Evaluation of Entrepreneurship Theories in Modern Business

This essay critically examines the applicability of traditional entrepreneurship theories in the contemporary business environment, highlighting the impact of global dislocations and uncertainty. It explores the concepts of causation and effectuation, illustrating how entrepreneurs navigate risks and make decisions in dynamic markets. The essay analyzes real-world examples, such as the Curry in a Hurry and U-Haul, to demonstrate the limitations of theoretical models and the importance of adapting to changing market conditions. It emphasizes that no single process—causation, effectuation, or thought experiments—guarantees success, underscoring the need for entrepreneurs to be flexible and responsive to contingent opportunities. The essay concludes that while theoretical models offer guidance, their effectiveness is often diminished by the customer-centric and dynamic nature of the modern business landscape.

CMI

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7
Books and Journals......................................................................................................................7

INTRODUCTION
Entrepreneurship involves creation of a business and accordingly, all the risks associated
with the new business are borne by the entrepreneur and further all they receive all the rewards
as well by taking such risks. The uncertainty or the risks associated with the entrepreneurial
venture comes because of the problem with respect to the selection of a particular effect which
may or may not results in the implementation of intended goals. Usually entrepreneurs begin
with a common desire like creating a valuable legacy, making lots of money or simply pursuing
an idea seems to be interesting or worth pursuing. Entrepreneurial contingency can be defined as
the potentiality of the occurrence of some negative event in the future for which the
entrepreneurs much provide for through analysis & implementation of measures that could
protect from such uncertainty. Entrepreneur usually applies exiting theories & principles to
overcome the risks associated with such contingencies along with conducting market research for
the purpose of formulating the strategies to penetrate it (Sarasvathy, 2001). Therefore, the
present essay would be based on the discussion pertaining to how theoretical model of
entrepreneurship found to be less effective in the contemporary business environment due to the
global dislocations and uncertainty associated with it. The critical evaluation of the same would
be done by quoting the examples of business within the discussion.
MAIN BODY
Entrepreneurship have found to be changed dramatically during the 21st Century keeping
its core reasons as the same. Everywhere across the globe, entrepreneurship have found to be
arising on large scale for providing the supply to meet the demand that has not yet fulfilled.
Therefore, in the recent years, the concept of entrepreneurship has been claimed to be a major
economic growth driver. Theoretical model of entrepreneurship suggests that entrepreneurs
strives for inventing & innovating new technologies or product or services that has not been
thought by anyone till now and accordingly, meant for solving the problems existing in the
market in an innovative manner. However, there always remain a risk of failure or uncertainty
which the entrepreneur solely bears which gives no guarantee for the continuation of business
and whether the entrepreneur would get the chance to recover the amount of capital & time they
have invested in the business.

The article which has been evaluated for this essay revolves around the uncertainty
associated with four major aspects of entrepreneurship which includes, making pricing decision
without any existence of firm or the product, hiring people for the organization that is not
existing (such as acquisition of employees for a knowledge intensive firm like software
company), valuation of firm in the industry which is not lasting for long and the creation of
capitalist economy from a former communist economy. All these provides entrepreneurs with
huge rewards but at the same time comes with a great risk (Dao, 2022).
Both causation and effectuation are the processes that shows how entrepreneurial venture
comes into existence where causation begins by choosing a particular effect and then preparing
for means or set of means for the creation of that effect while the effectuation begins with the set
of means and then focus over the selection among possible effects that could be created with the
help of available set of means. Whatever the process could be chosen by an entrepreneur, the end
goals always remain the same that is, creation of a firm or product or service despite of the
inclusion of elements like dynamism and contingencies in the possible effects and set of means
during the process of causation and effectuation.
Entrepreneur whether chooses the causation or effectuation process, there is always a
requirement of making choice between means or between possible effects respectively where the
outcomes are inevitable in terms artifacts or firms due to the preference ordering of entrepreneurs
and assumptions of rationality while making choices. This is the point where the likelihood of
uncertainty arises.
For instance, in the article, it has been identified that entrepreneurs begins with
determining the location at which they are desiring to create a firm and then conduct a market
survey to study the customer buying behavior in order to determine who could be their target
segment and accordingly, the marketing strategies are framed to induce the target audience for
trying their new or innovative product (Sarasvathy, 2001). This entrepreneurial strategy of
entering into a new market and determining the potential customer group outline the process of
causation where the article quoted the example of Curry in a Hurry. In this example,
entrepreneurs begin with the set effect in their mind that they want to create an Indian restaurant
where the universe of all the potential customers are means to achieve their target or possible
effect.

