Attachment A

Annotated Bibliography
A. Effectuation Theory
1 Sarasvathy, S.D. (1999). How do firms come to be? Towards a theory of the pre-firm.
Pittsburg: Carnegie Mellon University.

Sarasvathy (1999), employing the grounded theory approach through protocol
analysis, inductively derived effectuation theory with data collected from expert
entrepreneurs. The author found that 44% of the sample uses effectuation 85% of
the time. This article initiated the stream of research on effectuation as scholars
subsequently engaged in academic debate on the subject.

2 Sarasvathy, S.D. (2001). Causation and effectuation: Toward a theoretical shift from
economic inevitability to entrepreneurial contingency. The Academy of Management
Review, 26(2), 243-263.

In this article, Sarasvathy argued that an explanation of the creation of artifacts
such as firms/organizations and markets requires the notion of effectuation. She
further clarifies that causation rests on logic of prediction while effectuation on
the logic of control. This paper is basically conceptual and offers illustrative
business examples and thought experiments. The author also strengthens her
arguments by pointing out links with existing theories and results of relevant
empirical studies.

3 Sarasvathy, S.D. & Kotha, S. (2001). Dealing with Knightian uncertainty in the new
economy: The real networks case. In J. Butler (ed.) Research on Management and
Entrepreneurship, pp. 31-62. Greenwich, CT: IAP, Inc.

In this report, the authors highlighted evidence on the five dimensions of
effectuation earlier theorized by Sarasvathy in the experience of Real Networks.
The investigation used the case study method. This paper provides documentation
on the process-centered approach to studying effectuation.

4 Dew, N. (2003). Lipsticks and razorblades: How the auto ID center used pre-commitments
to build the Internet of things. Charlottesville, VA: University of Virginia.

In Dews dissertation, he presented how the process model of effectuation was
inductively culled from historical and interview data in the formation of an industry
thus providing additional empirical evidence on the process-centered approach to
studying effectuation.

B. Factors related to effectuation
5 Allen, C. (2003). College Park, MD: University of Maryland.

In Allens dissertation, a strong correlation was found between the use of
effectuation and experience; and no correlation was established between most
psychological measures of personal traits and the use of effectuation in a sample of
MBA students. The author used protocol analysis and survey in addressing his
research agenda. This is one of the studies that focused on the antecedents of the
use of effectuation. The use of MBA students as examples may be supported by the
assumption that MBA students are more likely to be entrepreneurs or are planning
to start a business.

6 Edelman, L., & Yli-Renko, H. (2010). The impact of environment and entrepreneurial
perceptions on venture-creation efforts: Bridging the discovery and creation views of
entrepreneurship. Entrepreneurship Theory & Practice , 833-856.

In this article, the authors integrated insights from both discovery and creation
theories to empirically examine the interrelationships among environmental
conditions, entrepreneurial perceptions, entrepreneurial action, and outcomes and
attempted to explain the roles that both objective environmental conditions and
entrepreneurial perceptions of opportunity and resource availability play in the
process of firm creation. It used longitudinal data on nascent entrepreneurs from
PSED in the U.S. and employed SEM Analysis. It was found that entrepreneurs
opportunity perceptions mediate between objective characteristics of the
environment and the entrepreneurs efforts to start a new venture while no similar
mediating effect was found for perceived resource availability. This article is
identified as reference as it contains a comparison of the discovery and creation
views of entrepreneurship as well as measures of perceived market opportunity,
perceived availability of resources, efforts to create a venture, imitativeness,
growth orientation, venture start-up status.

7 McGee, J.E., Peterson, M., Mueller, S.L. & Sequeira, J.M. (2009). Entrepreneurial self-
efficacy: Refining the measure. Entrepreneurship Theory and Practice, 965-988. DOI:
10.1111/j.1540-6520.2009.00304.x

This article presents the development of a refined and standardized
entrepreneurial self-efficacy measure following Mueller and Goics (2003)
definition of entrepreneurial tasks in the context of venture creation process
searching, planning, marshaling, and implementing as earlier proposed by
Stevenson, et. al. (1985). This could be used to measure entrepreneurial self-
efficacy.


