Causation And Effectuation Assignment: Understanding The Dynamic Of Business Management Issues
Task: In economics and management, scholars have traditionally assumed the existence of artefacts such as firms, organisations and markets. Several commentators (ØysteinHøvig, IngerBeatePettersen and JarleAarstad, 2017 and Sarasvathy, 2019) argue that explanation for such artefacts requires a novel approach to the concept of venture creation.
Drawing on the concept of causation and effectuation, critically discuss this statement and its relevance to understanding the dynamic of business management issues in the contemporary global business environment.
This causation and effectuation assignment explores how planning must be explored to reduce business risks while establishing a new venture. There are several scholars in the field of management and economics, who traditionally acknowledge the existence of the artefacts comprising the organizations or firms and markets (Berglund, Bousfiha and Mansoori, 2020). On the other hand, there are few commentators who have argued that to explain these artefacts there is a need for a novel approach towards the idea of venture creation. In this essay, with reference to the concepts of causation and effectuation, the relevance of such artefacts will be discussed. The relevance of these artefacts and the concept of causation and effectuation in the contemporary world’s business management issues will be discussed.
Explaining the artefactsin this causation and effectuation assignment
In the theories of management as well as in economics used on this causation and effectuation assignment, the scholars have assumed traditionally that the artefacts like firms or organisations and market exists. However, it has been argued by Liu (2019), that the concept of effectuation explains the reason for creating such artefacts. The foundation of the concept of causation lies in its logic of predicting. On the other hand, effectuation is based on the logic of controlling. The problem or the main question behind anything that happens or we do is regarding its creation. The problem of creation is the main question at the end. Sustenance, striving, perseverance and putting the efforts as one moves along and finally manages to achieve one’s intention, is the action. This is where effectuation is at work. However, it all started with creation which is the first intention. This is how causality comes into play. The idea of causation and effectuation can be explained better with an example. For a business consultant it is easy to advise an entrepreneur or business organisation on decision making. The reason is the business consultant has already been given a situation and a set of preferences out of which the best has to be decided. However, in case the situation is not yet created, i.e., the firm has not yet been created for which the decision has to be taken or the set of preferences do not exist, the causation has to do its work first (Dao, 2022).
The decision making in the field of management or economics could be discussed at various levels. The decisions could be taken at the individual level, firm level, market or industry level and economy level. However, every decision has one common underlying fact. This fact or foundational concept is the creation of the artifacts. The central artefacts identified on this causation and effectuation assignment need to first exist before anything else is decided upon. The business contexts need to be created so that their existence could facilitate the decision making. According to Shirokova et al (2020), causation considers a specific effect as given and refers to the process which concentrates mainly on choosing between the means of creating that effect. Effectuation as defined by Hauser, Eggers and Güldenberg(2020), consider a set of means to be given. This process on the contrary, emphasizes on choosing between the different effects which could be created with the given set of means. These two concepts could be well explained with the help of real-life examples from business. For instance, when an entrepreneur decides to start a business or produce something, the choice is between the means of producing or carrying out the business. In case of production of shoes, the producer has to decide the means or techniques by which the shoes could be manufactured. Here the given effect is making shoes and the choice of means refers to selecting the ways or techniques or inputs for manufacturing shoes. This is the concept of causation. On the other hand, effectuation is the situation where the inputs or the means of production are given. For example, leather is available but with this input which effect will be created is to be decided. The manufacturer could make shoes or bags. The choice here is between the effects and not the means.
As per Nelson and Lima (2020), in this contemporary world, considering business management, the concept of causation and effectuation is of utmost relevance. The curricula in the field of management or economics often overlooks the significance or disregards the relevance of causation and effectuation in creation of artifacts. However the research doe on this causation and effectuation assignment shows the decisions which are taken need to consider these concepts. For instance, in economics it is not discussed that how a firm would decide upon its pricing strategy if the firm does not even exist. The problem of creation or approach towards venture creation is important because unless the venture is created the decisions cannot be taken. To explain further, before the employees are recruited, the organization needs to exist, before production the manufacturing unit needs to exist, before admitting students the school has to be set, and much more examples could be cited based on the problem of creation. As stated by Zhang and Van Burg(2020), in economics and in business, the concept of effectuation is mainly implemented to develop the components of the business model. These include value proposition as well as development of the specific segment of the market. Causation on the contrary, is used for developing the cost structures, for development of activities as well as key resources. The use of the causation concept also includes customer segments and value propositions often.
To conclude this causation and effectuation assignment, entrepreneurs going by the causation approach concentrate on the predefined goals. They further intend to explore the best means out of the choice set to attain the goals. However, the effectuation approach leads the entrepreneurs to emphasize on the means available rather than the goal. The goals in this case are not predefined. The available means at hand would be utilised for materialising into one or more than one goal. It can further be said from this essay that for entrepreneurs the use of effectuation is more important than causation. This is because, though there is a predefined goal in case of the effectuation process, there is sufficient flexibility offered to the entrepreneur. This facilitates creating one or more than one probable, feasible effect. This creation of venture is irrespective of the original or initial goal which was set. Therefore, it can be reported on this causation and effectuation assignment that the change is easy and shapes the goals over time and with time is allowed in effectuation.
Berglund, H., Bousfiha, M. and Mansoori, Y., 2020. Opportunities as artifacts and entrepreneurship as design. Academy of Management Review, 45(4), pp.825-846.
Dao, B.A.K., 2022. Causation and effectuation. In Modern Classics in Entrepreneurship Studies (pp. 209-228). Palgrave Macmillan, Cham.causation and effectuation assignment.
Hauser, A., Eggers, F. and Güldenberg, S., 2020. Strategic decision-making in SMEs: effectuation, causation, and the absence of strategy. Small Business Economics, 54(3), pp.775-790.
Liu, Y.T., 2019. Exploring the role of original aspiration in effectuation tendency. International Entrepreneurship and Management Journal, 15(3), pp.977-1016.
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.
Shirokova, G., Osiyevskyy, O., Laskovaia, A. and MahdaviMazdeh, H., 2020. Navigating the emerging market context: Performance implications of effectuation and causation for small and medium enterprises during adverse economic conditions in Russia. Strategic Entrepreneurship Journal, 14(3), pp.470-500.
Zhang, S.X. and Van Burg, E., 2020. Advancing entrepreneurship as a design science: developing additional design principles for effectuation. Small Business Economics,causation and effectuation assignment. 55(3), pp.607-626.