Causation and Effectuation: Toward A Theoretical Shift from Economic Inevitability to Entrepreneurial Contingency

This essay demonstrates an understanding about the impact of causation as well as effectuation in regards with entrepreneurial mindset in regards with uncertainty as well as major global dislocations such as climate change.

Causation and Effectuation: Toward
A Theoretical Shift from Economic
Inevitability to Entrepreneurial
Contingency

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
REFERENCES................................................................................................................................1

INTRODUCTION
Entrepreneurship can be described as a practice of creating or extracting economic values
whereby entrepreneurs encountered varied risks throughout the business practices in a strategic
manner. An entrepreneur should have capabilities such as communication, self-focus, integrity
and many more which help them to averse risks in an exponential manner (Braun and Sieger,
2021). Casual and effectual thinking are considered as significant for entrepreneurs as these help
them in making critical decisions on timely basis. This essay demonstrates an understanding
about the impact of causation as well as effectuation in regards with entrepreneurial mindset in
regards with uncertainty as well as major global dislocations such as climate change.
MAIN BODY
As per Sarasvathy (2008), causation processes in regards with entrepreneurship can be
described as approach which took specified given effect as well as focus on selecting among
means for creating the effect (Sarasvathy, 2008). Effectuation processes are regards with take a
set of means which are given and then focus on selecting among possible effects for creating the
set of means. Casual thinking in context to entrepreneurship initiates with predetermined
objectives as well as set of means (Shirokova and Et. Al., 2021). Effectuation process is actor
dependent whereas causation process is effect oriented. Business across the globe are becoming
more market free, few of them are using emerging technologies (Grégoire and Cherchem, 2020).
Causation is important for entrepreneurs to know the dynamic environment of the
business. The firms and organisation tend to employ effectuation at initial level and than shift to
causation when achieve growth (Hauser, Eggers and Güldenberg, 2020).
In creation of a venture creation such as HungryPanda, causation is used in identifying the
resources at a specific point of time as well as using them effectively. There are so many
uncertainties involved in creation of a new venture. The uncertainties include technological,
political, environmental, customer, resources (Villani, Linder and Grimaldi, 2018). Causation
involves setting of predetermined goals, which reduces the risk of uncertainty as things or
activities will be pre planned (Høvig, Pettersen, and Aarstad, 2018). In today's scenario, the
technology is changing every year and it is important for the business to run along the world. If
the business will have a planning than it can perform its activities smoothly. The business
without any planning is more tend to run in loss and cannot survive in the market (Matalamäki,
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2017). Effectuation involves, using the available resources creating a goal. If the business will
follow effectuation process than it cannot deal with uncertainties, the available resources may or
may not be useful for the business to tackle the uncertainty (Ortega, García and Santos, 2017).
For example, if an organisation is following effectuation process than if any technological
uncertainty occurs than the company must have resources like financial assistance, skilled
employees, place for installation etc. If any of these resources are not present with the
organisation than it cannot access the technology which will make them suffer (Servantie and
Rispal, 2020). The company, for example, HungryPanda cannot survive for a long run in the
market. Setting goals is the first step which every business organisation should take which to
avoid any type of risk or uncertainty (Arvidsson and Coudounaris, 2020).
When it comes to Causation process it generally take a particular effect and focuses on selecting
among means for the purpose to create that effect. In reference to effectuation process, it takes a
set of means and focuses on selecting among the possible effects which could be created with
that set of means (Braun and Sieger, 2021). For example, a chef has assigned the job to cook
dinner. There are two different methods through which the particular task can be organized.
Firstly, the menu can be picked in advance and the chefs needs to do is list the ingredients
needed and purchase the ingredients as per the decided menu (Grégoire and Cherchem, 2020). It
is a basically a process which can be described as causation. It generally begins with a given
menu and paying emphasis on selecting between effective methods in order to make the food
prepare. In another situation, the host asks the chef to look through the available cupboards
present in the kitchen for the utensils and possible ingredients and then prepare the meal
