An investigation of the differences between
effectuation and bricolage in startups
MSc BA Small Business & Entrepreneurship
2013
University of Groningen H. de Bruin
Student number: 2218305 Date: 21-06-2013
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There are three kinds of people in this world, those who make it
happen, those who see it happen, and those who wonder what has
happened. We all know where entrepreneurs fit in.- Mary Kay Ash,
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Abstract
This paper focuses on a comparison between effectuation and bricolage. These two emergent entrepreneurial behavior approaches have been receiving increasingly more attention in the research field of entrepreneurship. The purpose of this study is to discover how entrepreneurs use effectuation and bricolage and to what extend do they use it. Through multiple interviews and desk research, an interesting new point of view has emerged with regards to these two theories. Future research has to prove whether the assumptions made in this study may be regarded as the truth. It seems like bricolage is not that emergent as been described in the theory by Baker and Nelson (2005). I propose that bricolage is a hybrid mode between effectuation (emergent) and causation (traditional). Indicating that the differences between bricolage and causation are smaller than the differences between effectuation and causation. Furthermore, a distinction between high knowledge intensity (HKI) entrepreneurs and low knowledge intensity (LKI) entrepreneurs is outlined. With regards to the theories, two contributions arise. First, I propose that HKI entrepreneurs focus more on their means instead of their goals in comparison with LKI businesses. Second, I propose that HKI entrepreneurs engage in co-creation of products with customers and suppliers which would otherwise not be available to a larger extent than LKI entrepreneurs do.
Key words: Entrepreneur, effectuation, bricolage, start-ups, causation. Word count: 82 pages – 40.722 words
Acknowledgements: Many individuals have offered their expertise during the development of this paper. First, I would like to thank all the interviewees who allowed me to take a look in their
4 Table of contents 1. Introduction ... 5 Research question ... 6 2. Theory ... 7 Entrepreneurship ... 7 Entrepreneurial behavior ... 7
Entrepreneurial process approaches ... 9
Traditional approach ... 9
Alternative approaches ... 10
Traditional versus emergent ... 11
Effectuation ... 13
Bricolage ... 16
Resemblances between effectuation and bricolage ... 19
Differences between effectuation and bricolage ... 21
Research framework ... 23
3. Method ... 24
Context ... 24
Case selection ... 25
Analysis of the cases ... 25
4. Results ... 29
General results ... 44
Effectuation ... 45
Bricolage ... 46
Differences between effectuation and bricolage ... 47
5. Discussion and conclusion ... 50
Bricolage as hybrid between an emergent and a traditional approach ... 50
High knowledge intensity versus low knowledge intensity ... 52
Theoretical implications ... 53
Managerial implications ... 53
6. Limitations and further research... 54
7. References ... 55
Appendices ... 59
Appendix I: Codebook ... 59
Appendix II: Operationalization codebook to the interview ... 60
Appendix III: Interview ... 63
Appendix IV: Guidelines for the interviewer ... 66
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1. Introduction
Entrepreneurial behavior has a considerable amount of influence on whether organizations are filed for bankruptcy or flourishing like they have never done before (Sarasvathy, 2008). The amount of resources that an newly formed organization possesses is not a key element in making that organization successful. For instance, the amount of money or human capital is not always the decisive factor in whether an organization will survive or fail, especially in the case of resource constraint start-up businesses. IKEA and Starbucks are well known examples of severe resource constraint start-ups which turned out to be successful multimillion dollar businesses (Sarasvathy, 2008). For the purposes of this paper entrepreneurial behavior is defined as: “human behavior involved in identifying and exploiting opportunities through creating and developing new ventures (Bird & Schjoedt, 2009) as well as exploring and creating opportunities while in the process of emerging organizations (Gartner, Carter, & Reynolds, 2010).”
Over the past decade, a number of different theoretical perspectives have emerged to describe the logic and behavior underlying the entrepreneurial behavioral processes. A distinction has been made between the traditional approach to entrepreneurship (the so-called causal approach (Sarasvathy, 2001)) and the alternative approach to entrepreneurship (the so-called emergent approach (Sarasvathy, 2001)). Two of these emergent approaches to entrepreneurship are the focus of this study: Effectuation and bricolage. Effectuation is defined as the concept of handling (scarce) which take a set of means as given and focus on selecting between possible effects that can be created with that set of means (Sarasvathy, 2001). Bricolage is defined as making do by applying combinations of resources at hand to new problems and opportunities (Baker and Nelson, 2005).
Understanding how entrepreneurs run their businesses is related to a variety of relevant business, social or political trends. This relatedness is why it is such an important field to study. The credit crunch has its impact on the current entrepreneurial climate. Small businesses have increasingly more trouble in acquiring funds from financial institutions. According to a recent study of van den Poel (2011), financial institutions will cut their funds given to Dutch small businesses (MKB) with 20% in 2012. Young and/or small businesses have less resources at hand than they used to have.
Entrepreneurs need to be more creative in order to survive. This survival is essential for the economy. Wong, Ping Ho and Autio (2005) argue that entrepreneurship can contribute to the economic growth in four ways: introducing innovations (developing technological processes), introducing variations (new products), creating competition (new ventures) and enhancing rivalry (efficient use of resources). Next to a business trend, this topic is also relevant as a social trend. The current credit crunch leads to higher rates of unemployment. Thurik, Carree, van Stel and Audretsch (2008) state that high unemployment rates lead to start-up activity of self-employed individuals, a phenomenon called “the refugee” effect. This, in turn, may contribute to economic growth.
