Effectuation: Mid-May Update
Stuart Read
We got a lot of good feedback from the last email, have updates on
research, teaching and events, opened a lively debate on the question
of the business plan, and on the strength of those bring you the
second effectuation update.
It is customary to bring you the above and then talk about next steps
and tasks going forward -- but we decided to be effectual and start
each monthly update by stating the "TASK OF THE MONTH" with details
following in the body of the update
TASK OF THE MONTH
----------------------------------
Please offer your ideas on what an effectual business plan might look
like and alternatives to the teaching the business plan at:
http://www.effectuation.org/instructor-area/teaching-questions/1192
(you must be logged in as an instructor to participate in this, so if
youve not yet registered please do that as well!)
BUSINESS PLAN
--------------------------
On the April 27 webconference call, a big topic was teaching
entrepreneurship and the business plan. Business plans are clearly a
good pedagogical tool, but less connected with actually getting a new
venture going. What are the alternatives? How to measure students?
What might an effectual business plan look like? Discussion was good,
but not conclusive, so we have done two things.
First, we posed the question at the Carey-Darden last weekend, and Ive
summarized inputs in the teaching forum:
http://www.effectuation.org/instructor-area/teaching-questions/1192
Second, a followup call. The objective of the call is to develop
concrete implementations of teaching entrepreneurship without using a
business plan in the strict/traditional sense. It will be Wednesday,
15 June at 7:00am Pacific, 10:00am Atlantic, 3:00pm London, 4:00pm
Europe and 7:30pm India: http://imd.adobeconnect.com/effectuation/
(Note: Adobe Connect supports many participants, but doesnt do well
with audio, so please put on a headset and join in). Also, dont wait
for the call to add concrete thoughts in the teaching forum area
(above)!
RESEARCH
------------------
There is lots of interesting work coming out related to effectuation,
so much that its hard to keep track. Highlighted in this note is "An
Investigation of the Implications for Effectuation of Social
Interaction Enabled by the Use of Social Media", just out in JBV and
online at: http://www.swinburne.edu.au/lib/ir/onlineconferences/agse2011/000094.pdf
TEACHING
----------------
We just finished a set of 5 YouTube videos on effectual principles.
Each is about 10 minutes, and covers a case (or variety of cases).
Collect the whole set at:
http://www.youtube.com/playlist?p=PL1CB958D2AB874C4C
Looking for hightech presentation tools? Sean Carr posted an
effectuation overview using Prezi (http://prezi.com/sptktnlq0sci/
effectuation-understanding-the-entrepreneurial-method/). The
entrepreneur in the video is Klaus Meyer, and Ive attached a brief on
him to this email.
EVENTS
------------
LYON. December 5th & 6th 2011 will be devoted to effectuation
Research, Teaching, and Food in Lyon France. Agenda goes up in June.
Save the date!
BCERC. Stuart will host an aperitif (european for beer) at BCERC on
June 9th, 5:30pm, Sheraton hotel bar.
DREAM. Doctoral seminar in Dubrovnik, Croatia from May 23-27: (http://
www.ices-study.org/News/Pages/DREAMDoctoralSeminaronEntrepreneurshipasMaking.aspx)
Hope something is useful in here. If you have requests or ideas for
the next note, please email in...@effectuation.org.
Thank you!
Stuart Read & the SEA Team
Tobias Goedbloed
秦剑
--
Thank you.
Best Regards,
Jian Qin, Ph.D.
Assistant Professor
Institute of International Business
TEDA College, Nankai University
Tianjin, P.R.China 300457
Phone: 86-13702184291
E-mail: nkqi...@hotmail.com
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Date: Fri, 20 May 2011 18:31:00 +0200
Subject: Re: Effectuation: Mid-May Update
From: tobias.g...@gmail.com
To: effect...@googlegroups.com
CC: i...@configment.com
Stuart Read
9. Effectuation is not an independent theory – it builds on and integrates the work of many well-received theories in economics and management
While complete as a theory, effectuation also integrates closely with a myriad of important theoretical domains. Some links to the resource-based view of strategy, resource dependency theory, social psychology and action-theory have already been described in our exposition. In this section, we highlight the following additional linkages:
