An empirical investigation of determinants of effectual and causal decision logics in online and high-tech start-up firms

Frese, Tobias and Geiger, Ingmar and Dost, Florian (2020) An empirical investigation of determinants of effectual and causal decision logics in online and high-tech start-up firms. Small Business Economics, 54. pp. 641-664. ISSN 0921-898X

Abstract

Scholars have criticized effectuation research for being insufficiently embedded in a nomological network of practically relevant antecedents. To address this research gap, the current study uses a mixed-methods design. First, a qualitative study with 20 venturing experts (entrepreneurs and investors) validates various effectuation logics and uncovers the following four antecedents of effectuation and causation: founders’ perceived uncertainty, entrepreneurial experience, management experience, and investor influence. Second, a large-scale quantitative study of founders in online, software, and high-tech start-ups (n = 435) provides statistical support for the identified antecedents, using structural equation modeling and multigroup comparisons over early and later venture stages. The study confirms the multifaceted nature of effectuation; experimentation is the only effectual logic that reflects influences of all the determinants. Founders’ prior experiences affect experimentation and causation in the early venture stage, but not during the later stages. Investor influence displays the broadest array of effects on the decision logics, offering both theoretical embeddedness for effectuation and a new, practically relevant driver.