Theoretical framework for this thesis stresses two logics entrepreneurs used in their decision-making process that are causation and effectuation. Before illuminating the two logics, I use the following articles mentioning entrepreneurs’ decisions to outline what is decision is, why and how entrepreneurs make decisions in their daily business operation.
Decision-making process
Four articles below present entrepreneurial decision-making process:
“Differences between entrepreneurs and managers in large organizations: biases and heuristics in strategic decision-making” of Busenitz and Barney (1997) explores differences between entrepreneurs and managers in large organizations. The authors argue that biases and heuristics can be an efficient guide to decision-making under conditions of environmental uncertainty and complexity.
“Self-regulation and decision heuristics in entrepreneurial opportunity evaluation and exploitation” of Bryant (2007) explores self-regulation in heuristics decision making
“whereby individuals set goals and then direct their own thought and behaviour to achieve such goals” (Zeidner et al. 2000). The author adopts both qualitative and quantitative techniques to investigate complex cognitive phenomena in organizational contexts (Creswell et al 2003). The results suggest that self-regulation does indeed play a significant role in the use of decision heuristics by entrepreneurs.
“Entrepreneurial decision-making: new conceptual perspectives” of Winnaar and Scholtz (2019) provides a more inclusive mechanism for the study of how entrepreneurs make decisions, with a more holistic approach to be utilized in their respective fields.
“Decision and design heuristics in the context of entrepreneurial uncertainties” of Gilbert-Saad et al. (2018) proposes a more realistic framework to explain the strategic use of heuristics. The authors prove distinction between decision and design heuristics; and argue that useful heuristics follow inherently distinct mechanism under absolute uncertainty.
And one e-book “Business decision making: streamlining the process for more effective results” is published by Frankl in the year 2015. This book is a good reference to learn about heuristics-based decision-making model.
Causation and effectuation logics
The article “Causation and effectuation: Toward a theoretical shift from economic inevitability to entrepreneurial contingency” written by Sarasvathy in 2001 is a relatively rigorous research. She utilizes a grounded theory methodology to identify the constructs of causation and effectuation. It impresses me that the clarification of two concepts is vividly depicted through two different business models of an imaginary restaurant. The author is excellent at not only defining causation and effectuation processes but also comparing differences the two logics. The research also sets a foundation for further studies on the two logics.
Another article “Causation and effectuation process: A validation study” of Chandler et al. published in 2009 continues developing two approaches evaluation from the original study of Sarasvathy. The research has investigated entrepreneurial decision making under conditions of uncertainty that hinges on dimensions of causation and effectuation constructs. The authors follow quantitative methodology that involves questionnaire and semi-structured interviews with entrepreneurs of young firms to collect data. The results have added pre-commitment dimension which is important to both processes. However, I think it is still not a significant contribution because the research has not clarified yet which approach those entrepreneurs tend to choose in the early stage of venture.
The study, How entrepreneurs think: why effectuation and effectual logic may be the key to successful enterprise entrepreneurship, by Duening et al. (2012) reports the application of effectual logic to key innovation process in the enterprise setting, herein to the new product development and the software development process. Discourse analysis is used to outline the authors’ general views on effectuation’s beneficial effect in innovation and there is no empirical evidence, which impose limitation on the study’s findings.
Nonetheless, this study is still helpful for me to perceive effectuation adoption in uncertain business environments that is akin to the gamification context in my thesis.
The next article “Effectuation, an emerging theory of entrepreneurship – towards a mature stage of the development” written by Matalamäki (2017) can be regarded as a critical research. Review is given based on prior studies that build and argue effectuation theory development (from the year 1998 to the end of the year 2016). The research contributes four main streams effectuation theory concerning innovation and product development, internationalization, effectuation and causation that can work simultaneously, and entrepreneurial expertise. This article provides me with a broad comprehension of effectual logic theory.
The research “Effectuation or causation: An fsQCA analysis of entrepreneurial passion, risk perception, and self-efficacy”, conducted by Stroe et al. in 2018, explores when and under what circumstances individual entrepreneurs’ passion, entrepreneurial self-efficacy, and risk perception lead to a causal or effectual decision-making logic. The study contributes and examines individual-level predictors of effectual and causal decision processes. I use this study as a source of reference to complement the theory section of two approaches.