A. The sources on innovation.
Since at least as early as Schumpeter’s original work on innovation just after the turn of the century (Schumpeter, 1976), scholars have drawn attention to the processes by which invention and innovation occur. In the Schumpeterian tradition, much attention was given to the role of the solitary and independent “inventor” (Weiner, 1996). More recently von Hippel’s (1976) studies of innovation have shown the importance of social processes in innovation; specifically the interface between users – who are, in many industries, the dominant locus of innovation – and producers. The theory of effectuation enhances the explanatory power of this research in two important ways. First, it offers an explanation as to the process of how users innovate: they effectuate. User innovation occurs when users experiment with what can be done with existing products and services (effectual) rather than what ought to be done with them per the manufacturers’ prescriptions (causal/predictive). Users thus take an active and imaginative role in creating new uses from existing artifacts (Bianchi, 1998). Second, the efficacy of strategic pre-commitments to early-stage partners becomes transparent. Because producers often learn of key improvements in products by watching users (von Hippel, 1976) it makes sense for entrepreneurs to partner with early users and let users have a significant hand in producing a final product or service. The underlying logic for this process lies in informational efficiencies, as von Hippel and others have observed (von Hippel, 1994; Arrow, 1983).
B. First-mover advantages and consumer preference formation.
Marketing scholarship has for many years keenly researched the question of why some market pioneers develop long-lasting advantages over brands that enter markets later (Wind & Mahajan, 1997). In their highly innovative theoretical account of preference formation, Carpenter & Nakamoto (1989) argued that, “[P]ioneering advantage can arise from the process by which consumers learn about brands and form their preferences. This process can produce a preference structure that favors the pioneer.” (1989:1). The crux of this explanation is that enduring consumer preferences for the structure and weight of various product attributes are constructed by pioneering producers, rather than being “discovered”. This is especially true when the importance of attributes is ambiguous (as it often is in the early stages of the development of new markets). It also suggests that many different preference structures (i.e., many different markets) are possible given a particular technology and that entrepreneurs sometimes achieve success in markets by influencing preferences rather than simply responding to them. The theory of effectuation integrates with Carpenter and Nakamoto’s explanation of consumer preference formation by providing the underlying logic for the process of consumer choice. In short, in cases where preferences (ends) do not pre-exist, consumers choose effectually based on the materials at hand (means) -- hence the pioneering economic artifact. Consumers attribute the success-in-use of a product to its combination of attributes (Carpenter & Nakamoto, 1989:287) thus effectuating their way towards a preference structure by choosing the ends (preferences) that matter to them. Effectual processes therefore can be seen as a promising underlying logic that informs the vexing problem of how, in the absence of goals, people acquire goals. It partly answers March’s (1982) call for a “technology of foolishness” – for a goal-finding process that explains how individuals construct new values and preferences.
C. Marchian exploration-exploitation (March, 1991).
Stylizing effectual processes as the exploration aspect of the exploration-exploitation is possible (Sarasvathy, 2001a) and serves to locate effectual reasoning within a framework that is very well accepted in entrepreneurship research. The crux of March’s argument is that, “Both exploration and exploitation are essential for organizations, but they compete for scarce resources. As a result, organizations make explicit and implicit choices between the two.” (1991:71). Consistent with streams of literature previous to it (for example Arrow, 1962), March’s essential point is that organizations are good at adaptive processes that result in efficient exploitation of existing opportunities, but are poor at exploring for new opportunities owing to the uncertainties involved. The theory of effectuation explains the process by which some individuals are able, nevertheless, to conquer the seemingly paralyzing uncertainties of economic change by applying the logic of control rather than the logic of prediction in the exploration process. Whereas the logic of prediction underpins the exploitation process, the logic of control (effectuation) underpins the exploration process, making uncertainty irrelevant through the affordable loss principle, destroying uncertainty through pre-commitments from key stakeholders, and leveraging uncertainty in its key processes. The contrast between effectual reasoning and predictive rationality therefore provides the underlying machinery for March’s exploration-exploitation dichotomy; in fact, without the alternative of effectuation, the dichotomy hangs unsupported on the exploration side. As a result existing literature alludes to mystical sounding processes such as intuition, and/or incomplete characterizations of creativity such as bricolage and improvization as the only alternatives. The theory of effectuation, however, begins to point to some fresh interpretations, and more rigorous and complete solutions to this age-old problem. Effectual logic can equally well be used to undergird other models that feature exploration (search) mechanisms, such as Nelson & Winter’s (1982) characterization of evolutionary mechanisms in economics.
Does anyone could offer me some papers concerning the interface and relationship between Effectuation and Bricolage? Thanks!
--
Thank you.
Best Regards,
Jian Qin, Ph.D.