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investment than those created through processes of causation. Effectuation processes allow the economy to experiment with more numbers of new ideas at lower costs’. This statement implies that funding effectuated businesses (alternative) is less costly than funding causational businesses (traditional). The time of spending money rather reckless is gone, it is time for these funding institutions to spend their budget wisely. Stimulating alternative approaches to entrepreneurship could play a significant role in this aim.
The purpose of this study is to discover how entrepreneurs use effectuation and bricolage and to what extend do they use it. The use of alternative approaches ‘effectuation’ and ‘bricolage’ will be tested in the area of start-ups. The sample will be drawn from Dutch entrepreneurs, which is a limitation of this study. The findings of this research will hopefully deepen the debate on the applicability of this theory in practice.As mentioned before, understanding how entrepreneurs run their businesses is related to a variety of relevant business, social or political trends. This indicates that the subject relates to larger issues than the research field itself. This relevance makes the purpose of this study worth pursuing. From a theoretical perspective, the findings help to develop an even more integrative perspective of the behaviors that underlie the entrepreneurial process in uncertain, resource-constrained environments. To the best of my knowledge, the concepts of effectuation and bricolage have never been systematically compared in this context. Exploring this gap will deepen the debate about these important emerging theories and provide directions for further research. Moreover, the findings may also help entrepreneurs or managers. This study will have several contributions to the practical field. The findings help entrepreneurs to run their business in an alternative way which enables them to survive in resource-constrained environments. For example, entrepreneurs may benefit from being active community builders. By building a community of interested parties around their ventures, they benefit from feedback and word-of-mouth advertising. Finally, entrepreneurs and resource providers (e.g., venture capitalists) should be conscious of the potential risks and implications of excessive amounts of capital in a new venture.
Research question
The research question for this study will be:
How are the concepts of bricolage and effectuation used in practice amongst start-ups firms in the Netherlands, and furthermore, are the theoretical differences between effectuation and bricolage
confirmed by the practice?
This main research question will be supported by the following sub-questions:
1. How is bricolage applied in practice and in which functions/context of an organization is it mainly used?
2. How is effectuation applied in practice and in which functions/context of an organization is it mainly used?
3. What kind of characteristics do firms display which do not apply the concepts of bricolage and effectuation?
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2. Theory
The theory section includes the elaboration of the concepts which are involved in this study. It starts with defining entrepreneurship and entrepreneurial behaviour. After that, it narrows down to the debate of traditional and alternative approaches to entrepreneurship. It ends with the main concepts of this thesis: bricolage and effectuation. Both theories will be elaborated and compared. Their similarities and differences will be mapped in the last part of this section. The theory section ends with a conceptual model.
Entrepreneurship
As stated in the introduction, entrepreneurs are able to chose between traditional and alternative approaches to entrepreneurship. But what is meant by entrepreneurship? Entrepreneurship can be defined in many different ways. Davidsson (2005) defines entrepreneurship as “the competitive behaviors that drive the market process”, Eckhardt & Shane (2003) define it as “the discovery, evaluation, and exploitation of future goods and services”, whereas Bjerke and Hultman (in Carter & Jones-Evans (2006)) define entrepreneurship as “the means to drive change requiring mental skills” and Perren (in Carter & Jones-Evans (2006)) as “the personal search for independence and
identification of market opportunities”. Krueger, Reilly and Carsrud (2000) define it as a way of thinking, a way of thinking that emphasizes opportunities over threats.
From these definitions can be concluded that entrepreneurship can be approached from several different perspectives. This study uses the well known definition of entrepreneurship formulated by Shane and Venkataraman (2000): ‘the process by which opportunities to create future goods and services are discovered, evaluated and exploited’. Fundamental to this approach are four key assumptions: 1) Entrepreneurial opportunities exist – but are not known to everyone. 2) People have different perceptions on the value (financial or non-financial) of an opportunity. 3) Some people will choose to pursue these opportunities. 4) Acting on these opportunities will result in differing
outcomes, both profitable and unprofitable. Shane and Venkataraman (2000) argue that the concern should be with three sets of research questions about entrepreneurship: 1) Why, when and how opportunities for the creation of goods and services come into existence. 2) Why, when and how some people and not others discover and exploit these opportunities. 3) Why, when and how different modes of action are used to exploit entrepreneurial opportunities. Especially the why and how part fit well with the context of this study’s main research question: why entrepreneurs engage in alternative perspectives on entrepreneurship and how do they do so. Entrepreneurial behavior is central to this definition and therefore suitable for using in this study.
Entrepreneurial behavior
Entrepreneurial behavior is defined as: “Human behavior involved in identifying and exploiting opportunities through creating and developing new ventures (Bird & Schjoedt, 2009) as well as exploring and creating opportunities while in the process of emerging organizations (Gartner, Carter, & Reynolds, 2010). So, at which point is an individual engaging in entrepreneurial behavior?