8 Sequeira, J., Mueller, S.L. & McGee, J.E. (2007). The influence of social ties and self-
efficacy in forming entrepreneurial intentions and motivating nascent behavior. Journal of
Developmental Entrepreneurship, 12(3), 275-293.

Theoretical models of entrepreneurship suggest that an individuals intention to
start an enterprise is a strong predictor of eventual entrepreneurial action. Less
understood are factors that influence the likelihood of entrepreneurial intentions
and nascent behavior. In this study, we develop and test several hypotheses about
how social network ties and self-efficacy affect entrepreneurial intentions and
nascent behavior. We found that a personal network of supportive strong ties
coupled with high entrepreneurial self-efficacy increases the likelihood of
entrepreneurial intentions and nascent behavior. A personal network of weak ties
with practical business knowledge and experience also increases the likelihood of
entrepreneurial nascent behavior but not entrepreneurial intentions. This particular
finding however is understood to be inconsistent with its model that intention
precedes behavior. Meanwhile, in contrast, a personal network of strong ties with
practical business knowledge and experience has little effect on either intentions or
nascent behavior and may, in fact, suppress both. This contains a definition of
nascent behavior but follows a more causal logic. Self efficacy is used in the general
context.

9 Jeong-Nam, K., Clelland, I. & Bach, S. (2010). Entrepreneurs as parallel processors: An
examination of a cognitive model of new venture opportunity evaluation. Academy of
Entrepreneurship Journal, 16(2), 57-85.

This study (N = 276) tested the role of individual and situational variables on an
inexperienced, pre-nascent entrepreneurs likelihood of pursuing an
entrepreneurial opportunity. The researchers identified self- efficacy and cognitive
multilateralism as psychological traits that explained activation of different types
of entrepreneurial cognitive structures. These cognitive structures then affect risk
and opportunity perceptions and new venture opportunity evaluation decisions.
The article presented a definition of entrepreneurial cognition as well as the
concepts of risk perception and optimistic thinking that the proposed study can
use.

10 Chandler, G.N., DeTienne, D.R., McKelvie, A. & Mumford, T.V. (2011). Causation and
effectuation processes: A validation study. Journal of Business Venturing, 26(3), 375390.
http://dx.doi.org/10.1016/j.jbusvent.2009.10.006


The article reports how the authors developed and validated measures of causation
and effectuation approaches to new venture creation and tested the measures
with two samples of entrepreneurs in young firms. As a follow-up on their measure
development undertaking in 2007, they maintain that their measure of causation is
a well-defined and coherent unidimensional construct. Moreover, it is proposed
that effectuation is a formative, multidimensional construct with three associated
sub-dimensions (experimentation, affordable loss, and flexibility) and one
dimension shared with the causation construct (pre-commitments). Taking the
study further, the authors show that causation is negatively associated with
uncertainty, while experimentation, a sub-dimension of effectuation, is positively
correlated with uncertainty as originally theorized by Sarasvathy (2001). This paper
reports the validated scales that measure causation and effectuation deemed
useful in the proposed study.

11 Fischer,E. A. & Reuber, R. (2011). Social interaction via new social media: (How) can
interactions on Twitter affect effectual thinking and behavior? Journal of Business
Venturing, 26(1), 118.
http://dx.doi.org/10.1016/j.jbusvent.2010.09.002

Recognizing that social interaction plays a central role in effectuation processes,
the authors explored the implications for effectuation when an entrepreneur
interacts via particular channels such as social media, particularly, Twitter, a micro-
blogging platform that can facilitate a marked increase in interaction. The authors
also introduced perceived time affordability, hypothesized to predict the level of
social interaction in which an entrepreneur engages via Twitter, as well as the
moderating effects of community orientation and community norm adherence.
Given the wide use of social media, the article suggests a fresh and timely addition
to the probable factors that can further explicate effectuation, specifically in the
aspect of interactions in actively seeking pre-commitments.


C. Non-exclusivity of effectuation and causation
12 Harting, T. (2004). Entrepreneurial effectuation in a corporate setting: The case of Circuit
Citys CarMax unit. Paper presented at the Babson Kauffman Entrepreneurship Research
Conference. Glasgow, Scotland.