The study “The role of entrepreneurial decision-making in opportunity creation and recognition” of Maine et al. (2015) investigates effectuation and causation as two opposing decision-making modes leading to opportunity creation and recognition. Case study method is employed to measure the decision-making processes of biotechnology entrepreneurs who has run their ventures for over ten years. The findings reveal that entrepreneurs recognize opportunities through either effectuation or a combination of effectuation and causation.
The study is well researched, informative, in conjunction with insightful discussion. The most interesting point I see is a proposed model of entrepreneurial decision-making in opportunity generation. The authors argue that the interplay between the environment and entrepreneurial decision-making modes describes when and how entrepreneurs adapt their responses and actions, and the role of external constraints explains the shift from effectuation to causation.
The article “Effectual versus predictive logics in entrepreneurial decision-making:
differences between experts and novice” of Dew et al. published in 2009 presents
differences in decision-making logics between expert and novice entrepreneurs. The authors apply Sarasvathy’s theoretical foundation along with quantitative methodology to evaluating differences in venture creation. In my view, the research is an exciting discovery since it proves that expert entrepreneurs tend to deploy effectuation, whereas novice entrepreneurs tend to deploy causation. Accordingly, I highly appreciate this research thanks to the new findings which also have a strong contribution to literature on two decision-making logics in particular and entrepreneurial expertise in general.
Additionally, I use this research as a source of reference to complete the theory section of the two logics.
The article “Effectuation logic in digital business model transformation: Insights from Japanese high-tech innovators”, studied by Baber et al. in 2019, examines how effectuation and causation logics are used in digital business models’ evolution. Studied firms are from Japan. The findings show the case firms’ evolution follows both effectuation and causation logics. Multiple case study is used to investigate incremental change combined with semi-structured interviews with the key decision-makers from the case firms. The study offers several implications for managers of digital businesses and contributes to the authors’ understanding of digital innovators’ business model changes based on various decisions when they move to new digital platforms.
In my opinion, this article presents rigorous research, especially the process of analyzing data. I highly appreciate the findings’ contribution to practical implication, apart from the purpose of doing the research. The article provides good reference to researching decision-making process in technological firms, and to a sample of analyzing decisions based on effectuation and causation reasoning. I believe that this article is well worth considering because the study content is similar to the context in my thesis.
The study, “Effectuation-causation: what happens in new product development?”, by Ortega et al. (2017) reports that in the context of new product development, causation reasoning is mainly adopted, in which planning plays an important role. On the contrary, as the level of innovation increases, the effectuation reasoning proves a more appropriate alternative. The study adopts action research, using documentary analysis, content analysis and alternate templates to analyze four new product development projects in food industry in Spain. The findings confirm appearance of both causation and effectuation
reasoning in all projects, effectuation emerges as dominant logic in the project linked to a greater degree of innovation and uncertainty. The study contributes to utilizing effectuation reasoning as a means engaging in projects that entail a higher degree of innovation, since it offers ways of dealing with the uncertainty linked to such projects.
I am fascinated by the research method used in the study because action research enables the authors to solve a practical business problem by engaging in the real projects, hence improvement in the impact and image of business research. The article offers good reference to linkage between innovation and the utilization of both decision-making logics.
The research “Effectuation and foreign market entry of entrepreneurial firms” of Chetty et al. (2015) explores decision-making process in the context of internationalization. The findings infer firms using causation logic are learning more rapidly
about foreign markets than the timid ones using effectuation logic and learning in
incremental steps. Both causation and effectuation logics are intertwined as alternate approach to foreign market selection and foreign market entry. A multiple case study is used for research method, including software firms from Finland and New Zealand.
The findings imply requirement for entrepreneurs’ flexibility in recognizing and creating opportunities as well as combining both the logics during internationalization.
I recognize that this is an interesting research as decision-making process using both the logics is discovered in the context of internationalization which goes through complex processes, risks, and entrepreneurs’ liability.
The study “Use of effectuation by established micro businesses: short-term gain, long-term pain?” of McGowan published 2020 investigate the efficacy and impact of effectual logic used by owner-managers of established micro firms when making buying decisions.