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Carland, Hoy, Boulton and Carland (1984) make a distinction between small business owners or managers and entrepreneurs in the field of entrepreneurial behavior. Carland et al. (1984) state that a small business owner is an individual who establishes and manages a business for the principle purpose of furthering personal goals. The business must be the primary source of income and will consume the majority of one’s time and resources. The owner perceives the business as an extension of his or her personality, intricately bound with the family needs and desires (Carland et al., 1984). On the contrary, an entrepreneur is an individual who establishes and manages a business for the principal purpose of profit and growth. The entrepreneur is characterized principally by innovative behavior and will employ strategic management practices in business. The definitions of entrepreneurship and entrepreneurial behavior are focused on opportunities: the discovery, (evaluation) and exploitation of opportunities, in line with ‘the principal purpose of profit and growth’ performed by the real entrepreneur according to Carland et al. (1984). Carland et al. (1984) argue that an individual having a small business which is independently owned and operated, not dominant in its field, and does not engage in any new marketing or innovative practices, is not engaging in entrepreneurial behavior because there is a lack of profitable/growth focus and a lack of innovative strategic practices. Entrepreneurial behavior can be explained by entrepreneurial traits (Obschonka, Silbereisen and Schmitt – Rodermund, 2012). Entrepreneurs share a constellation of personality traits. In other words, some people are naturally more entrepreneurial than others. What are these traits? Chell (2008) argues that there are three traits that are important. The first of these is need for achievement. People with high levels of need for achievement are achievement motivated, undertake tasks of moderate difficulty, actively seek out taking responsibility and welcome feedback on their actions. Second, there is internal locus of control. Such individuals believe that the achievement of a goal is due to their own actions. In contrast, those with an external locus of control believe that outside evens or ‘fate’ determines the likelihood of achieving a goal. Individuals with an internal locus of control are more likely to become entrepreneurs because they believe they have control over their own destiny. Internal locus of control is related to self efficacy, which is the perceived ability to execute a target behavior (Azjen, 1991). The final trait is risk-taking propensity. The argument here is that because risk taking is so fundamental to entrepreneurship it must follow that entrepreneurs are individuals with greater propensities to take risks. Small businesses face a lot of calculated risk and uncalculated uncertainty. For example, small businesses tend to be price takers (market uncertainty), reliant on few customers (customer uncertainty) and have a wide range of aspirations (aspirational uncertainty) for their business. Entrepreneurs seem to be less hesitant when it comes to dealing with risk and uncertainty. Your fears may determine if, when and how you act on the opportunities you do see.
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Entrepreneurial process approaches
Over the past decade, a distinction has been made to describe the logic and behavior underlying the entrepreneurial process. One the one hand, there is the traditional approach to entrepreneurship (the so-called causal approach (Sarasvathy, 2001)) and on the other hand the alternative approach to entrepreneurship (the so-called emergent approach (Sarasvathy, 2001)).
Traditional approach
The traditional approach of entrepreneurship emphasizes on economic thinking how an
entrepreneur or business takes on entrepreneurial action by searching for gaps in the market. This specific gap refers to an area where the demand for a product/service exceeds the supply (Casson, 1982). This gap is also referred to as an opportunity. When the entrepreneur has discovered the opportunity, he takes action by obtaining resources to establish an legal entity that will exploit this opportunity by developing and delivering a product or service which fits with the identified
opportunity. Eventually, this will create returns from the venture. A simple step-by-step guide for a traditional approach would be: 1) Formulate a goal which the entrepreneurs wants to achieve, 2) Come up with a set of alternative means or causes that fulfill that goal, 3) Come up with constraints on the possible means (usually imposed by the environment), 4) Come up with criteria for selecting between the means (usually maximization of expected return in terms of the predetermined goal) (Sarasvathy, 2001). It is a straight forward, well known example of how to exploit an opportunity. Traditional processes are effect dependent. The effect or desired goal is the starting point. Planning is an essential part of the traditional approach. Planning should come before strategic decisions and execution. ‘Traditional’ entrepreneurs have a well-formulated plan and one or more clear pre-set goals. A part of this well-formulated plan is making internal and external analysis. For example, competitor, customer or internal resources analyses in order to obtain as much as knowledge and therefore certainty as possible. Forecasting has a considerable high priority. A common saying in causational logic theories is:”To the extent we can predict the future, we can control it” (Sarasvathy, 2001). Knowledge is the key to success. The causational logic is in line with the uncertainty reduction theory, which suggests that individuals are motivated to seek information/knowledge to reduce uncertainty (Daft and Lengel, 1986). The theory of causation (Sarasvathy, 2001) is an illustrative example of the traditional approach to entrepreneurship. Causation processes take a particular effect as given and focus on selecting between means to create that effect. For example, the task of cooking a menu at a restaurant. Causation implies that there are preset menus. The chef needs to list the ingredients needed (means), shop for them and then actually cook the meal (effect). Moreover, the discovery approach of Alvarez and Barney (2007) is also a traditional approach to
entrepreneurship. The discovery theory assumes that the goal of entrepreneurs is to discover and exploit opportunities. The theory assumes that entrepreneurs who discover opportunities are significantly different from others in their ability to either see opportunities or, once they are seen, to exploit these. Finally, the decision making context within which entrepreneurs choose to exploit an opportunity is assumed, by discovery theory, to be risky (calculated), rather than uncertain (uncalculated). Furthermore, Shah and Tripsas (2007) describe “classical approach” as a process of taking advantages of opportunities. It is conceptualized as occurring in two stages: the
discovery/recognition of the opportunity and the evaluation of whether or not to exploit the opportunity and form a firm (Shane and Venkataraman, 2000 in Shah and Tripsas, 2007).
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entrepreneurship begins with the discovery of an opportunity. This opportunity is not visible for all individuals due to asymmetries in the knowledge base of individuals. The individual who discovers the opportunity evaluates the opportunity and judges if the opportunity is worth pursuing. If it is, due to for example resource availability, this individual will exploit the opportunity. It starts with a goal: exploiting the discovered opportunity and continues with the possible allocating of resources to obtain this goal. The alternative approach ‘causation’ will be the counterpart of the emergent
approaches bricolage and effectuation.
Alternative approaches
Alternative theoretical perspectives for describing entrepreneurial action suggest that under certain conditions, entrepreneurs take a different route to identifying and exploiting opportunities.