afterwards. Therefore, the chef has to decide the menu as per the available items and then
prepare the final dishes. It is basically described as the process of effectuation (Høvig, Pettersen,
and Aarstad, 2018).
As per the viewpoint of Schumpeter, the entrepreneurs take the stationary economy to a new
level of development by adding creativity and innovation of their own (Hauser, Eggers and
Güldenberg, 2020). He also added that the entrepreneurs brings innovation in basically two
methods, first is through increasing the demand for few products and second is by reducing the
cost of production. In reference to the entrepreneurship theories, it generally comprises of nature
of decision making framework, nature of opportunities and the nature of entrepreneurs within an
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entrepreneur functions (Ruiz-Jiménez, Ruiz-Arroyo and del Mar Fuentes-Fuentes, 2021). In the
mentioned article, when it comes to management and economics theories, the scholars have
traditionally assumed that the existence of the artifacts basically comprises of markets,
organizations and enterprises (Nelson and Lima, 2020). Also it has been argued that the detailed
information about the creation of artifacts basically needs the notion of effectuation (Servantie
and Rispal, 2020). In case of causation, it basically rests on a logic of prediction and on the other
hand, the effectuation on the logic of control. Generally the effectuation is basically illustrated
through different kind of experiments and business examples. Also it helps in detailed
examination about the effectuation’s connections with the empirical evidence and current
theories (Dao, 2022). Various business incubators basically aims to provide network resources
and basically stimulates the sharing of ideas. In reference to causation approach, it basically
implies that entrepreneurs focuses on the predefined objective and then aim to find the means to
reach this objective (Van Mumford and Zettinig, 2022).
In case of effectuation approach, it basically implies that the entrepreneurs focuses on generally
the means at hand (Henninger and et.al, 2020). In case of entrepreneurs, they take an
effectuation approach who basically have a proclivity to share the ideas and they basically
perceive such network resources who precisely have a high value (McKelvie and et.al, 2020). On
the other hand, Entrepreneurs taking a causation approach, have a limited proclivity to share
ideas with other incubator firms and they perceive such network resources who have a relatively
low value (Kerr and Coviello, 2020). In relation to contingency approach, it generally basically
involves the ideas that business leaders need to adjust their leadership style based on the situation
at hand. Also it becomes a balance of business leader’s natural style and understanding when and
where it needs to be altered (Villani, Linder and Grimaldi, 2018). In reference to
entrepreneurship, the salient dimensions basically comprises of uncertainty and risk. As per the
various economic theories, it predicts that the entrepreneurs as business owning residual
claimants are less averse towards uncertainty and risk as compared to others (Laskovaia, Lee,
Bogatyreva, and Herrmann, 2022). The life of Entrepreneurs totally depends upon two factors
which is uncertainty and risk. They basically don’t have any choices and the future basically
depends upon them. They are highly responsible and accountable for the failure and success and
also the success is never permanent. In case of Entrepreneurs, it is very important to know how
to handle the uncertainty and risk of having to be responsible for the employees and the company
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(Wu, Liu and Su, 2020). In addition to that, the environmental and climate entrepreneurs are
basically defined as the change agents who see the creation of ventures as a method to address
environmental challenges and urgent climate. In case of Entrepreneurship theories, it helps in
bringing better understanding of the behaviour of entrepreneurship exhibited different
entrepreneurs. It also enables one to understand the need for the entrepreneurship and why some
individuals are more entrepreneurial than others (Sarasvathy and Ramesh, 2019).
Conclusion
From the above essay, it can be concluded that Entrepreneurship plays a very important role
when it comes to extraction and creation of the economic values whereby the entrepreneurs
basically faces various risks throughout the business practices in the strategic way. For an
entrepreneur, it is very important to have the desired capabilities for the purpose to deal with the
risky situations in a exponential way. In addition to that, it is also determined that effectual and
casual thinking are considered to be really important for the entrepreneurs as it basically helps in
carrying out effective decisions in a timely manner. It helps in demonstration an understanding
about the influence of causation as well as the effectuation in relation with entrepreneurial
mindset in relation to the uncertainty as well as the major global dislocations which involves
climate change.
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