE LAUNCH OF THE NEW PRODUCT, SERVICE, OR BUSINESS
MODEL) INCREASES THE LIKELIHOOD OF SUSTAINING ACTOR
ENGAGEMENT WITH THE OPPORTUNITY DEVELOPMENT PROCESS.
 OBJECTIVE TIME AND ACTOR
ENGAGEMENT
ENTREPRENEURS CAN ALSO INFLUENCE OBJECTIVE (CLOCK) TIME
TO SUSTAIN ACTOR ENGAGEMENT. WE ARGUED EARLIER THAT
TRANSLATION AND TRANSFORMATION ARE BOTH TIME- AND
EFFORT-SENSITIVE PROCESSES. THE TIMING OF THESE PHASES
WITH DIFFERENT EXTERNAL ACTORS WILL BE IMPORTANT TO
SUSTAIN ACTOR ENGAGEMENT.

OPTIMAL PACING. PACING REFERS TO ‘HOW QUICKLY AN EVENT

UNFOLDS DURING A SERIES OF EVENTS OR DENSITY OF EVENTS PER
UNIT OF TIME’ (HUY, 2001: 605). IT HAS BEEN USED TO DISCUSS
THE TEMPORAL STRUCTURING OF INTERIM EVALUATION INSTANCES
THAT DIVIDE INNOVATION PROJECTS (SHEREMATA, 2000);
INCREASING ACTORS’ SUBJECTIVE PERCEPTION OF THE TIME
AVAILABLE UNTIL THE END STATE OF THE DEVELOPMENT (E.G., THE
LAUNCH OF THE NEW PRODUCT, SERVICE, OR BUSINESS MODEL)
INCREASES THE LIKELIHOOD OF SUSTAINING ACTOR ENGAGEMENT
WITH THE OPPORTUNITY DEVELOPMENT PROCESS.
 OPTIMAL PACING AND OPPORTUNITY
NOVELTY
THE TIMING OF ENGAGEMENT EVENTS WILL ALSO DEPEND ON THE
DEGREE OF OPPORTUNITY NOVELTY; MORE NOVEL OPPORTUNITIES
REQUIRE MORE DEVELOPMENT TO REDUCE INCONGRUITIES WITH
ACTORS. NOTE THAT WHILE OUR MODEL FOCUSES ON NOVEL
OPPORTUNITIES, SOME OPPORTUNITIES CAN BE PERCEIVED AS
MORE NOVEL THAN OTHERS (SEE, FOR EXAMPLE, THE CLASSIC
DISTINCTION BETWEEN RADICAL AND INCREMENTAL INNOVATIONS,
E.G., DAMANPOUR, 1991).

OPPORTUNITY NOVELTY MODERATES THE INVERTED U-SHAPED

RELATIONSHIP BETWEEN PACING AND SUSTAINED ACTOR
ENGAGEMENT SUCH THAT OPPORTUNITIES WITH HIGHER NOVELTY
WILL REQUIRE A SLOWER PACE OF TRANSLATION AND
TRANSFORMATION TO SUSTAIN ACTOR ENGAGEMENT.
Towards a Process Theory of Entrepreneurial
Ecosystems

Ben Spigel, Richard Harrison

 ENTREPRENEURIAL
ECOSYSTEMS
Ecosystems are a conceptual umbrella for the benefits and
resources produced by a cohesive, typically regional, community
of entrepreneurs and their supporters that help new high-
growth ventures form, survive, and expand.

According to the OECD (2014), an entrepreneurial ecosystem (EE) is a set

of interconnected entrepreneurial actors (both potential and existing),
organisations (other firms, venture capital, for example), institutions
(universities) and business processes (e.g., the entrepreneurial birth rate)
that formally and informally come together to connect, mediate and
govern performance within the local entrepreneurial environment.
TRANSFORMATION OF ENTREPRENEURIAL ECOSYSTEM
REPRESENTATIVE SCHEMATIC OF ECOSYSTEM TYPES
DIFFRENCES BETWEEN ENTREPRENEURIAL ECOSYSTEMS
AND CLUSTER/RIS THEORY
 ECOSYSTEMS, POLICY, AND PROSPERITY

The largest policy challenge of EE is how entrepreneurs and the state

can support the development of a strong, well-functioning
entrepreneurial ecosystem. Most important of these is a localized culture
that and encourages risk-taking, network development, trust, and
learning (Argote and Miron-Spektor 2011).