Alternative perspectives are relatively new in the research field of entrepreneurship. These
perspectives are called emergent, because the opportunities in this perspective may call for prompt action and may arise unexpectedly or along the way. Henry Mintzberg (1978) defined emerging approaches as followed: An emergent approach does not originate in the mind of the strategist, but in the interaction of the organization with its environment. He implies that an emergent strategy is created along the way and not up front.Emergent approaches which have been given a lot of attention the last decade are the concepts of effectuation by Sarasvathy (2001), bricolage by Baker and Nelson (2005), user entrepreneurship by Shah and Tripsas (2007) and the opportunity creation theory by Alvarez and Barney (2007). The former two concepts will be elaborated thoroughly later on since these concepts are the main focus of this study. For now, the concepts of effectuation and bricolage will be discussed briefly. A concept of handling (scarce) resources is the concept of ‘Effectuation’, as stated by Sarasvathy (2001). Effectuation processes take a set of means as given and focus on selecting between possible effects that can be created with that set of means. The example of illustrating the concept of causation is used to explain effectuation. Effectuation implies that the restaurant does not have any preset menus. The chef simply looks in the kitchen for possible ingredients and utensils and then cook a meal (effect). Here, the chef has to imagine possible menus based on the given ingredients (means). Hence, causation starts from effect to means and
effectuation starts from means to possible effects. Baker and Nelson (2005) introduced the concept of ‘Entrepreneurial Bricolage’. This concept explains the fact that entrepreneurs are able to created something from nothing. With this ‘nothing’ they mean resources at hand that are available very cheaply or for free, often because others judge them to be useless or substandard. An illustrative rule of the so-called bricoleur’s game is: “Always to make do with ‘whatever is at hand.’” User entrepreneurship (Shah and Tripsas, 2007) implies that an user entrepreneurs develops a product for his own personal use, without any formal acknowledgment or evaluation of a commercial
opportunity. After a while the potential for making money with it arises (opportunity) and he starts to exploiting it. It starts with the fulfillment of the unmet user needs. This user experiments and creates a novel solution to satisfy his own needs. Friends and family take notice of this new product and give feedback which leads to improvement. Moreover, it leads to the diffusion of the innovation. More people start to get attracted to the product, the opportunity is discovered and the user starts to form a firm. At this point the user becomes an entrepreneur, hence the term user
entrepreneurship. This is an emergent perspective on entrepreneurship because it is an non-linear and path dependent process. Alvarez and Barney (2007) have also elaborated on an emergent approach on entrepreneurship: the opportunity creation theory. This theory suggests that
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exploring ways to produce new products or services and not necessarily by exogenous shocks, on which most of the entrepreneurial models focus. In the creation theory, entrepreneurs do not search for opportunities. They act and observe how consumers and markets respond to their actions. Creation theory assumes that entrepreneur’s actions are the essential source of these opportunities. Creation opportunities are social constructions that do not exist independent of entrepreneur’s perceptions (Aldrich and Kenworthy, 1999; Berger and Luckmann, 1967 in Alvarez and Barney, 2007). However when entrepreneurs act to exploit these socially constructed opportunities, they interact with an environment—the market—that tests the truthfulness of their perceptions. If their
perceptions are misleading, the entrepreneurs adapts his actions and generates an altered product or service. So far, seven theories have been discussed and are summarized in table 1.
Authors Traditional Emergent
Sarasvathy (2001) Causation Effectuation
Shah and Tripsas (2007) Classical approach User entrepreneurship
Baker and Nelson (2005) - Bricolage
Alvarez and Barney (2007) Opportunity discovery Opportunity creation
Table 1. Traditional versus emergent strategies
In this study, the causational approach will be used as the counterpart of effectuation and bricolage. The causational approach is used as an antagonist is all of the studies of which bricolage and effectuation are compared to a traditional approach (Fisher, 2012)(Hindle & Senderovitz, 2010)(Rotemberg – Shir & Wennberg, 2011).
Traditional versus emergent
Traditional and emergent approaches differ in several points of view. Table 2 maps the differences between traditional and emergent approaches. In this study the emergent approaches bricolage and effectuation will be researched. As a typical counterpart, the traditional approach of causation is used due to its widespread acknowledgment as traditional approach in literature (Sarasvathy, 2001)(Fisher, 2012)(Hindle & Senderovitz, 2010)(Rotemberg – Shir & Wennberg, 2011).
Traditional (causation) Emergent (bricolage and effectuation)
Goal-setting Well -defined goals up front Not fully necessary to have.
Planning Essential part. Should become
before strategic decision making and execution
Not fully necessary to plan thoroughly.
Ability to control or predict the future
Forecasting is very important. “To the extent we can predict the future, we can control it.”
Not necessary to forecast. The future is too complex.
Conducting analyses Making internal and external analyses to predict the future
Not sensible to make extended analyses. Trial-and-error with products/services to receive market response
Resources Well-defined Not explicitly defined
Opportunities Discovered Created
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From this overview it looks like a traditional approach will be the most usual approach to pursue. It is more elaborate on what to do and how to do. An emergent approach will be: “Just try out some stuff, see if it works, and if it does not, adapt the product / service until it works and there you have your opportunity”. But why do certain entrepreneurs pursue an emergent approach? A possible answer to this elementary question may lie in the bounded rationality theory of Herbert Simon (1955).
