Causation vs Effectuation: Addressing Management Issues in Business

This essay delves into the concepts of causation and effectuation within the context of contemporary management issues. It discusses causation as an approach where entrepreneurs focus on predefined goals and find means to achieve them, while effectuation emphasizes utilizing available resources to materialize potentially unforeseen goals. The essay analyzes the relevance of these concepts in addressing organizational management challenges in the international business environment, referencing examples like James Dyson and U-Haul to illustrate their practical applications. It also explores the decision-making process and how it links to effectuation, concluding that both causation and effectuation are essential for entrepreneurial success and effective management practices. Desklib provides access to this essay and other resources for students.

Contemporary
Management Issues in the
21st Century

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................5

INTRODUCTION
Contemporary management is control of resources, innovations along with processes in a
company for attaining proposed goals within current possibilities, limitations addition to
conditions as per economical rationality of economic practices (Barad, 2016). In 21st century, all
business faces contemporary management issues as these are associated with organisational
behaviour. Causation and effectuation helps entrepreneurs to emphasis on predefined objectives
to reach goals and aim for materialising into goals which are not essentially predefined. The aim
of the essay to discuss concept of causation as well as effectuation with explanation of certain
artefacts requiring a novel approach for venture creation.
The essay highlights concept of causation and effectuation along with critical discussion
of a statement and its relevance to gain insights about dynamic of issues in business management
in contemporary international business environment.
MAIN BODY
The concept of causation is an approach which implies that focus of entrepreneurs in
contemporary business environment is towards predefined goals as well as finding a means for
reaching end goals. In the world of business and economics, causation indicates that an event or
circumstance is direct outcome of other. It is why for specific result from business actions.
Businesses across the globe are becoming more free market oriented together with more
entrepreneurial. Almost half of ventures uses emerging technologies available on internet and not
only devise rapid changes, rather fundamentally redefine the ways they truck, trade and interact
with others in each sphere of human practices (Sarasvathy, 2001).
Within contemporary business environment, causation is relevant for entrepreneurs to
understand dynamic of organisational management issues as the approach implies consideration
of entrepreneur on predetermined objective and determining means for reaching end goals. The
concept rests on logic of prediction, moreover, its process takes particular effect as well as draws
a clear picture about reasons about something could be combined or incoherent in life cycle
stages (Kasemsap, 2017). With a causal concept, entrepreneurs in 21st century views future as
continuation of past which could be an acceptable addition to be usefully predictable. It pursues
maximum opportunity and concerned with business issue of competition along with constrain
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task relationship with suppliers and customers to what is essential in dynamic business
environment.
Causation guide business managers to create new products together with ventures. STP
process of Kotler is a specifics of causation that states that organisational marketers segment
entire market, identify attractive segments for targeting, prior devising suitable positioning
tactics along with allocate resources for the purpose of marketing activities in the dynamic
business environment (Leiber, Stensaker and Harvey, 2015). International entrepreneurship is
outcome of globalisation and advances in technology. STP analysis is based on presumption that
states that there is existing market with defined demand addition to supply curve. Business
entrepreneurs, for example, James Dyson of Dyson Ltd understand dynamic of management
issue that is changing marketing demand through STP process that aid in increasing marketing
efficiency through directing efforts of human resources towards designated segment in the way
which is consistent with characteristics of segments. It helps entrepreneurs to reduce costs to
company through not promoting offerings where there is no requirement within global business
environment.
New venture creation is a journey wherein an entrepreneur engages in practices for
turning a new venture opportunity or idea into value. It implies that group of people has
complete freedom for crafting all types of business aspects (Nikbin and Et. Al., 2016). While
doing so, there are certain contemporary issues faced by managers. For instance, one of
contemporary business issue faced by James Dyson of Dyson Ltd is resource constraint. In
contemporary global business environment, the business issue imposes unique discipline on
entrepreneurial venture needing wider care to make use of resources efficiently. Causation can
also be described as result of occurrence depends on another event. This two events can be
interrelated which helps them to increase or decrease the result of both factors.
Concept of effectuation implies that entrepreneurs in contemporary business environment
emphasises towards means at hand for materialising into various goals which are not necessarily
pre-determined (Hubner and Baum, 2018). In other words, effectuation is described as problem
solving skills of individuals which advocates that future is largely uncertain. It also says that
future can be controlled through some sort of human action.
Professor Saraswathy have propounded this theory of effectuation by analysing
entrepreneurial skills. Professor defines entrepreneurship which is mistakenly taken as form of
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management. Through his varied experiments, professor observed that managers are casual
thinkers which suggests that they start their actions by keeping end in mind which helps them to
find the best way to attain that (Strauß, Greven and Brettel, 2021). Professor Saraswathy's study
of the concept of effectuation contemplates four basic principles such as bird in hand, affordable
loss, lemonade and crazy-quilt principles. Varied experiments and their results performed by
professor are given to MBA students in order to contrasting between entrepreneurship and
management.
U-haul can be described as sharing of organisation's equipment and machineries with
different establishments (Schweizer, 2015). It is done through contractual basis and helps in
lowering operational and fixed cost of organisations. This practice is very effective for