From an ecosystems perspective, the proper role of the state is to

cultivate the entrepreneurial community and culture that will eventually
help to produce and reproduce these resources rather than trying to
create them from scratch.

From an ecosystem-based policy view, instead of trying to outright

increase the number of new firms created through public investment,
the state might take on a less direct role by supporting community
dealmakers in their efforts to create denser networks between
entrepreneurs, supporting forums and events for entrepreneurs to meet,
and helping actors in the ecosystems identify the challenges they are
facing and seeking to build consensus around how to address them.
 Entrepreneurial firms grow up:
Board undervaluation, board
evolution & firm
performance in newly public firms

Sam Garg | Qiang John Li | Jason

D. Shaw
When a company goes IPO, a lot of changes happen to its BOD

For example, an official & thorough board leadership structure

is put in place.

When there is more board undervaluation, there is more

director turnover and, in the years that follow, new directors
with lower qualifications.

Director turnover & the qualifications of new directors play a

role in how undervaluing the board affects the success of the
company.

But these two factors have opposite effects on performance:

Lower new director qualifications are linked to higher firm
performance, while higher director turnover is linked to lower
firm performance.
How should a privately owned business set up its BOD
when it goes public?

Having more directors leave their jobs is linked to higher

board undervaluation.

This means that the avg degree to which directors'

qualifications based on generally accepted criteria for
board leadership are not properly reflected in their
appointments to the board chair & committee

These two evolutionary paths have opposite effects on

performance:
When directors leave, performance goes down, but
when fewer people meet the standards to become
directors, performance goes up
GARG ET AL. (2018),
OUR MAIN IDEA IS
THAT WHEN A BOARD BASELINE HYPOTHESIS:
DOESN'T THINK A BOARD
UNDERVALUATION
COMPANY IS WORTH POSITIVELY RELATES TO
WHAT IT'S WORTH, DIRECTOR TURNOVER.
THERE IS MORE
DIRECTOR CHANGE
““I was approached out of the blue. Frankly, I am not sure why I was selected. I
am glad I have the opportunity. Certainly there are many others who are more
qualified than me. But, I think one of the key reasons I was chosen is that I am
not a threat to the board members.”

Board recruitment is one of the murkiest. "

Very little process, very little transparency, much less than for the CEO positions.
If you want to bring on somebody as a director, it is easy to rationalize the candidate.”

Hypothesis (H1).
Board undervaluation negatively relates to new directors' qualifications.
Hypothesis (H2a). Hypothesis (H2b).

Director turnover New directors' qualifications

mediates the relationship
mediate the relationship
between board
undervaluation & firm between board undervaluation
performance such that & firm performance such that
higher board higher board undervaluation is
undervaluation is associated with lower new
associated with higher
director's qualifications & lower
director turnover,
& higher director turnover new director's qualifications
is associated with lower are associated with higher firm
firm performance. performance
Board Undervaluation Director Turnover Firm Performance

Director Qualification
THE TERMS OF A DIRECTOR'S
POSITION CAN END AT
DIFFERENT TIMES, BUT THEY
USUALLY DO SO EVERY 1, 2,
OR 3 YEARS.
IF A DIRECTOR GOES BEFORE
THE END OF THEIR TERM, IT'S
MORE LIKELY THAT THEY ARE
UNHAPPY AND ARE LEAVING
ON THEIR OWN.
WHEN BOARDS UNDERVALUE A COMPANY, IT LEADS
TO NEW DIRECTORS WHO AREN'T VERY QUALIFIED.

HOWEVER, IT'S ALSO POSSIBLE THAT THIS IS

BECAUSE AFTER AN IPO, THE QUALIFICATIONS OF
NEW DIRECTORS WILL NATURALLY GO DOWN.

IN THE YEARS AFTER THE IPO, COMPANIES MAY NOT

NEED DIRECTORS WITH A LOT OF QUALIFICATIONS
TO LOOK GOOD.