By the middle 1950’s a theory of bounded rationality had been proposed as an alternative to classical omniscient rationality. Bounded rationality is referred to as the limits upon the ability of human beings to adapt optimally or even satisfactorily to complex environments (Simon, 1991). An entrepreneur simply cannot know everything. The entrepreneur has to deal with not knowing everything. There is always some sort of uncertainty. What is unusually defined as uncertainty is a lack of knowledge only on the probability of the outcomes (Grandori, 2001). This is in contrast with the statement of classical omniscient (perfect) rationality uncertainty. Simon (1969) argues that the classical omniscient rationality is impossible due to ‘computational complexity’. Computational complexity refers to the number of actions/states of the world combinations: it thus includes the number of alternative moves available to a decision maker. Computational complexity is ubiquitous in the environment of most businesses and therefore he states that it is impossible to know
everything. Computational complexity is related to Knightian or epistemic uncertainty. This type of uncertainty refers to partial knowledge of the world, the lack of knowledge on cause-effect relations and therefore on what the relevant alternative moves and parameters for evaluating them might be all together (Grandori, 2010). This is in line with Simon (1955) who argues that an entrepreneur needs to look for a ‘good’ move instead of seeking for the ‘best move’. Simon calls this decision making strategy ‘Satisficing’. Grandori (2010) supports Simon by arguing that rationality has little to do with knowing everything, but a lot to do with following good rather than bad procedures.
Empirical studies showed that actual businesses decision making to conform reasonably well with the assumptions of bounded rationality, but not with the assumptions of perfect rationality (Simon, 1978).
Looking at traditional and alternative approaches to entrepreneurship from this point of view may justify why entrepreneurs chose to act in an alternative way. Why would an entrepreneur want to find out everything there is? Bounded rationality theory (Simon, 1955) combined with epistemic uncertainty tells us that an individual cannot simply know everything. He or she will only have partial knowledge of the internal and external environment. There will always be an opportunity or space for contingencies, such as rapidly changing customer demands or evolutionary technological
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always engage in some kind of planning or analyses even though they are pursuing an alternative approach, such as effectuation
Effectuation (Sarasvathy, 2001) and bricolage (Baker and Nelson, 2005) are two alternative approaches to entrepreneurship which have had a considerable amount of attention in research studies over the last decade. These two approaches enable resource-constraint businesses to survive and even grow. The focus of this master thesis will be to examine concepts of effectuation and bricolage. In the upcoming chapters, the characteristics of both approaches will be explained. Furthermore, the resemblances between effectuation and bricolage will be mapped. Lastly, all though the approaches seem a like at first sight, the differences between them will be explained.
Effectuation
A concept of handling (scarce) resources is the concept of ‘Effectuation’, as stated by Sarasvathy (2001). Effectuation processes take a set of means as given and focus on selecting between possible effects that can be created with that set of means. As stated earlier on, effectuation implies that a restaurants’ chef simply looks in the kitchen for possible ingredients and utensils and then cooks a meal (effect). Here, the chef has to imagine possible menus based on the given ingredients (means). Hence, effectuation starts from means to possible effects. In contrast with causation which starts from effects to means. Instead of focusing on goals, the entrepreneur exerts control over the available set of means—the things over which the entrepreneur has control (Sarasvathy, 2001). An entrepreneur engaging in effectuation is called an effectuator. An effectuator is defined as ‘an actor, who seizes contingent opportunities and exploits any and all means at hand to fulfill a plurality of current and future aspirations, many of which are shaped and created through the very process of economic decision making and are not given a priori’ (Sarasvathy, 2001). The effectuator merely pursues an aspiration and visualizes a set of actions for transforming the original idea into a firm – not into the particular predetermined or optimal firm but a very generalized aspiration of a firm. This aspiration may change over time. Goals change, are shaped and constructed over time, and are sometimes formed by chance (Fisher, 2012) The originated idea (or set of causes) does not imply any one single strategic universe for the firm (or effect). Instead, the process of effectuation allows the entrepreneur to create one or more several possible effects irrespective of the generalized end goal with which she started. Effectuation embraces bounded rationality and endogenous and contingent goal creation and explicitly eschews prediction. The logic of effectuation is stated as: to the extent that we can control the future, we do not need to predict it. Effectuation processes are excellent at exploiting contingencies, therefore predicting the future is not a necessity. For example, a person opens a regular food store without having a marketing plan or what so ever. If the first customers who actually buy the food and come back for more are working women of varied ethnic origin, this becomes the target segment. Fisher (2012) argues that effectuation dictates that in highly uncertain and dynamic environments, target customers can only be defined ex post through whoever buys a product or service.
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Figure 1. Effectuation process
There are five principles/heuristics that form the core of a rudimentary theory of effectuation:
1. Affordable loss rather than expected returns
This relates to evaluating opportunities based on whether the downside is acceptable, rather than on the attractiveness of the predicted upside. It focuses on experimenting
with as many strategies as possible with the given limited means. The key question here is: how much is an entrepreneur willing to lose? Effectuators look at the current situation of how much a person is willing to invest and not so much about the future results, in terms of return on
investment and the like.
2. Strategic alliances rather than competitive analyses (Crazy quilt principle)
This relates to forming partnerships with people and organizations willing to make a real commitment to jointly creating the future--product, firm, market--with you. Expert
entrepreneurs build partnerships with self-selecting stakeholders. Competitive analyses and strategic planning are not that relevant. Effectuation emphasizes strategic alliances and precommitments from stakeholders as a way to reduce and/or eliminate uncertainty and to erect entry barriers. This co-creation principle is based on the ‘Who do I know?’ question, visualized in figure 2.
3. Exploitation of contingencies rather than exploitation of preexisting knowledge (Lemonade principle)
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4. Means (Bird in hand principle)
Effectuation processes take a set of means as given and focus on selecting between possible effects that can be created with that set of means. It is a means-based approach to
entrepreneurship, instead of an goal-based approach. When entrepreneurs set out to build a new venture, they start with their means. Three main questions are relevant: who I am, what I know, and whom I know. From that point of view, the entrepreneurs imagine possibilities that originate from their means.