Alternatively, the process of effectuation can also be used for creating the firm or product
like begin by having low pool of resources and then going with either strategic partnership with
established restaurateur or asking financier to invest the required sum of money to start a
restaurant. But the factor of uncertainty comes at this point where the entrepreneur is required to
bear the risk whether the venture would be successful or not because of the tastes and
preferences differing across the nations to nations (Melo, Silva and Almeida, 2019). Like, the
entrepreneur is going to start with the Indian fast food chain in USA, so it is not necessary that
Americans would demand for Indian fast food at a large scale. Therefore, the market risk results
in contingent event for the entrepreneur whether the latter are not in a position to determine
whether there would be a positive or negative reaction from the customers or the market as a
whole. A fast food chain becoming successful in one nation may not necessarily getting the same
success in another nation.
With the process of effectuation, entrepreneurs are able to build firms of different types
in different kind of industries by facilitating creation of several possible effects irrespective of
what the end goal is with which the process of entrepreneurship has begun. Further, process of
effectuation allows entrepreneurs to change, reshape and construct their end goals over the time
while facing with any contingencies.
Thought experiment is another process through which the firms are created like what
happened in the case of U Haul. The causation process is not the sole way to reach the end goals
for the entrepreneur. The best theories and practices of marketing do not allow for making the
right decision by following the causation process sometimes because it follows the
predetermined path while making the marketing decisions which begins with the identification of
potential universe of customers, developing the marketing plan accordingly in order to target that
segment which is having highest potential for return on investment (Ferreira and et.al., 2022). In
case of U Haul, if such path would be followed, then the minimal amount of initial capital would
definitely be exhausted in all these activities. Further, not being able to find potential investors
would result in making the project financially as well as psychologically non-viable because of
the huge financial requirement in projects like U Haul. However, U Haul was created as a
successful venture with just a minimum initial outlay.

The example of U Haul indicates that the people in USA are facing with the problem or
in need of some do – it – yourself moving equipment on a one - way nation - wide basis. The
needs are associated specifically to the USA (Ridgefield, Washington). Therefore, the same idea
could be feasible for other nations or markets and accordingly, the contingency of future
business failure becomes higher. This way uncertainty for entrepreneurs arises at a later stage.
There is no particular process like causation, effectuation or thought process that could be
regarded as the best or less efficient than the others, it depends upon the changing market
conditions or requirements from nation to nation and idea to be a feasible in one nation may not
be equally profitable in another nation.
As per the arguments of economists and management experts in the articles, it has been
identified that entrepreneurship cannot only be regarded as the creation of artifacts out of
contingent endeavors and endowments but it is an inevitable outcome of mindless forces,
environmental selection or stochastic processes (Sarasvathy, 2001).
The contemporary business environment is highly customer centric and dynamic where it
is not relevant to apply the theoretical models of entrepreneurship because of the existence of
uncertainty due to global dislocations and accordingly, the needs, preferences and tastes of
customers changes (Gil-Barragan, Aguilera-Castillo and Salas Amaya, 2021.). Therefore, to be
successful, an entrepreneur must an effectuator to utilize the available means in the best interest
of the contingent opportunities available in the specific market.
CONCLUSION
Through the above essay, it has been concluded that entrepreneurship theories and model
could not be applied as it is in each different business environment of the world economies. This
essay identified several processes through which entrepreneurs begins with the creation of firms
with respect to different real life instances of businesses. This indicates that no one process is
best or more efficient than the other, instead, it depends on the environment in which the
economic actor is going to act.

REFERENCES
Books and Journals
Dao, B. A. K., 2022. Causation and effectuation. In Modern Classics in Entrepreneurship
Studies (pp. 209-228). Palgrave Macmillan, Cham.
Ferreira, K. F. O., and et.al., 2022. Analysis of the entrepreneurial process from effectuation and
causation logic: a case study in two companies from Minas Gerais. Revista de
Administração da UFSM, 15, pp.83-104.
Gil-Barragan, J. M., Aguilera-Castillo, A. and Salas Amaya, S. A., 2021. Effectuation Theory
and International Business Research: A Bibliometric Overview. In Contemporary
Entrepreneurship Issues in International Business (pp. 3-26).
Melo, F. L. N. B. D., Silva, R. R. D. and Almeida, T. N. V. D., 2019. Gender and
Entrepreneurship: a comparative study between the Causation and Effectuation
approaches. BBR. Brazilian Business Review, 16, pp.273-296.
Sarasvathy, S. D., 2001. Causation and effectuation: Toward a theoretical shift from economic
inevitability to entrepreneurial contingency. Academy of management Review. 26(2).
pp.243-263.