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

By Nicholas Dew, Stuart Read, S. Sarasvathy, Robert Wiltbank. 2009

894 citations recorded by the source corpus.

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.

Subfields: Education, Experimental and Cognitive Psychology, Management of Technology and Innovation

View Paper: https://www.semanticscholar.org/paper/09522fc0814d85445d11bad8dfd16f79c99efed4

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Education

In Experimental and Cognitive Psychology

In Management of Technology and Innovation

Citations in the corpus

Making sense of blockchain technology: How will it transform supply chains? (2019, background): “…strategies, but the experts have the advantage of a much stronger understanding of the situations under consideration; they also have more experience and knowledge about cause-and-effect relationships and thus generally produce more insightful comments (Klein et al., 2007; Dew et al., 2009).”
Toward a Theory of Public Entrepreneurship (2010, methodology): “Mechanisms for extracting information and for evaluating and managing uncertainty of each type have been widely studied in the extant entrepreneurship literature (Sarasvathy, 2001; Dew et al., 2009).”
Expect the unexpected: examining the shaping role of entrepreneurial orientation on causal and effectual decision-making logic during economic crisis (2018, methodology): “SMEs using the affordable loss principle commit only a limited amount of resources to new projects (Fisher 2012), which helps increase the probability the SME will survive should the project fail (Cai et al. 2017; Dew et al. 2009).”
Thinking About Entrepreneurial Decision Making (2015, background): “…differ from each other in their (1) start-up experience, which affects decision speed (Forbes, 2005b) and use of effectual logic to frame decisions (Dew et al., 2009); (2) international experience, which influences the decision to locate in a university park (Wright, Liu, Buck, & Filatotchev,…”
‘I Like How You Think’: Similarity as an Interaction Bias in the Investor–Entrepreneur Dyad (2011, neutral): “Whereas Sarasvathy (2001a) and her colleagues (Dew et al., 2009; Wiltbank et al., 2008) demonstrate empirically that causation and effectuation are actively employed by entrepreneurs evaluating opportunities, such evidence does not exist for alternative decision processes.”
Bridging Behavioral Models and Theoretical Concepts: Effectuation and Bricolage in the Opportunity Creation Framework (2016, neutral): “Effectuation captures the decision-making heuristics of expert entrepreneurs, empirically derived through quasi-experimental interviews with serial entrepreneurs (Sarasvathy, 2001; Dew et al., 2009a).”
Effectuation As Ineffectual? Applying the 3E Theory-Assessment Framework to a Proposed New Theory of Entrepreneurship (2015, background): “Baron (2009) critiqued the empirical analysis in effectuation (e.g., in Dew et al.’s [2009] study contrasting the use of effectual logic of expert entrepreneurs and novice MBA students), commenting that such studies lack credibility because many real alternative explanations for why expert…”
Industry and Startup Experience on Entrepreneur Forecast Performance in New Firms (2014, neutral): “Those who engage in more repetitive and homogenous tasks in opportunity evaluation should be more likely to benefit from experience (Dew et al. 2009).”