Using case study method, Harting found 48% causal and 52% effectual decision
elements in the founding of Circuit Citys CarMax unit. This provides evidence
supporting the argument that no entrepreneur use pure causation or pure
effectuation in decision making in the context of venture formation and creation.
However, this argument should be treated with caution as the analysis was based
only on one case.



D. Use of different logics in various stages of venture creation and growth
13 Harmeling, S., Oberman, S., Venkataraman, S. & Stevenson, H.H. (2004). That my
neighbors cow might live: Effectuation, entrepreneurship education and economic
development in Croatia. Paper presented at the Babson Kauffman Entrepreneurship
Research Conference. Glasgow, Scotland.

In a case study on a business school, the authors discovered that new Croatian
MBA program was developed initially using effectual logic and gradually
incorporated more causal principles as it grew across five time periods. This finding
suggests that entrepreneurs employ more effectuation logic in the pre-start-up
stage and employ more causation logic once the new venture has been formed. In
general terms, the findings also suggest that different decision making logics or
entrepreneurial approaches are used by entrepreneurs in the different stages of the
firms life.


E. Measure development
14 Chandler, G.N., DeTienne, D.R. & Mumford, T.V. (2007). Causation and effectuation:
Measurement development and validation. Frontiers of Entrepreneurship Research,
27(13), Article 3. Available at: http://digitalknowledge.babson.edu/fer/vol27/iss13/3

This article presented the development and validation of causation and
effectuation processes measures. The authors conducted a pilot study consisting of
180 firms and a second study of 196 firms and found that causation processes
appear to be a well-defined and coherent set of practices that can be viewed as a
unidimensional construct but were unable to establish the five dimensions of
effectuation as theorized by Sarasvathy (2001) are sub-dimensions of the larger
construct called effectuation. Going over the items developed to capture the
causation and effectuation constructs, it is worthy to note that the statements
does describe the dimensions but might be difficult to comprehend for nascent
entrepreneurs. Given the results of the study, there seems to be a need to enhance
the scales
.
15 Chandler, G.N., DeTienne, D.R., McKelvie, A. & Mumford, T.V. (2011). Causation and
effectuation processes: A validation study. Journal of Business Venturing, 26(2011), 375-
390.

This article presents the results of the validation study undertaken by Chandler, et.
al. on effectuation and causation. The authors tested the measures with two
samples of entrepreneurs in young rms. They maintain that causation is a well-
dened and coherent uni-dimensional construct and also postulate that
effectuation is a formative, multidimensional construct with three associated sub-
dimensions (experimentation, affordable loss, and exibility) and one dimension
shared with the causation construct (pre-commitments).The results of the study
further confirms the theory by Sarasvathy (2001 that causation is negatively
associated with uncertainty, while experimentation, a sub-dimension of
effectuation, is positively correlated with uncertainty. This paper provides an
enhanced measure for effectuation and causation.

F. Impact of effectuation on venture outcomes
16 Read, S., Song, M. & Smit, W. (2009). Meta-analytic review of effectuation and venture
performance. Journal of Business Venturing, 24(6), 573-587.

The authors acknowledge that though much research in entrepreneurship makes
the fundamental assumption that opportunities are found, new work is emerging
which questions this core tenet and cited effectuation as an example of this new
perspective where the entrepreneur is regarded as co-creator of opportunities,
together with committed stakeholders. In this particular study, a meta-analysis of
the articles published in the Journal of Business Venturing, summarizing data on
9897 new ventures was conducted to connect three of the principles of effectuation
positively with new venture performance. Results indicate significant relationships
existing between venture performance and 3 effectual constructs, namely: means
orientation, stakeholder partnering and contingency leveraging. This article is
significantly relevant to the proposed study as it provides a benchmark in the
definition of the new venture performance construct. It further provides
additional empirical evidence on how effectuation impacts venture outcomes.

17 Wiltbank, R., Read, S., Dew, N. & Sarasvathy, S.D. (2009). Prediction and control under
uncertainty: Outcomes in angel investing. Journal of Business Venturing, 116-133.

