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Effectual versus predictive logics in entrepreneurial decision-making: Differences between experts and novices

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  • Dew, Nicholas
  • Read, Stuart
  • Sarasvathy, Saras D.
  • Wiltbank, Robert
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    Abstract

    In support of theory, this study demonstrates that entrepreneurial experts frame decisions using an "effectual" logic (identify more potential markets, focus more on building the venture as a whole, pay less attention to predictive information, worry more about making do with resources on hand to invest only what they could afford to lose, and emphasize stitching together networks of partnerships); while novices use a "predictive frame" and tend to "go by the textbook." We asked 27 expert entrepreneurs and 37 MBA students to think aloud continuously as they solved typical decision-making problems in creating a new venture. Transcriptions were analyzed using methods from cognitive science. Results showed that expert entrepreneurs framed problems in a dramatically different way than MBA students.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Business Venturing.

    Volume (Year): 24 (2009)
    Issue (Month): 4 (July)
    Pages: 287-309

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    Handle: RePEc:eee:jbvent:v:24:y:2009:i:4:p:287-309

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    Web page: http://www.elsevier.com/locate/jbusvent

    Related research

    Keywords: Entrepreneur Framing Expertise Decision-making Effectuation;

    References

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    Cited by:
    1. Anthony Endres & Christine Woods, 2010. "Schumpeter’s ‘conduct model of the dynamic entrepreneur’: scope and distinctiveness," Journal of Evolutionary Economics, Springer, Springer, vol. 20(4), pages 583-607, August.
    2. Fischer, Eileen & Reuber, A. Rebecca, 2011. "Social interaction via new social media: (How) can interactions on Twitter affect effectual thinking and behavior?," Journal of Business Venturing, Elsevier, Elsevier, vol. 26(1), pages 1-18, January.
    3. Rainer Harms & Holger Schiele, 2012. "Antecedents and consequences of effectuation and causation in the international new venture creation process," Journal of International Entrepreneurship, Springer, Springer, vol. 10(2), pages 95-116, June.
    4. Berg, Nathan, 2014. "Success from satisficing and imitation: Entrepreneurs' location choice and implications of heuristics for local economic development," Journal of Business Research, Elsevier, Elsevier, vol. 67(8), pages 1700-1709.
    5. McKelvie, Alexander & Haynie, J. Michael & Gustavsson, Veronica, 2011. "Unpacking the uncertainty construct: Implications for entrepreneurial action," Journal of Business Venturing, Elsevier, Elsevier, vol. 26(3), pages 273-292, May.
    6. Chandler, Gaylen N. & DeTienne, Dawn R. & McKelvie, Alexander & Mumford, Troy V., 2011. "Causation and effectuation processes: A validation study," Journal of Business Venturing, Elsevier, Elsevier, vol. 26(3), pages 375-390, May.
    7. Uy, Marilyn A. & Foo, Maw-Der & Song, Zhaoli, 2013. "Joint effects of prior start-up experience and coping strategies on entrepreneurs’ psychological well-being," Journal of Business Venturing, Elsevier, Elsevier, vol. 28(5), pages 583-597.
    8. Burmeister-Lamp, Katrin & Lévesque, Moren & Schade, Christian, 2012. "Are entrepreneurs influenced by risk attitude, regulatory focus or both? An experiment on entrepreneurs' time allocation," Journal of Business Venturing, Elsevier, Elsevier, vol. 27(4), pages 456-476.
    9. Cassar, Gavin, 2014. "Industry and startup experience on entrepreneur forecast performance in new firms," Journal of Business Venturing, Elsevier, Elsevier, vol. 29(1), pages 137-151.
    10. Peter G. Klein & Joseph T. Mahoney & Anita McGahan & Christos N. Pitelis, 2010. "Toward a Theory of Public Entrepreneurship," DRUID Working Papers, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies 10-07, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    11. Jonas Gabrielsson & Diamanto Politis, 2011. "Career motives and entrepreneurial decision-making: examining preferences for causal and effectual logics in the early stage of new ventures," Small Business Economics, Springer, Springer, vol. 36(3), pages 281-298, April.
    12. Salisu Isyaku, 2014. "Mediating Effect of Uncertainty Avoidance on the Relationship between Entrepreneurial Talent and SMEs Performance in Nigeria: A Conceptual Analysis," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Scien, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 4(6), pages 368-383, June.

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