THIS COULD BE BECAUSE OF THIS, OR BECAUSE

COMPANIES MAY WANT DIRECTORS WITH SPECIAL
SKILLS TO ADAPT TO CHANGES IN THE MARKET,
WHICH COULD MEAN LOWERING OVERALL
QUALIFICATIONS.
1. Board undervaluation is linked to more
director turnover and better standards for
new directors

2. A lower board value affects boards,

investors, and the rules set by the stock
market for the leadership structure of boards
 The evolution of vertical firm
boundaries in new high
technology ventures
by Niron Hashai and Ivo Zander
When starting a new high-tech business, managers who are
short on cash may want to outsource their R&D,
manufacturing, marketing, and sales work, but at first they
may not be able to.

This probably happens because these new businesses depend

on the founders' unspoken knowledge of new goods and how
to market them, and because uncertainty makes it hard to
sign contracts with outside partners.

Hiring these kinds of tasks becomes easier over time, mostly

for marketing & sales tasks, not so much for R&D.

New high-tech businesses that try out new goods &

businesses whose founders have experience in technology, on
the other hand, outsource more slowly
HYPOTHESIS 1: AMONG NEW HIGH
TECHNOLOGY VENTURES, THE
OUTSOURCING OF R&D PROCEEDS
AT A SLOWER PACE THAN THAT
OF MANUFACTURING AND
MARKETING AND SALES, WHILE
THE
OUTSOURCING OF MARKETING
AND SALES PROCEEDS AT THE
FASTEST PACE.
HYPOTHESIS 2B: THE
MODERATING EFFECT
OF TECHNOLOGICAL HYPOTHESIS 2A: THE
KNOWLEDGE GREATER THE DEGREE
EXPLORATION ON THE OF TECHNOLOGICAL
CONTRACTION OF KNOWLEDGE
NEW HIGH EXPLORATION IN NEW
TECHNOLOGY HIGH TECHNOLOGY
VENTURES’ VERTICAL VENTURES, THE
FIRM BOUNDARIES IS SLOWER THE
THE STRONGEST CONTRACTION OF
FOR R&D AND THE VERTICAL FIRM
WEAKEST FOR BOUNDARIES.
MARKETING AND
SALES.
HYPOTHESIS 3: FOUNDERS
WITH A TECHNOLOGICAL
BACKGROUND NEGATIVELY
AFFECT THE PACE OF
CONTRACTION OF NEW HIGH
TECHNOLOGY VENTURES’
VERTICAL BOUNDARIES,
WITH THE STRONGEST
EFFECT ON R&D.
Key Findings

1. Outsourcing 2. Heterogeneity 3. Founders' tacit 4. Slowdown in

knowledge outsourcing
Over time, the New high technology
outsourcing of R&D is ventures that engage New high technology The slowdown in the
slower than in knowledge ventures rely heavily pace of outsourcing is
outsourcing of exploration and those on founders' tacit the strongest for R&D
manufacturing, while whose founders have knowledge about new and the weakest for
outsourcing of strong technological products and how to marketing and sales
marketing and sales is backgrounds exhibit commercialize them,
the fastest slower vertical and uncertainty
boundary contraction makes it difficult to
reach contractual
agreements with
external partners
As time goes by, the outsourcing of
activities becomes increasingly
possible, especially for marketing
and sales activities, but less so for
R&D.

This research provides insights into

the dynamics of vertical firm
boundaries and their evolution in the
context of high technology ventures.
vertical firm
boundaries

vertical firm boundaries depend on the strategy of the

company and the nature of the business in which it
works. They can change over time as companies
adjust to new technologies and changes in the market.
Strategy Formation in
Entrepreneurial Settings:
Past Insights and Future
Directions

Timothy E. Ott, Kathleen

M. Eisenhardt, and
Christopher B. Bingham
why some businesses that are
run by entrepreneurs gain a
competitive edge and do well,
while others do not
 Key points

1. Strategy Formation by Doing 2. Strategy Formation by Thinking 3. Integration of Doing and

This approach refers to
entrepreneurs forming strategies
based on learning from their
experiences in business
environments. Entrepreneurs who
adopt this process prioritize taking
action and forming strategies based
on what they learn
This approach involves
conceptualizing a vision or
"blueprint" for the industry
ecosystem that specifies the
entrepreneur's own actions and
those of other market participants
Thinking
Recent work has blended the two
approaches, recognizing that
entrepreneurs often engage in both
activities simultaneously
1. Strategy Formation
by Doing

executives cannot predict the future in entrepreneurial Trial-and-error

settings because they are characterized by high Bricolage
velocity – i.e., novel, unpredictable, ambiguous, and improvisation
fast-paced markets Experimentation
(Eisenhardt, 1989)
 2. Strategy Formation by Thinking

even though executives in entrepreneurial

settings cannot predict the future, they form
better strategies when they have a holistic Mental models
understanding of opportunities, markets, analogies
and their own firms identity
(Barr, Stimpert and Huff,
1992; Gary and Wood, 2011)
3. Integration of Doing and Thinking