Venture investing plays an important role in entrepreneurship not only because
financial resources are important to new ventures, but also because early investors
help shape the ventures' managerial and strategic destiny. In this study of 121
angel investors who had made 1038 new venture investments, we empirically
investigate angel investors' differential use of predictive versus non-predictive
control strategies. We show how the use of these strategies affects the outcomes
of angel investors. Results show that angels who emphasize prediction make
significantly larger venture investments, while those who emphasize non-predictive
control experience a reduction in investment failures without a reduction in their
number of successes. This article presents some elements of effectuation in
somewhat fresh perspective, considering that the subjects are angel investors as
compared to the more abundant literature focusing on the entrepreneur as an
active new venture creator.

18 Garonne, C., Davidsson, P. & Steffens, P.R. (2010) Do strategy choices matter for nascent
firms? A study on effectuation and causation impacts on new ventures outcomes.
In Langan-Fox, Janice (Ed.) Proceedings of the 7th AGSE International Entrepreneurship
Research Exchange, Swinburne University of Technology, University of the Sunshine
Coast, Queensland.

The authors empirically investigated the effects of effectuation on firm
performance. In this study, newness, a measure of venture sophistication was
introduced as a moderating variable. Utilizing a longitudinal data of nascent firms
over a period of 2 years in Australia, the study found that firms using effectuation
are more likely to reach operational stage than their counterpart using
causation. This paper confirms other research supporting the premise that
effectuation, rather than causation, is a better approach for new venture creation.

19 Rust, A.F. (2010). The impact of following a causation versus an effectuation approach on
the survival of nascent entrepreneurial ventures in dynamic industries. Gauteng, South
Africa: University of Pretoria .

The study consists of a means analysis testing for firm survival in highly dynamic
industries per pure causal or effectual approach and of a variance analysis,
testing for survival as a function of the mixed use of causation and effectuation in
both high and low dynamism industries. It was found that only 2 entrepreneurs out
of a cohort of 1771 follow a pure causal or pure effectual approach. It was also
found that causation is a significantly better predictor of entrepreneurial survival
than effectuation in both high and low dynamism industries. However, the author
was prudent in providing caution that there are several mediating factors not
included in the study (i.e., access to resources) and the nature of the proxy
variables used in the study.


G. Other factors that affect venture outcomes
20 Hechavarria, D.M., Renko, M. & Matthews, C.H. (2012). The nascent entrepreneurship
hub: goals, entrepreneurial self-efficacy and start-up outcomes. Small Business
Economics, 39(3), 685-701. DOI: 10.1007/s11187-011-9355-2

The authors applied elements of goal theory and social cognitive theory to develop
a motivational model of nascent entrepreneurial start-up outcomes. Results of
their study suggest that motivational determinants among nascent entrepreneurs
significantly influence the likelihood of quitting the start-up process versus
continuing nascent entrepreneurial start-up efforts. This study provides empirical
evidence on motivation as a factor to start-up outcomes, regardless of the decision
logic being used. (from SpringerLink)

21 Cooper, A.C., Gimeno-Gascon, F.J. & Woo, C.Y. (1994). Initial human and financial capital
as predictors of new venture performance. Journal of Business Venturing, 9(5), 371395.
http://dx.doi.org/10.1016/0883-9026(94)90013-2

The study utilized a longitudinal study approach, examining general human capital,
represented here by the entrepreneur's education, gender, and race; management
know-how, embodied in the entrepreneur or available through advisors or
partners; industry-specific know-how, reflecting specific experience in similar
businesses; and financial capital. It was found that measures of general human
capital influenced both survival and growth (except for gender, with women-owned
ventures being less likely to grow, but just as likely to survive). Management know-
how variables had more limited impact. Having parents who had owned a business
contributed to marginal survival, but not to growth. Number of partners
contributed to growth but not to survival. Management level, prior employment in
non-profit organizations or not having been in the labor force, and the use of
professional advisors did not have significant effects. Industry-specific know-how
contributed to both survival and growth. Amount of initial financial capital also
contributed to both. This study is identified as reference because it provides initial
pool of evidence on the means dimension of effectuation. It also provides a
definition of venture performance outcomes, namely: failure, marginal survival,
and high growth, which may prove useful in the proposed study.