entrepreneurs as they have less investment and want to set up their business at large level.
Causation approach is described as casual thinking of manager where they focus on pre-
determined objective and then search for a means to accomplish that. Whereas, an effectuation
approach states that an entrepreneur thought process is to concentrate on the way that helps to set
objectives (Nelson and Lima, 2020). However, these two concepts are similar in terms of its
advocacy. As these two terms are proposed by Professor Saraswathy in order to describe
entrepreneurship in an effective manner. These two concepts are developed by same process
called observation.
Professor Saraswathy has contemplates five principles in order to simplify the concept of
effectuation (Sarasvathy, 2008). Bird in hand principle advocates that entrepreneurs know their
competencies and expertise in order to find the means to start a specified job. Affordable loss
principle states that entrepreneurs are rationale enough to measure their risks and they only
prefer to take calculative risks. Lemonade principle suggests that entrepreneurs should be taken
as surprise packages. They are very adaptive and flexible in their approach which helps them to
make modifications in their operations so as to gain competitive advantage.
Patch work quilt advocates that entrepreneurs have to bring innovations and convince
their investors with their unique business idea as well as innovative practices. They can create
partnerships with well-establish businesses in order to be more competitive in market (Renton
and Simmonds, 2019). Pilot in the plane principle states that successful entrepreneurs have faith
in people rather than machines. They perform extensive market research inn order to recognise
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diverse needs of differential consumers so that these wants can be fulfilled. They tend to make
long lasting relationships with their customers and varied stakeholders.
Sir James Dyson is an British inventor and entrepreneur who mainly deals in innovative
household appliances. Dyson manufactures a vacuum cleaner at its first invention through
performing extensive research. Dyson has sold his first vacuum cleaner to a Japanese company
which helped him to get best designer award. After that he has an innovative idea of
manufacturing designers vacuum cleaners. He went to investors by carrying his idea of making
household appliances (Schmidt and Heidenreich, 2018). After making first deign, Dyson
continuously modify its designs and launch new products. This helped him in gaining utter
success, fame and competitive advantage.
There is a link between James Stoner decision-making process and effectuation. James
Stoner defines decision-making process as identifying and choosing among alternatives or action
in order to make a critical decision. Effectuation can be described as a thought process of
entrepreneur where they try to find the way to complete the given task effectively (Ladd, 2016).
James Stoner's decision-making process also describes choosing an alternative for performing a
given task.
CONCLUSION
From the above essay, it has been concluded that causation and effectuation are two
terms which helps in modifying entrepreneurial practices. Causation relates to casual thinking of
individuals as it only concentrates on pre-determined goals and ways to achieve them. Whereas,
in effectuation, ways are determined first by individuals in order to meet objectives which are
unpredictable. These concepts are different as well as similar in their approach. As these two are
framed for better understanding of entrepreneurial practices in long term. It does not only define
entrepreneurial strategies but also describes management principle. In order to become
successful entrepreneur, it is necessary to take care of these two concepts and bring innovations
in practice.
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REFERENCES
Books and Journals:
Barad, K., 2016. Queer causation and the ethics of mattering. In Queering the non/human (pp.
339-366). Routledge.
Hubner, S. and Baum, M., 2018. Effectuation, entrepreneurs' leadership behaviour, and
employee outcomes: a conceptual model. International Journal of Entrepreneurial
Venturing. 10(4). pp.383-411.
Kasemsap, K., 2017. Strategic innovation management: An integrative framework and causal
model of knowledge management, strategic orientation, organizational innovation, and
organizational performance. In Organizational culture and behavior: Concepts,
methodologies, tools, and applications (pp. 86-101). IGI Global.
Ladd, T., 2016. Customer development and effectuation: a review of textbooks to teach a
contemporary introduction to entrepreneurship. Management Teaching Review. 1(3).
pp.205-210.
Leiber, T., Stensaker, B. and Harvey, L., 2015. Impact evaluation of quality assurance in higher
education: methodology and causal designs. Quality in Higher Education. 21(3). pp.288-
311.
Nelson, R. and Lima, E., 2020. Effectuations, social bricolage and causation in the response to a
natural disaster. Small Business Economics. 54(3). pp.721-750.
Nikbin, D. and Et. Al., 2016. Airline travelers' causal attribution of service failure and its impact
on trust and loyalty formation: the moderating role of corporate social responsibility. Asia
Pacific Journal of Tourism Research. 21(4). pp.355-374.
Renton, M. and Simmonds, H., 2019. Effectuation and Morphogenesis in the New Zealand
Fairtrade Marketing System. Journal of Macromarketing. 39(4). pp.385-399.
Rubin, V. L., 2019. Disinformation and misinformation triangle: A conceptual model for “fake
news” epidemic, causal factors and interventions. Journal of documentation.
Schmidt, J. and Heidenreich, S., 2018. The role of human capital for entrepreneurial decision-
making-investigating experience, skills and knowledge as antecedents to effectuation and
causation. International Journal of Entrepreneurial Venturing. 10(3). pp.287-311.
Schweizer, R., 2015. Decision–making during small and medium–sized enterprises'
internationalisation-effectuation vs. causation. Journal for International Business and
Entrepreneurship Development. 8(1). pp.22-41.
Strauß, P., Greven, A. and Brettel, M., 2021. Determining the influence of national culture:
insights into entrepreneurs’ collective identity and effectuation. International
Entrepreneurship and Management Journal. 17(2). pp.981-1006.
Suddaby, R., 2015. Can institutional theory be critical?. Journal of Management Inquiry. 24(1).
pp.93-95.
Online:
Sarasvathy. S. D. 2001. Causation and Effectuation: Toward A Theoretical Shift from Economic
Inevitability to Entrepreneurial Contingency. [Online]. Available through: <
file:///C:/Users/user/Downloads/Causation__1724266625%20(2).pdf>
Sarasvathy. S. D. 2008. Effectuation: Elements of Entrepreneurial Expertise. [Online]. Available
through:
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<https://www.researchgate.net/publication/228786046_Effectuation_Elements_of_Entre
preneurial_Expertise<
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