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Managing uncertainty in emerging economies: The interaction effects between causation and effectuation on firm performance

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  • Yu, Xiaoyu
  • Tao, Yida
  • Tao, Xiangming
  • Xia, Fan
  • Li, Yajie

Abstract

Causation and effectuation are acknowledged as two fundamental strategic decision-making logics that firms use to form strategies to cope with uncertainty. Using data collected from 312 software firms in an emerging economy, we explore the effects of causation and effectuation on firm performance. In addition, we investigate the contingent interaction effects between causation and effectuation on firm performance from the perspective of organizational ambidexterity. We find that (1) causation and effectuation have a positive interaction effect on firm performance when environmental uncertainty is (relatively) high, but have a negative interaction effect on firm performance when environmental uncertainty is (relatively) low; (2) causation has a positive effect on firm performance in emerging economies; and (3) effectuation has a positive effect on firm performance in emerging economies when environmental uncertainty is (relatively) high. Our findings suggest entrepreneurial firms in emerging economies use a combination of causation and effectuation in a more uncertain environment, and adopt causation as a priority in a less uncertain environment.

Suggested Citation

  • Yu, Xiaoyu & Tao, Yida & Tao, Xiangming & Xia, Fan & Li, Yajie, 2018. "Managing uncertainty in emerging economies: The interaction effects between causation and effectuation on firm performance," Technological Forecasting and Social Change, Elsevier, vol. 135(C), pages 121-131.
    • Handle: RePEc:eee:tefoso:v:135:y:2018:i:c:p:121-131
    DOI: 10.1016/j.techfore.2017.11.017
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    6. Peng, Xue Bing & Liu, Yue Ling & Jiao, Qi Qi & Feng, Xiao Bin & Zheng, Bei, 2020. "The nonlinear effect of effectuation and causation on new venture performance: The moderating effect of environmental uncertainty," Journal of Business Research, Elsevier, vol. 117(C), pages 112-123.
    7. Siriram, Rajenlall, 2022. "An innovative approach to overcoming technological challenges and improving firm performance in South Africa," Technology in Society, Elsevier, vol. 68(C).
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    9. Mumford, Jonathan Van & Zettinig, Peter, 2022. "Co-creation in effectuation processes: A stakeholder perspective on commitment reasoning," Journal of Business Venturing, Elsevier, vol. 37(4).
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