22 Snchez, V.B. & Sahuquillo, C.A. (2012). Entrepreneurial behavior: Impact of motivation
factors on decision to create a new venture. Investigaciones Europeas de Direccin y
Economa de la Empresa, 18(2), 132138. http://dx.doi.org/10.1016/S1135-
2523(12)70003-5

The authors assert that forming a new company represents a decision based on
both personal and subjective motives, as well as on the environment and further
argue that regardless of the origin, a founder's motivation represents a
commitment to a project or business idea, and thus dictates the future success of
the enterprise. In this article, the authors investigated the motivational profiles of
101 entrepreneurs who have founded companies, and why they choose to create
new industrial enterprises. Results of the study reveal that making money or being
one's own boss does not appear to be sufficient reasons to create a new venture
and that the motivation content of entrepreneurs influences their decision to start
a business. This article is included among the relevant references for the proposed
study since it offers evidence on the role of motivation in the pursuit of forming and
creating a venture. Initially, motivation is premised to be a factor to a nascent
entrepreneurs persistence or the lack thereof in starting a new venture. Whether it
is an immediate factor or a moderating factor remains to be established.

23 Dew, N., Read, S., Sarasvathy, S.D. & Wiltbank, R. (2008). Outlines of a behavioral theory
of the entrepreneurial firm. Journal of Economic Behavior & Organization, 66(1), 3759.
http://dx.doi.org/10.1016/j.jebo.2006.10.008

With reference to A Behavioral Theory of the Firm (BTF), Cyert and March [Cyert,
R.M., March, J.G., 1963. A Behavioral Theory of the Firm. Prentice-Hall, Englewood
Cliffs, NJ] where several ideas for explaining the behavior of established firms
within an environment of well-defined markets, stakeholder relationships,
technologies, and so on are presented. this paper, outlines a behavioral theory of
the entrepreneurial firm that emphasizes transforming environments rather than
acting within extant ones. In particular, the authors explicate three ideas that
parallel key concepts in BTF, to wit:: (1) accumulating stakeholder commitments
under goal ambiguity (in line with a political conception of goals), (2) achieving
control (as opposed to managing expectations) through non-predictive strategies,
and (3) predominately exaptive (rather than adaptive) orientation. This article is
deemed helpful in the elaboration and explication of the control and predictions
aspects in effectuation theory.


H. Entrepreneurial logic differences between expert and novice entrepreneurs
24 Dew, N., Read, S., Sarasvathy, S.D. & Wiltbank, R. (2009). Effectual versus predictive logics
in entrepreneurial decision-making: Differences between experts and novices. Journal of
Business Venturing, 24(4), 287309. http://dx.doi.org/10.1016/j.jbusvent.2008.02.002

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 through think
aloud protocols with 27 expert entrepreneurs and 37 MBA students. The results on
the expert entrepreneurs validate the original study of Sarasvathy (1999, 2001).
The results on the MBA students may have been moderated by MBA training
methodologies and that these students may not be entrepreneurs or nascent
entrepreneurs.


I. Critical analysis of existing effectuation literature
25 Perry, J.T., Chandler, G.N. & Markova, G. (2011). Entrepreneurial Effectuation: A Review
and Suggestions for Future Research. Entrepreneurship Theory and Practice, 36(4), 837-
861.

This paper asserts that effectuation represents a paradigmatic shift in the way
that we understand entrepreneurship. The authors claim that since its
introduction, few researchers have attempted to empirically test effectuation. The
review was to lay down what has been done so far on this aspect of
entrepreneurship and suggest how to design and conduct empirically rigorous
effectuation studies consistent with the developmental state of the research
stream.

26 Ghorbel, F. & Boujelbne, Y. (2013). A comprehensive literature review of effectuation
theory from 1999 to 2011. International Journal of Entrepreneurial Venturing, 5(2), 168-
194. DOI: 10.1504/IJEV.2013.053593

In this article, the authors related the Effectuation Theory as espoused by Dr. Saras
Sarasvathy, emphasizing that entrepreneurs are entrepreneurial, as differentiated
from managerial or strategic, because they think effectually. They recount that
effectuation starts from the position that the future is contingent in which the
essential characteristic of the future, in this view, is its unpredictability and that
effectuation is based on transforming uncertainty into opportunities. As a result
of their review of effectuation literature, they proposed a new conceptual
classification scheme, in order to classify past and current developments in
effectuation research and suggested that researchers should concentrate on
empirical studies on effectuation theory.