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Keywords: effectuation, causation, business growth, innovation
Introduction
This study investigates the impact of a causal versus effectual decision style of 126 studied SMEs. Effectuation (Sarasvathy, 2001) is originally perceived an operating model covering the early stages of an organisation's growth. However, recent studies have concentrated on effectuation research in the context of an existing business. This paper adds the effectuation and causation to the context of established companies and explores their effect to innovation and growth. The main contribution is to build a model, which shows that causation and Chandler's (2011) dimensions of effectuation do have an impact on firm level innovativeness and ultimately business growth. The study consists of surveys for two groups; managers and higher executives, one to four informants from each company. Based on a sample of N=231 answers analysed on company level, the findings indicate that causation and flexibility positively affects to innovation, which leads to business growth.
There is relatively little previous literature combining effectuation to business growth. In a past few years, the literature has focused on combining effectuation and other constructs like innovation, which is on the other hand widely seen as one of the key sources of business growth (Dew and Sarasvathy, 2007; Gabrielsson and Gabrielsson, 2013; Helmersson and Mattson, 2013). This research aims to fill this gap in the literature by constructing an empirical relationship between effectuation and causation with innovation and business growth in the context of established companies. Roach, Ryman and Makani (2016) studied recently effectuation, innovation and firm performance, but they excluded causation, which is found as essential part of the comparison of effectual heuristics. Therefore we contribute to the current literature by concluding this element to our study.
Literature review
Business growth constitutes one of the central topics of entrepreneurship research. As interest in entrepreneurship has intensified, new theoretical perspectives have emerged explaining entrepreneurial behaviour (Leitch, Hill and Neergaard, 2010; Fisher, 2012). Based on the literature review, we identified five common business growth indicators in order of prevalence: (1) sales, (2) employees, (3) profit, (4) assets, and (5) equity (Davidsson and Wiklund 2000; Shepherd and Wiklund, 2009; Weinzimmer et al. 1998). The time span, over which growth is measured, varies from one to several years. Weinzimmer et al (1998) found that...