5. Controlling an unpredictable future rather than an predicting an uncertain one. (World view principle)
Effectuation focuses on the controllable aspects of an unpredictable future. For example, instead of predicting a market of customers, an effectuator would define his or
her market as a community of people willing and able to commit enough resources and talents to sustain the particular enterprise. The founder, along with others, creates the market by bringing together enough stakeholders who "buy into" the idea to sustain the enterprise. Since the structure of what exactly the enterprise is, is left open and is dependent upon the particular commitments made by the stakeholders, the need for prediction is greatly reduced, if not completely obliterated.
Effectuation is an approach that anyone can learn and use to decrease the risk of starting a venture, "fail" more effectively and use fewer resources. Effectuators use the process to lower the risk of the venture (by getting customers and income early, setting affordable loss, and spreading risk to others) and finding truly new and useful market opportunities by leveraging constraints and new
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So how could an effectuation process look like? Figure 2 is an visualization of the effectuation process.
Figure 2. Effectuation in action
It starts off with the means an individual has. In this stage this individual may ask him or herself: Who am I? What do I know? Who do I know? This knowledge is translated to goals: What can I do with these means? Furthermore, the individual interacts with others in order to get (stakeholder) commitment. When no commitment is gained, the opportunity is at a dead end and is put on hold. Gained commitment leads to new means, because other stakeholders get involved who possess additional means. Moreover, commitment leads to new goals based on stakeholder commitment. Entrepreneurs use the new means and new goals to drive the creation of the venture in ways they hadn't expected, leveraging surprises as they present themselves. This eventually may lead to a new firm, new product or new market. The end result of this stage is under influence by changes in the environment. The means or constraints of this end result (new firm, new product, new market) may change due to these changes.
Bricolage
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practices, definitions and standards, and has to insist instead on trying out solutions, observing and dealing with the results. It may be about the discovery of innovations in the form of new services from existing resources. Firms that made do with what was at hand tended to favor recombining existing elements rather than fabricating them from scratch. Baker and Nelson (2005) use three characterizations that are useful for understanding how entrepreneurs may construct resources from nothing
- Each firm is unique in its idiosyncratic relation to its resource environment;
- Substantial differences among firms in their ability to survive or prosper given ostensibly similar resource constraints. Different firms will discover and elicit different services and combinations of services from similar objective resources;
- The same resource may be worthless (even treated as waste products) to one firm but valuable to another, especially to the extent that the latter firm can combine what was heretofore valueless with its own unique set of other resources and services.
There are two types of bricolage: parallel and selective bricolage. Parallel bricolage implies that an individual creates something from nothing in almost every aspect of a firm’s operation For example, regarding physical inputs: There is a diverse resource trove, which is the result of a great deal of scavenging. The storage area of the entrepreneur could require at least double the square footage of his workspace. Furthermore with regards to labor input, the entrepreneur relies on broad self taught skills. He or she has less formal education in the industry they are working in. They usually have picked up a variety of skills in an informal way. Bricoleurs repeatedly deviate from and test the limits of local codes with regards to the institutional and regulatory environment. Bricoleurs are not afraid of the law and often create the risk of heavy fines. Moreover, bricoleurs usually have multiplex ties with regards to customer and labor resources (Baker and Nelson, 2005). Many customers began as or became friends. Friends and customers would frequently contribute labor or expertise to projects. Together, these bricolage aspects created a mutually reinforcing pattern: Scavenging led to diverse resource trove, which combined with flexibility in standards and practices and permissive multiplex network ties, encouraged the firms engaged in parallel bricolage to undertake a broad set of challenges. Interlocking behaviors and expectations that kept them on the path of parallel bricolage (Baker and Nelson, 2005). Not surprisingly, the process of frequent interaction blurred the distinction between customer, owner, employee, supplier as well as work and leisure. Systematically applying bricolage will lead to bricolage capabilities. Fisher (2012) assumes that bricolage capabilities will provide survival advantages during the periods of low resource stocks experienced by most new firms, even in generally munificent environments. Moreover, in very crowded and competitive markets, a decline in available resources might have a positive overall effect on firms with strong bricolage capabilities, as competitors that only know how to operate with exactly the right levels and types of resources disband, forgo opportunities, or otherwise exit the market. Knowledge of the resources at hand enabled firms engaged in bricolage to find combinations of resources that allowed them to embrace new problems and opportunities, which meant that opportunity discovery could be interactive and social, rather than a process requiring an individual epiphany. Specifically, the
opportunities that emerge when an entrepreneur focuses on resources on hand are more actionable than those that are discovered through market or industry analysis.
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bricolage is sometimes used in an explorative way, i.e. successively investigating and developing innovations and growth opportunities through bricolage. Baker and Nelson (2005) suggest that when firms use bricolage more narrowly or temporarily, first rejecting and then enacting environmental resource limitations, they appear to be more likely to grow.
Bricolage processes represent an opportunity to understand innovation as a process of imbuing previously worthless resources with value. Among the firms Fisher (2012) studied, bricolage was much more important as a tool of value creation than as a tool of value appropriation. How does an individual engage in bricolage? As with effectuation, there is no linear process to engage in bricolage. Baker and Nelson (2005) propose that bricolage is especially useful in penurious environments, which are environments that present new challenges without providing new resources. Bricolage can be applied in five domains:
- Physical inputs—imbuing forgotten, discarded, worn, or presumed single-application materials with new use-value;
- Labor inputs—involving customers, suppliers, and hangers-on in providing work on projects; - Skills inputs—permitting and encouraging the use of amateur and self-taught skills that
would otherwise go unapplied;
- Customers/markets—providing products or services that would otherwise be unavailable; - Institutional and regulatory environment—refusing to enact limitations with
regards to many “standards” and regulations, and by actively trying things in a variety of areas in which entrepreneurs either do not know the rules or do not see them as constraining.