Assistant Professor
Institute of International Business
TEDA College, Nankai University
Tianjin, P.R.China 300457
Phone: 86-13702184291
E-mail: nkqi...@hotmail.com
秦剑博士
南开大学泰达学院国际商务研究所讲师
美国密苏里大学商学院访问研究学者（2007-2008）
瑞典延雪平大学国际商学院访问助理教授（2009)
中国，天津
手机: 13702184291
Email: nkqi...@hotmail.com
Stuart Read
秦剑
I was much appeciated for you help, the paper and related references you send to me is really helpful, I will explore them carefully.
Have a good day!
Welcome you come to China!
Jian
--
Thank you.
Best Regards,
Jian Qin, Ph.D.
Assistant Professor
Institute of International Business
TEDA College, Nankai University
Tianjin, P.R.China 300457
Phone: 86-13702184291
E-mail: nkqi...@hotmail.com
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Subject: Re: Effectuation: Mid-May Update
Dear Jian -I dont know what other responses youve received to your question, so please accept my apologies for any duplication. First off, there are a number of papers that touch on effectuation and bricolage together. I include 5 representative cites with relevant text from the work in italics. As you will see, there is a significant diversity in the treatment of bricolage and effectuation:1>> Alvarez, S., Parker, S. (2009) Emerging Firms and the Allocation of Control Rights: A Bayesian Approach. Academy of Management Review, 34;2, 209-227.In the current analysis we try to understand emerging firms with regard to the actions of founders (Alvarez & Barney, 2007) and to show how these different actions affect the types of decision-making models that can be used (Baker & Nelson, 2005; Sarasvathy, 2001).2>> de Bruin, Anne; Brush, Candida G.; Welter, Friederike (2007) Advancing a Framework for Coherent Research on Women's Entrepreneurship. Entrepreneurship: Theory & Practice, 31:3, 323-339....decision-making styles such as bricolage (Baker & Nelson, 2005) or effectuation (Sarasvathy, 2001)��.
3>> Schmude, J��rgen; Welter, Friederike; Heumann, Stefan (2008) Entrepreneurship Research in Germany. Entrepreneurship: Theory & Practice, 32:2, 289-311.
In international mainstream entrepreneurship research, this would include opportunity recognition (Eckhardt & Shane, 2003), cognition (Wadeson, 2006), decision-making styles such as bricolage (Baker & Nelson, 2005) or effectuation (Sarasvathy, 2001), corporate entrepreneurship (Sharma & Chrisman, 1999),4>> Zellweger, Thomas, Philipp Sieger, Frank Halter (2010) Should I stay or should I go? Career choice intentions of students with family business background. Journal of Business Venturing, In Press, Corrected Proof, Available online 10 May 2010.Theories of effectuation and bricolage, for example, cast doubt on the intentional and volitional aspects of entrepreneurial intent (Sarasvathy, 2001; Baker and Nelson, 2005). We believe that the students in our sample are well aware of the role of founder, successor, or employee, Wiklund et al 2010 accounting measures make do with the resources at hand through selective bricolage (Baker, 2007; Baker and Nelson, 2005) and effectuation (Sarasvathy, 2001) are typically more appropriate for new firm survival...5>> Farjoun, Moshe (2008) Strategy making, novelty and analogical reasoning - commentary on Gavetti, Levinthal, and Rivkin (2005). Strategic Management Journal, 29:9, 1001.In emerging and novel industries, actors recombine existing businesses and resources through entrepreneurial bricolage (Baker and Nelson, 2005; Garud and Karnoe, 2003), reject dominant notions of resource environments, and construct new opportunities (Sarasvathy, 2001).Attempting to open the discussion around this variation is a working paper posted on www.effectuation.org, entitled "What Effectuation is Not...":Ive pasted an excerpt from the paper (point 9) below that hopefully will offer a some insight into the relationship with effectuation and bricolage.-------------------------
9. Effectuation is not an independent theory �C it builds on and integrates the work of many well-received theories in economics and management
While complete as a theory, effectuation also integrates closely with a myriad of important theoretical domains. Some links to the resource-based view of strategy, resource dependency theory, social psychology and action-theory have already been described in our exposition. In this section, we highlight the following additional linkages:
