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

Author

Listed:
  • Xiaoyu Yu
  • Yida Tao
  • Xiangming Tao
  • Fan Xia

    (ESC [Rennes] - ESC Rennes School of Business)

  • Yajie Li

    (I2M - Institut de Mécanique et d'Ingénierie de Bordeaux - INRA - Institut National de la Recherche Agronomique - UB - Université de Bordeaux - ENSAM - École Nationale Supérieure d'Arts et Métiers - Arts et Métiers Sciences et Technologies - HESAM - HESAM Université - Communauté d'universités et d'établissements Hautes écoles Sorbonne Arts et métiers université - Institut Polytechnique de Bordeaux - CNRS - Centre National de la Recherche Scientifique)

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

  • Xiaoyu Yu & Yida Tao & Xiangming Tao & Fan Xia & Yajie Li, 2018. "Managing uncertainty in emerging economies: The interaction effects between causation and effectuation on firm performance," Post-Print hal-01989673, HAL.
    • Handle: RePEc:hal:journl:hal-01989673
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    Citations

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    Cited by:

    1. Siriram, Rajenlall, 2022. "An innovative approach to overcoming technological challenges and improving firm performance in South Africa," Technology in Society, Elsevier, vol. 68(C).
    2. Shirokova, Galina & Morris, Michael H. & Laskovaia, Anastasiia & Micelotta, Evelyn, 2021. "Effectuation and causation, firm performance, and the impact of institutions: A multi-country moderation analysis," Journal of Business Research, Elsevier, vol. 129(C), pages 169-182.
    3. Jessica Alzamora-Ruiz & María Fuentes-Fuentes & Myriam Martinez-Fiestas, 2021. "Together or separately? Direct and synergistic effects of Effectuation and Causation on innovation in technology-based SMEs," International Entrepreneurship and Management Journal, Springer, vol. 17(4), pages 1917-1943, December.
    4. 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).
    5. Donbesuur, Francis & Zahoor, Nadia & Boso, Nathaniel, 2022. "International network formation, home market institutional support and post-entry performance of international new ventures," International Business Review, Elsevier, vol. 31(3).
    6. Gholipour, Hassan F. & Tajaddini, Reza & Farzanegan, Mohammad Reza & Yam, Sharon, 2021. "Responses of REITs index and commercial property prices to economic uncertainties: A VAR analysis," Research in International Business and Finance, Elsevier, vol. 58(C).
    7. Gayoung Kim & Woo Jin Lee & Hoshik Shim, 2022. "Managerial Dilemmas and Entrepreneurial Challenges in the Ambidexterity of SMEs: A Systematic Review for Execution System," Sustainability, MDPI, vol. 14(24), pages 1-22, December.
    8. Tajaddini, Reza & Gholipour, Hassan F., 2021. "Economic uncertainty and business formation: A cross-country analysis," Journal of Business Venturing Insights, Elsevier, vol. 16(C).
    9. Kaur, Sarabjot & Gupta, Shivam & Singh, Sanjay Kumar & Perano, Mirko, 2019. "Organizational ambidexterity through global strategic partnerships: A cognitive computing perspective," Technological Forecasting and Social Change, Elsevier, vol. 145(C), pages 43-54.
    10. Quader, Syed Manzur, 2023. "The interplay between uncertainty, managerial decision making, and firm value: Evidence from Bangladesh," Journal of Economics and Business, Elsevier, vol. 123(C).
    11. 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.

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