Causation and Effectuation: Addressing 21st Century Management Issues

This essay delves into the complexities of contemporary management by examining the theories of causation and effectuation. It elucidates how these theories influence decision-making processes and impact the achievement of organizational goals in today's dynamic business environment. The essay discusses the relevance of both causation, which emphasizes predetermined goals and resource acquisition, and effectuation, which focuses on leveraging available resources to create objectives. It analyzes how these approaches are applied in entrepreneurship and business management, highlighting their implications for planning, resource allocation, and problem-solving. The essay concludes that while causation is beneficial for large organizations requiring clarity and structured planning, effectuation is more suitable for emerging firms dealing with uncertainty and limited resources, ultimately emphasizing the importance of adapting management strategies to specific contexts and challenges. Desklib offers this essay as part of its collection of student-contributed assignments and study resources.

Contemporary
Management Issues in
the 21st Century
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Table of Contents
Introduction ....................................................................................................................................3
Main body........................................................................................................................................3
Conclusion ......................................................................................................................................6
References.......................................................................................................................................7
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Introduction
Contemporary management is associated with processes through which leaders and
managers attempts to achieve organisational goals through complying with hierarchical
objectives. The concept of contemporary management studies various theories which provides
assistance in the process of decision-making and helps in improving interpersonal relationships
while encouraging staff participation. It implies optimum utilisation of resources through leaders
and managers and apply relevant approaches for the purpose of effective management. The term
contemporary management is related with numerous business challenges and dynamics of
working in a global environment . In this essay, the concept of causation and effectuation has
been discussed and its relevance in understanding dynamics of business management. It reflects
upon the theories of causation and effectuation which are related in acquiring knowledge of
contemporary management and its issues . It also discuss the implications of applying theories of
causation and effectuation in dealing with issues of contemporary management.
Main body
The study of business management is associated with various models and theories which
helps in determining issues of contemporary management and provides solutions to it. The
theories of causation and effectuation are extremely relevant in the study of contemporary
management. These theories discuss upon the consequences and impacts that they have on the
working of management (Yu and et.al., 2018). The process of working and managing operations
takes into consideration numerous aspects and approaches on the basis of which they formulate
strategies and performs functions. The theory of causation implies that the consequences of a
event are predetermined and that one events leads to the cause of another event. It states that one
event (cause) is likely to impose some consequences (effect) and implies that effect is dependent
upon cause. The theory of causation focus upon predetermined purposes and act accordingly in
order to accomplish those purposes. It is focused upon establishing purpose or objective and then
gathering resources or means in order to fulfil predetermined objectives. Whereas the
effectuation theory implies that resulted are obtained through assessing availability of current
resources and means (Vanderstraeten and et.al., 2020). It is based on the approach of applying
suitability in processes and attempts to utilise resources which are currently available to create
objectives. The management of business enterprises are mainly focused on these two approaches
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that is either causation and effectuation. While initiating the idea of a business, an organisation
or respective owners attempts to decide an approach on the basis of which rest of the functions
are to be performed.
The application of causation theory in the function of entrepreneurship implies that
entrepreneurs should clearly identify and set their goals and objectives and then act in
accordance. It states that clear objectives are to be established first and then entrepreneurs should
aim to collect or acquire relevant resources and means to accomplish predefined goals. Whereas
the effectuation approach states that entrepreneurs should focus upon utilisation of means which
are currently available and then define goals according to whatever could be accomplished using
those available resources and means (Shirokova and et.al., 2021). The function of
entrepreneurship and aspects of contemporary management are highly associated with
consideration of these two theories. It has to be assessed through managers and owners that
which approach is best suited for their business organisation or project. For instance, under a
causation approach, while initiating a business project, entrepreneurs must identify all the
resources that are required in accomplishing their pre decided objectives. They must first acquire
human resources, physical equipments, building and machinery and other relevant means to start
the business. Whereas, under effectuation theory, an entrepreneur could make use of whatever
resources that are already available, for example an additional space in residential house where
initially business operations could be executed. The relevance of causation and effectuation
theory is significant in continuous management of business operations. These approaches helps
in understanding the issues of contemporary management effectively in order to construct
solutions. The processes conducted by entrepreneurs and managers to operate business
operations are to be determined using either of the two approaches. Under causation theory,
owners and managers are focused upon strict planning and systematic compliance with steps
established in plan. Managers already plan in advance resources and means through which
predefined objectives could be achieved (Servantie and Rispal, 2018). This approach of
causation is effective in establishing clarity in functions and actions through constructive
planning procedures. However, this theory does not takes into consideration the aspects of
uncertainty and unfortunate events which can disrupt the working of a business organisation.