A. The sources on innovation.
Since at least as early as Schumpeter��s original work on innovation just after the turn of the century (Schumpeter, 1976), scholars have drawn attention to the processes by which invention and innovation occur. In the Schumpeterian tradition, much attention was given to the role of the solitary and independent ��inventor�� (Weiner, 1996). More recently von Hippel��s (1976) studies of innovation have shown the importance of social processes in innovation; specifically the interface between users �C who are, in many industries, the dominant locus of innovation �C and producers. The theory of effectuation enhances the explanatory power of this research in two important ways. First, it offers an explanation as to the process of how users innovate: they effectuate. User innovation occurs when users experiment with what can be done with existing products and services (effectual) rather than what ought to be done with them per the manufacturers�� prescriptions (causal/predictive). Users thus take an active and imaginative role in creating new uses from existing artifacts (Bianchi, 1998). Second, the efficacy of strategic pre-commitments to early-stage partners becomes transparent. Because producers often learn of key improvements in products by watching users (von Hippel, 1976) it makes sense for entrepreneurs to partner with early users and let users have a significant hand in producing a final product or service. The underlying logic for this process lies in informational efficiencies, as von Hippel and others have observed (von Hippel, 1994; Arrow, 1983).
B. First-mover advantages and consumer preference formation.
Marketing scholarship has for many years keenly researched the question of why some market pioneers develop long-lasting advantages over brands that enter markets later (Wind & Mahajan, 1997). In their highly innovative theoretical account of preference formation, Carpenter & Nakamoto (1989) argued that, ��[P]ioneering advantage can arise from the process by which consumers learn about brands and form their preferences. This process can produce a preference structure that favors the pioneer.�� (1989:1). The crux of this explanation is that enduring consumer preferences for the structure and weight of various product attributes are constructed by pioneering producers, rather than being ��discovered��. This is especially true when the importance of attributes is ambiguous (as it often is in the early stages of the development of new markets). It also suggests that many different preference structures (i.e., many different markets) are possible given a particular technology and that entrepreneurs sometimes achieve success in markets by influencing preferences rather than simply responding to them. The theory of effectuation integrates with Carpenter and Nakamoto��s explanation of consumer preference formation by providing the underlying logic for the process of consumer choice. In short, in cases where preferences (ends) do not pre-exist, consumers choose effectually based on the materials at hand (means) -- hence the pioneering economic artifact. Consumers attribute the success-in-use of a product to its combination of attributes (Carpenter & Nakamoto, 1989:287) thus effectuating their way towards a preference structure by choosing the ends (preferences) that matter to them. Effectual processes therefore can be seen as a promising underlying logic that informs the vexing problem of how, in the absence of goals, people acquire goals. It partly answers March��s (1982) call for a ��technology of foolishness�� �C for a goal-finding process that explains how individuals construct new values and preferences.
C. Marchian exploration-exploitation (March, 1991).
Stylizing effectual processes as the exploration aspect of the exploration-exploitation is possible (Sarasvathy, 2001a) and serves to locate effectual reasoning within a framework that is very well accepted in entrepreneurship research. The crux of March��s argument is that, ��Both exploration and exploitation are essential for organizations, but they compete for scarce resources. As a result, organizations make explicit and implicit choices between the two.�� (1991:71). Consistent with streams of literature previous to it (for example Arrow, 1962), March��s essential point is that organizations are good at adaptive processes that result in efficient exploitation of existing opportunities, but are poor at exploring for new opportunities owing to the uncertainties involved. The theory of effectuation explains the process by which some individuals are able, nevertheless, to conquer the seemingly paralyzing uncertainties of economic change by applying the logic of control rather than the logic of prediction in the exploration process. Whereas the logic of prediction underpins the exploitation process, the logic of control (effectuation) underpins the exploration process, making uncertainty irrelevant through the affordable loss principle, destroying uncertainty through pre-commitments from key stakeholders, and leveraging uncertainty in its key processes. The contrast between effectual reasoning and predictive rationality therefore provides the underlying machinery for March��s exploration-exploitation dichotomy; in fact, without the alternative of effectuation, the dichotomy hangs unsupported on the exploration side. As a result existing literature alludes to mystical sounding processes such as intuition, and/or incomplete characterizations of creativity such as bricolage and improvization as the only alternatives. The theory of effectuation, however, begins to point to some fresh interpretations, and more rigorous and complete solutions to this age-old problem. Effectual logic can equally well be used to undergird other models that feature exploration (search) mechanisms, such as Nelson & Winter��s (1982) characterization of evolutionary mechanisms in economics.
------------------------Hope that something in here helps!Best, Stuart
Does anyone could offer me some papers concerning the interface and relationship between Effectuation and Bricolage? Thanks!
--
Thank you.
Best Regards,
Jian Qin, Ph.D.
Assistant Professor
Institute of International Business
TEDA College, Nankai University
Tianjin, P.R.China 300457
Phone: 86-13702184291
E-mail: nkqi...@hotmail.com
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Email: nkqi...@hotmail.com