Group focused on strategy
formation by doing (action) and
learning from experience gives us
a lot of information about how
executives gradually come up
with strategies by using learning
processes,
Group focused on strategy
formation by thinking (cognition)
and getting a full picture, gives us
information about how
executives understand their
strategies as a whole by using
cognitive structures.
Entrepreneurial settings are
characterized by uncertainty and
rapid changes in the business
environment.
This can make it challenging for
entrepreneurs to formulate
strategies that are robust and
adaptable to changing
circumstances
 CAUSATION
AND
EFFECTUATION
Causation and Effectuation: Toward a Theoretical Shift from
Economic Inevitability to Entrepreneurial Contingency
Saras D. Sarasvathy (2001)
2 WAYS OF COOKING
DEFINITION
Effectuation processes take a
Causation processes take a
set of means as given and focus
particular effect as given and
on selecting between possible
focus on selecting between
effects that can be created with
means to create that effect.
that set of means.
 THOUGHT EXPERIMENT:
CURRY IN A HURRY

Causation

[imaginary] Curry in a Hurry is

a restaurant with a new twist
(Indian fast food section).

They used STP (marketing)

process (segmentation,
targeting, and positioning).
 THOUGHT EXPERIMENT:
CURRY IN A HURRY

Effectuation

if our imaginary entrepreneur were to use processes of

effectuation to build their restaurant, she would have
to proceed in the opposite direction (note that
effectuation is suggested here as a viable and
descriptively valid alternative to the STP process-not as
a normatively superior one).
DECISION INVOLVING CAUSATION
1. Given goal to be achieved or a decision to be made (usually
well structured and specific)
2. A set of alternative means or causes (that can be generated
through the decision process)
3. Constraints on possible means (usually imposed by the
environment)
4. Criteria for selecting between the means (usually
maximization of expected return in terms of the
predetermined goal).
DECISION INVOLVING EFFECTUATION
Decision involving effectuation consists of:
1. a given set of means (that usually consists of relatively unalterable
characteristics/ circumstances of the decision maker)
2. a set of effects or possible operationalizations of generalized
aspirations (mostly generated through the decision process).
3. Constraints on (and opportunities for) possible effects (usually
imposed by the limited means as well as by the environment and its
contingencies),
4. Criteria for selecting between the effects (usually a predetermined
level of affordable loss or acceptable risk related to the given means)
(Sarasvathy, 2001)

Four principles that form
the core of a rudimentary
theory of effectuation:
Affordable loss rather than
expected return
Strategic alliances rather than
competitive analyses

Exploitation of contingencies rather than

exploitation of preexisting knowledge

Controlling an unpredictable future rather

than predicting an uncertain one
) ) ) ) ) ) ) ) )
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Understanding Dynamics of
Strategic Decision Making in
Venture Creation: A Process Study
of Effectuation and Causation
Isabelle Reymena , Petra Andriesb,c, Hans Berendsd , Rene Mauere.
Ute Stephanf , Elco van Burgd (2015)
 ABSTRACT
) ) ) ) ) ) ) ) )
) ) ) ) ) ) ) ) )
The process of new venture creation is characterized by the need to decide and take action in
the face of uncertainty. Especially in the context of technology-based ventures uncertainty is
substantial, posing difficulties for strategic decision-making based on prediction and
planning. As alternative, more flexible and adaptive decision-making logics are being
advanced. This study draws upon effectuation and causation as examples of planning-based
and flexible decision-making logics, and investigates dynamics in the use of both logics. The
study applies a longitudinal process research approach to investigate strategic decision-
making in new venture creation over time. Combining qualitative and quantitative methods,
we analyze 385 decision events across nine technology-based ventures. Our observations
suggest a hybrid perspective on strategic decision-making, demonstrating how effectuation
and causation logics are combined, and how entrepreneurs’ emphasis on these logics shifts
and re-shifts over time. From our data, we induce a dynamic model which extends the
literature on strategic decision-making in venture creation, illustrating how external and
venture conditions - including not only uncertainty but also resource position and stakeholder
pressure - lead to changes in venture scope, and thereby to shifts in the use of decision-
making logics.
) ) ) ) ) ) ) ) )
) ) ) ) ) ) ) ) )
HYBRID DECISION-MAKING LOGIC

The findings indicate that entrepreneurial decision-making is most

commonly following a ‘hybrid’ logic that contains and combines elements of
both effectuation and causation.