This study contributes to the utilization of effectual logic by a micro firm owner-manager in order to develop relationships with trusted suppliers. Additionally, the findings suggest effectuation positively promotes flexibility and reduces loss potential, thus positively affecting the price that the owner-manager is willing to pay. The study is carried out by semi-structured interviews with thematic analysis. The study provides a simple research method with a new discovery of relationship between effectuation and purchasing and selling activities.
Gamification
Gamification just accounts for a minor part in my thesis since it is considered as a context that drives entrepreneurs’ decision-making process. The following articles explain the concept, principles, effectiveness, and its application to healthcare and well-being domain in reality.
The article “Is it all a game? Understanding the principles of gamification” was published by Robson et al. in 2015. It presents the fundamentals of gamification and explains how it prompts managers to think about business practice in new and innovative ways. The authors display a framework of three gamification principles - mechanics, dynamics, and emotions to illustrate how gamified experiences can be created. An extended illustration of gamification is then provided with suggestion for future research and application opportunities.
“Why do people use gamification services” was researched by Hamari and Koivisto in 2015. The article aims to explore what benefits motivate people to use gamification services. Quantitative research is carried out in conjunction with questionnaire gathered from the users of a gamification service. the results of the study suggest that social and perceived usefulness aspects are more prone to positively reflect on attitude formation, whereas the perceived enjoyment show weak relationship with attitudes. Social factors are strongly associated with attitude, but show only a weak further association with the intention to continue the use of a gamification service.
“Gamification for health and wellbeing: A systematic review of the literature” was written by Johnson et al. in 2016. The study aims to assess the amount and quality of empirical support for the advantages and effectiveness of gamification applied to health and well-being. Critical research is used to identify advantages of gamification combine with systematic literature review of empirical studies on gamification for health and well-being. The evidence supports that gamification can have a positive impact in health and well-being, particularly for health behaviours. However, further research is needed to determine its effectiveness in the domain mentioned above.
The study “The use of gamification mechanics to increase employee and user engagement in participative healthcare services - A study of two cases” of Hammedi et al. published
in 2017 investigates the effects of gamification mechanics, or game design principles on user engagement in gamified healthcare services. The findings reveal that gamification mechanics produce four distinct experiential outcomes in patients: challenge, entertainment, social dynamics, and escapism. But patients’ age and the severity of their disease may affect the engagement. It is recommended that health professionals adapt alternative options to increase patient well-being in the case of progressively decreasing capabilities. Many approaches are used to conduct the research, comprising observations, two case studies, and desk materials.
The article “Gamification in Apps and Technologies for Improving Mental Health and Well-Being: Systematic Review” of Bakker et al. (2019) analyzes current applications of gamification for mental health and well-being. The findings report that gamification is being applied to a greater range of mental health and well-being domains compared with previous reviews and a greater diversity of gamification elements is being used, such as levels or progress feedback, points or scoring, rewards or prizes, narrative or theme and so forth.
The most commonly observed mental health and well-being domains are anxiety disorders and well-being, whereas the least commonly observed domains are conduct disorder and bipolar disorders. Systematic review in the literature between the years 2013 and 2018 is used for the study with gathering data from various secondary sources.
The article “Engagement, compliance and retention with a gamified online social networking physical activity intervention” of Ryan et al. (2017) examine user engagement, compliance and retention with Active Team - a gamified physical activity intervention delivered by via an online Facebook application. The findings reveal individual differences in engagement with Active Team, highlighting a need to tailor interventions to the target audience. The study employs a randomized controlled trial to test the efficacy of the Active Team intervention.
The study “Gamification of nutrition: A preliminary study on the impact of gamification on nutrition knowledge, attitude, and behaviour of adolescents in Nigeria” was researched by Ezezika et al. in 2018. This is a pilot study aiming to understand whether and how gamification of nutrition can have an impact on addressing the problem of unhealthy eating among Nigerian adolescents. The findings show gamifying nutrition
through a board game intervention positively affect the knowledge, attitude and behaviour of adolescents and provide and an environment conducive to healthy eating habits. Semi-structured focus groups were conducted with grade 11 and 12 students in three secondary schools in Abuja, Nigeria over a span of three to four months.
2.4 Synthesis of gamification-related business and two decision-making models from