Summarized, the concept of bricolage can be visualized in the underlying figure 3.
Figure 3. Bricolage in action
This model assumes that entrepreneurs who are active in a penurious environment have three choices, one of them is bricolage. Bricolage can be applied via the five domains as already has been described. Surprisingly, Fisher (2012) claims that parallel bricolage does not lead to growth. The reason for this is that bricolage activities can enable entrepreneurs to overcome resource
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Resemblances between effectuation and bricolage
Both theories contrast with the ideas in the more traditional economic models of entrepreneurs. As elaborated before, effectuation and bricolage contrast with theories such as causation (Sarasvathy, 2001), the classical approach (Shah and Tripsas, 2007) and opportunity discovery (Alvarez and Barney, 2007). It is superfluous to say that both theories have specific aspects in common. Fisher (2012) and Hindle and Senderovitz (2012) argue that both theories have the eight similar dimensions: Resemblances effectuation and bricolage
Using existing resources as a source of entrepreneurial opportunity Action as a mechanism for overcoming resource constraints
Community engagement as a catalyst for venture emergence and growth Resource constraints as a source of creativity
Planning averse Non-predictability
Conducting internal and external analyses Opportunity creation
Table 3. Resemblances effectuation and bricolage
1. Using existing resources as a source of entrepreneurial opportunity
Sarasvathy and Dew (2005) suggest that entrepreneurs create opportunities by asking “Who am I? What do I know? Whom do I know?” This is the so-called effectual logic. These fundamental questions are based on existing resources. Moreover, bricolage assumes that entrepreneurs create opportunities with whatever is at hand. The logic of bricolage as well is focused on existing resources. This underlying assumption of using existing resources aligns strongly with the resource-based view (Barney, 1991). This theory suggests that the “value, rareness, imitability and substitutability” of firm resources are key indicators of potential sustained competitive advantage. Opportunities created or discovered are more actionable than those discovered through the market, because the
entrepreneur already has the resources required to exploit the opportunity (Fisher, 2012). 2. Action as a mechanism for overcoming resource constraints
Effectuators and bricoleurs usually take action quiet rapidly when they have created or discovered the opportunity. They have a particular idea in mind and act almost immediately on it. By acting on their ideas, the entrepreneurs examined were able to discover creative ways to solve problems so as to operate in resource-constrained entrepreneurial environments. These types of entrepreneurs do not devote a lot of time and effort in planning, goal setting and predicting the future. Therefore, rapid action is possible. Baker and Nelson (2005) found that entrepreneurs took action to overcome constraints by (1) devoting small chunks of time or resources to a solution while working on other jobs; (2) actively experimenting with low-cost solutions to see which solution worked best; (3) leveraging resources on hand (e.g., databases, computer code, hardware)
in devising possible solutions; and (4) sharing crude solutions with a wide audience to get
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3. Community engagement as a catalyst for venture emergence and growth
Fisher (2012) found out that effectuators as well as bricoleurs developed a large, strong community following, prior to the launching of their product. This type of entrepreneur shares and exchanges information about the product with their friends, family or even on for example their internet blog. The feedback and input from these “early customers” served as a source of innovation and collective creativity (Hargadon & Bechky, in Fisher, 2012), which allowed for the development of a more appealing product over time. Moreover, when the product was launched, the community of “early customers” served as early users and perhaps even more important, this group of users were selling the product to others through word of mouth.
4. Resource constraints as a source of creativity
This similarity has its roots in the area of cognitive psychology, which assumes that individuals are more creative when limited by constraints than when faced with a carte blanche. Finke, Ward and Smith (1992) argue that individuals draw on existing knowledge frameworks to establish
“preinventive structures” that interact with the constraints of the task at hand to foster creative solutions. If there are no constraints to channel people’s cognition when interacting with
preinventive structures, then solutions tend to be less creative. For example, when team members of R&D department are faced with a carte blanche, they tend to go for “the path of least resistance”. However, they facing resource constraints, team members will look for alternative beyond this “path” and this lead to higher innovativeness. (Moreau & Dahl, in Fisher, 2012).
5. Planning averse
Bricoleurs and effectuators are not in favor of planning every move they make. Effectuation argues that expert entrepreneurs do not work out and follow a pre-made linear (business) plan. A bricoleur has a predisposition for action and emergence and therefore planning is something a bricoleur does not do that often. The only thing a bricoleur can plan is to plan the intention to use bricolage (Hindle and Senderovitz, 2010).
6. Non-predictability
Predicting the future is not something bricoleurs and effectuators are busy with. Bricolage implies extensive trial-and-error and improvisational work processes. This suggest that the environment – particular a penurious environment – and future is complex and difficult to predict and control. Therefore, prediction is irrelevant to a certain extent. The effectuation principle “affordable loss rather than expected returns” is applicable with regards to this similarity. Expected returns implies that an entrepreneur tries to predict his or her return on investment. Affordable loss implies the amount of money an entrepreneur is willing to lose, without looking at the future. The underlying logic of effectuation applicable for this statement is: To the extent we can control the future, we do not need to predict it. (Sarasvathy, 2001).
7. Conducting internal and external analyses
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extended strategic analyses. Effectuators focus more on strategic alliances and getting
precommitments from stakeholders rather than conducting analyses to reduce and/or eliminate uncertainty.
8. Opportunity creation
Bricoleurs and effectuators see opportunities as something created, enacted, constructed etcetera. This is not in line with the traditional economic models, such as causation. Causation processes assume that opportunities are discovered rather than created (Hindle and Senderovitz, 2010).