Effectual and causal logics are at work simultaneously (Dew et al., 2011), and
contrast with studies treating effectuation and causation as mutually
exclusive, opposing logics (e.g., Brettel et al., 2012; Dew et al., 2009).
) ) ) ) ) ) ) ) ) Discussion
) ) ) ) ) ) ) ) )

We find that strategic Second, our findings –synthesized in our

entrepreneurial decision-making
follows a hybrid logic that uses both
effectuation and causation
simultaneously, while the dominant
logic dynamically shifts over time.
dynamic model of entrepreneurial
decision-making–support and elaborate
on the insights of Alvarez and Barney
(2005) regarding the context-
dependence of entrepreneurial decision-
making for venture creation.
) ) ) ) ) ) ) ) )
) ) ) ) ) ) ) ) )
CONCLUSION
We extend research on decision-making under uncertainty as
an important element in the organizing process of
entrepreneurial firms (Alvarez and Barney, 2005).
By studying patterns in ventures’ effectual and causal
decision-making in-depth and over time, we find that
entrepreneurs typically employ hybrid decision-making
logics, and shift from one dominant decision-making logic to
the other.
We explain these shifts, highlighting the intermediary role of
‘venture scoping’.
) ) ) ) ) ) ) ) )
) ) ) ) ) ) ) ) )
CONCLUSION

This study enrich the understanding of

conditions influencing the use of decision-
making logics, identifying venture resource
position, and stakeholder pressure in addition to
uncertainty as drivers of venture scoping
Emotions are a critical but often
unacknowledged part of entrepreneurial
decision-making.
Whi
ch m
Grou atte
We focus on the influence of group fear and p fea rs m
entr r ver ore?
epre sus h
group hope because, compared to other neur ope
of co i al esc in
emotions, fear and hope are more associated Tori mm alat
Y. Hu itme ion
Soui ang nt
with uncertainty (Chew & Ho, 1994; taris Vang
Siga
l G. B elis
Loewenstein, Weber, Hsee, & Welch, 2001; 2017 arsa
de
Lopes, 1987), which is inherent to the decision
to escalate commitment to a venture.
THE CONCEPTUAL MODEL
People can and do feel emotions simultaneously (Berrios, Totterdell,
& Kellett, 2015; Larsen & McGraw, 2011).
Which emotion will have a stronger influence on a team's decision to
escalate commitment to a currently failing venture or terminate the
venture, group fear, or group hope?

Hypothesis 1a: The relationship between group fear and terminating a

currently failing venture will be stronger than the relationship between
group hope and escalating commitment to that venture.
Hypothesis 1b: The relationship between group hope and escalating Stay Optimistic!
commitment to a currently failing venture is stronger than the relationship
between group fear and terminating that venture
Hypothesis 2a: Group engagement will mediate the relationship between
group fear and terminating a currently failing venture versus escalating
commitment to that venture.
Hypothesis 2b: Group engagement will mediate the relationship between
group hope and escalating commitment to a currently failing venture
versus terminating that venture.
Hypothesis 3: Group friendship strength will intensify the relationship of
group fear and terminating a currently failing venture and the relationship
of group hope and further escalating commitment to that venture.
Using a longitudinal start-up simulation and based on data fro
66 teams across 569 decision-making rounds, this research
find that group

“hope trumps fear.”