The problems of global business environment are highly associated with changes and
uncertainties involved in dynamic surroundings in which businesses operate. In order to cope
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with these challenges arising due to changes, the approach of either causation or effectuation are
to be taken into consideration. For instance, the arrangements of funds and financial resources
while initiating a business plan could be executed using these two approaches. Through
following causation approach, an emerging entrepreneur would first determine profitability
margins that are to be earned by the end of year and thus invest accordingly in the business
project. Whereas under effectuation theory, the profitability margins would not be predetermined
and it implies effective utilisation of available funds in the form of personal savings through the
individual who is working on a new business project. It suggests that an entrepreneur should
invest available funds and then earn profits through making most appropriate use of those funds.
In this case, the earned revenues would be the objective or purpose which was not predetermined
instead it was created out of utilising available financial resources. The implications of these two
theories varies from situation to situation (Arvidsson and Coudounaris, 2020). The causation
theory is important and more relevant in large scale organisations as to effectively perform
complex functions, objectives are to be defined clearly to the respective personnel or staff. The
problems of managing teams on a global level or effectively communicating to staff working
worldwide could be dealt better with application of causation theory. The functions of a large or
complex organisations are interdependent or linked to various departments, thus it becomes
important to maintain clarity regarding objectives or goals that are to be accomplished. However,
the elements of both causation and effectuation are likely to found in different areas of smaller or
emerging firms. The theory of effectuation is more practised through emerging entrepreneurs or
owners of small-scale business firms. The firms and individuals with limited physical and
financial resources are tend to create results or objectives through maximum utilisation of
available funds or resources. As a new business project or idea starts expanding, the
entrepreneurs starts considering the approach of causation. This helps them in clarifying
objectives and facilitates the process of constructive planning. However, there is no relevant
facts or results which could establish the practicality of these two approaches ensuring better
outcomes. The applicability of these two approaches are not defined in specific areas, this
decision lies with the perspectives of different enterprises (Villani, Linder and Grimaldi, 2018).
The techniques and methods that managers and entrepreneurs applies in the process of
decision making and solving business issues are based on logical thinking. The theory of
effectuation is helpful in logically leverage currently available resources, current personnel
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expertise and existing network of shareholders in order to yield opportunities instead of
forecasting or finding them. It helps in providing solutions to various problems of operating in a
continuously changing business environment. The main issue with challenges of operating in a
dynamic business environment is that problems or issues cannot be predicted as external
environment is beyond control of the business owners or managers. Hence, in developing
solutions to uncertainties and sudden problems, the theory of effectuation is helpful and more
appropriate (Hauser, Eggers and Güldenberg, 2020). As the effectual logic do not pre-plan
anything and make effective use of means and available alternatives as per the given
circumstances. It helps in developing effective solutions to problems which keeps occurring
during the course of operations and cannot be predetermined. However, some issues which are
constant and obvious can be dealt using causation approach and establishing fixed solutions. For
instance, managing different time zones and languages while working on a global level, these
issues requires fixed methods or adoption of causation approach. It requires adequate planning in
order to deal with issues which are of fixed and recurring nature. The contemporary management
issues such as fluctuations in currency exchange, inflation rates and interest rates are uncertain
and cannot be ascertained. Moreover political changes and technology obsolescences are also
uncertain and unfortunate in course of operating business globally. Hence, the solutions to these
issues are determined using effectual logic where measures are taken using available sources in
order to comply with sudden and uncertain changes.
Conclusion
From the above essay, it has been concluded that the contemporary management is
associated with consideration of various approaches and logics on the basis of which corporate
entities operate. It has been deduced that there are mainly two approaches which are applied by
entrepreneurs in dealing with challenges of operating in dynamic business environment. The
theory of causation is more preferred and useful when there is complexities in operations and
clarity of objectives are required. Whereas effectual approach is useful when entrepreneurs have
to deal with uncertainties of dynamic business environment.
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References
Books and Journals
Arvidsson, H.G. and Coudounaris, D.N., 2020. Effectuation versus causation: A case study of an
IT recruitment firm. International Journal of Entrepreneurship, 24(4), pp.1-13.
Hauser, A., Eggers, F. and Güldenberg, S., 2020. Strategic decision-making in SMEs:
effectuation, causation, and the absence of strategy. Small Business Economics, 54(3),
pp.775-790.
Servantie, V. and Rispal, M.H., 2018. Bricolage, effectuation, and causation shifts over time in
the context of social entrepreneurship. Entrepreneurship & Regional Development, 30(3-
4), pp.310-335.
Shirokova, G. and et.al., 2021. Effectuation and causation, firm performance, and the impact of
institutions: A multi-country moderation analysis. Journal of Business Research, 129,
pp.169-182.
Vanderstraeten, J. and et.al., 2020. SME innovativeness in a dynamic environment: is there any
value in combining causation and effectuation?. Technology Analysis & Strategic
Management, 32(11), pp.1277-1293.
Villani, E., Linder, C. and Grimaldi, R., 2018. Effectuation and causation in science-based new
venture creation: A configurational approach. Journal of Business Research, 83, pp.173-
185.
Yu, X. and et.al., 2018. Managing uncertainty in emerging economies: The interaction effects
between causation and effectuation on firm performance. Technological Forecasting and
Social Change, 135, pp.121-131.
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