The teams' level of hope—more than their fear—determined
whether they escalated their commitment and kept investing
resources into a currently failing venture rather than
terminating that venture.
PROBLEMISTIC SEARCH DISTANCE AND
ENTRE PRENE URIAL PERFO RMANC E
Ryan W. Angus
(2019)

This paper suggests that predicting the relationship

between search distance and subsequent performance
requires careful consideration of the benefits of both
nonlocal and local problemistic search.
 But, as the organization's initial
The level of an organization's past
performance rises to higher levels, the
performance negatively moderates the
benefits of moving to an average value
benefits of nonlocal search. (Gavetti &
search location through nonlocal search
Levinthal, 2000; Levinthal, 1997).
decrease in magnitude.
As an organization's initial performance
If the organization starts out in a higher
falls to lower levels, the benefits of
than average value search location,
moving to a higher value search location
nonlocal search may even have a negative
through nonlocal search increase.
effect on future performance.
Problemistic search distance

How much creative How far

organizations look entrepreneurial
for ways to solve groups should look
problems in order for answers to
to do better. problems
Key Aspects
Performance
The effectiveness and efficiency
with which entrepreneurial
organizations can improve their
performance by searching for
and implementing solutions to
problems
Search theory
The theoretical framework that predicts a
negative relationship between past
performance and subsequent search
distance, suggesting that entrepreneurial
organizations may be more likely to
search for solutions when their past
performance is poor
The moderating effect Methods
of past performance
Data were collected on nearly the entire contents
Researchers argue that organization's level of past of the Google Play app Lorem from ipsum February
dolor sit
amet, consectetur
2015 -
performance increases, the less beneficial moving to September 2016.
adipiscing elit. Sed
non orci hendrerit
augue interdum
an average value search location through nonlocal The data set for this studylacinia
consists
dolor.
at egestas
Vivamus of all de novo
search becomes and the costlier it becomes for the elementum pulvinar
app development organizations
tempus. that entered the
organization to sacrifice valuable context-specific Google Play app platform by publishing one app
knowledge to do so. during the data collection period
The online supplemental appendices describe a
Hypothesis (H1). An organization's level of past 2 propensity score matching analysis that controls
for endogeneity on observables and a fuzzy
performance moderates the relationship between
regression discontinuity analysis that seeks to
problemistic search distance and subsequent
establish causality among a subsample of this
performance: as the organization's past performance
Dependent Variable: app two installs (measures
increases, the less beneficial (and potentially more
the logged number of installs a developer's second
harmful) increasing search distance becomes
app had generated at the time it was last
observed)
 - Past performance moderates the relationship between
search distance and subsequent performance

- As past performance increases, the less beneficial (and

potentially more harmful) nonlocal search becomes

- The highest second app performance outcomes are

Key points associated with moderate search distances that fall

between local and nonlocal extremes

- Nonlocal search is rarely associated with higher second

app installs than local or moderate search

- Moderate search is associated with up to 6.04 times

higher expected second app installs than nonlocal and
local search
FINDINGS

The interactions between search

My
favorite distance and app one installs (β =
food 0.49, p = .01) as well as between
search distance squared and app one
installs (β = −0.63, p = .00) are both
significant and in the expected
direction
 DISCUSSION

This study seeks to extend problemistic search

This hypothesis is empirically tested
theory (Cyert & March, 1963) by asking the
using data from the Google Play app
deceptively simple question of how far
My store.
entrepreneurial organizations should search in favorite
Despite the apparent superiority of
response to negative performance feedback. food
moderate to nonlocal search, the app
As previously mentioned, develops a hypothesis
developers in this study were far
suggesting that there is a curvilinear, inverted-u
more likely to choose nonlocal search
shaped relationship between problemistic search
in response to poor initial
distance and future performance—and that an
performance.
organization's level of prior performance
negatively moderates this relationship.
 DISCUSSION

Pivoting logic suggests that nonlocal

This study suggests that predicting the
problemistic search (i.e., radical pivoting) is
relationship between search distance and
beneficial to organizations seeking to improve
subsequent performance requires careful
their chances for success.
consideration of the benefits of both nonlocal
Implications for the new product development
and local problemistic search
literature (Maidique & Zirger, 1985; Tyler &
On the one hand, the NK search literature
Caner, 2016).
suggests that searching locally after an
This paper shows that developers
organization fails to discover a valuable peak at
overwhelmingly chose to pursue a suboptimal
its first search location does not make sense in
nonlocal search strategy rather than a
rugged, complex landscapes (Gavetti &
potentially more beneficial moderate search
Levinthal, 2000; Levinthal, 1997)
strategy.
 LIMITATIONS

It is challenging to make causal claims regarding the negative effect

of problemistic search distance on
My future performance
favorite
The study cannot directly observe the
food actual development time of an
app
The study intentionally excludes the examination of the search
behavior of established app development organizations in favor of
nascent, entrepreneurial organizations
Need more work in different empirical contexts.
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