It is clear to see that effectuation and bricolage have a lot in common. There are some differences, despite the large number of similarities. These will be elaborated in the next section.
Differences between effectuation and bricolage
Difference between effectuation and bricolage are harder to find than their similarities. This is quite obvious since effectuation and bricolage are two alternative, emerging approaches to
entrepreneurship. These approaches are on the same side of the entrepreneurial behavioral continuum: on the one hand the traditional approaches and on the other hand the alternative approaches. However, there are difference between effectuation and bricolage. These differences are mapped in table 4.
Differences effectuation and bricolage Goal-setting Defining resources Expertise Motivation Financial wealth Education Social capital Self-efficacy
Table 4. Differences effectuation and bricolage 1. Goal-setting
The bricoleur usually works towards (pre)existing goals. Most empirical descriptions of bricolage are clearly teleological. On the other hand, effectuation is clearly non-teleological. The effectuator starts from a means base (the bird in hand principle) without having a pre-set or well-defined goal for the outcome (Fisher, 2012).
2. Defining resources
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make tomato soup, but instead he tries out an variation of tomato soup including some herbs he also found in the kitchen. By doing so, he defined the resource, in this case herbs, up front but used them in a more usual way.
3. Expertise
Bricolage is often carried out by non-experts, but it may be carried out by experts as well.
Effectuation, on the other hand, focuses more on experts. Experts in the sense of industry experience and former businesses they have had. It is a theory of how expert entrepreneurs reason and make decisions, according to Hindle and Senderovitz (2010).
4. Motivation
Bricoleurs and effectuators differ in terms of motivations to start a business. Rotemberg – Shir and Wennberg (2011) have found some interesting differences between bricoleurs and effectuators, in terms of motivations of nascent entrepreneurs. They state that nascent
entrepreneurs using bricolage as a strategy are significantly more motivated by
independence relative to those using effectuation . Moreover, Rotemberg-Shir and Wennberg found that non-financial motivation to be associated with the bricolage, while financial motivation was associated with effectuation. Lastly, they found that effectuators exhibited higher entrepreneurial career motivation relative to bricoleurs.
5. Financial wealth
Empirical research shows us that nascent entrepreneurs using effectuation have more financial wealth than those using bricolage (Rotemberg – Shir and Wennberg, 2011). This finding is rather strange, since both entrepreneurs using effectuation and bricolage are resource-constraint.
However, bricoleurs are the entrepreneurs who suffer the most from being resource constraint. The logic of this finding lies in the fundamental logic of bricolage: “Making do with whatever is at hand”. Bricoleurs are creative with their current resources, even more creative than effectuators. A
bricoleur may use resources that are available very cheaply or for free, although an effectuator would reject that kind of resource. It enables the bricoleur to cope with his limited amount of financial wealth.
6. Education
Rotemberg – Shir and Wennberg (2011) also found that nascent entrepreneurs using effectuation have less resources in terms of education than those using bricolage. This is not in line with Hindle and Senderovitz (2010). This author states that, in general, effectuators have more expertise than bricoleurs.
7. Social capital
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8. Self-efficacy
Entrepreneurial motivation is positive and significant for both effectuation and bricolage, while entrepreneurial self-efficacy to be positive and significant for effectuation only. Self-efficacy is the measure of one's own ability to complete tasks and reach goals. The emphasis on improvisation and trial-and-error is larger for entrepreneurs using bricolage than it is for those who use effectuation. For example, bricoleurs and effectuators usually do not perform any formal internal or external analyses. Instead, bricoleurs focuses on improvisational and trial-and-error processes. It is just the case of trying it out and seeing what happens. Effectuators focus more on strategic alliances and getting precommitments from stakeholders rather than conducting analyses to reduce and/or eliminate uncertainty. The actions of the effectuator reduce more uncertainty, compared to the actions of the bricoleur. This uncertainty reduction may lead to an increase in self-efficacy.
Research framework
The main focus of this paper will be about the differences between effectuation and bricolage, as discussed above. How do firms, in particular start-ups, use effectuation and bricolage in practice and furthermore, is there a hybrid mode between these two concepts and how does this hybrid mode look like in practice? Formulating a specific conceptual model up front is not that relevant, because this study encompasses an explorative research. Therefore, the following research framework can be brought up with:
Figure 4. Research framework
It implies that the concepts of effectuation and bricolage are placed next to each other. Their
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3. Method
This section discusses the research method chosen for this study. It starts off with elaborating on the context of the method. After that, the case selection and analysis of the cases are discussed. The method is completed by a summary of the used methodology.
Context
This study has been explorative in nature. The goal was to gain a deeper understanding regarding the concepts of bricolage and effectuation. More in-depth and qualitative analyses were appropriate. There were no certain hypothesis available yet or frequencies to be measured, which weaken the need for a quantitative analysis. ‘Why’ and ‘How’ question needed to be answered. To answer these type of questions, Yin (1989) suggests that a qualitative study in the form of case studies is the most appropriate research method. This type of theory refinement/elaboration requires case studies to develop propositions/hypothesis of missing relationships. An exploratory study is characterized by a loose structure. It deepens understanding and provides insight and is used to develop hypothesis, according to Cooper and Schindler (2008). Furthermore, Ghauri and Grönhaug (2002) state that a qualitative data collection method is necessary to gather in-depth knowledge. According to them, the most appropriate qualitative methods are interviews, observations and focus groups. Moreover, Marshall (1996) states that qualitative research is useful for exploring complex human issues. The main theme of this study is entrepreneurial behavior. This is not a straight forward theme, which can be measured by frequencies. Important questions such as: ‘How do entrepreneurs cope with resource constraints’ or ‘Why do others deviate from traditional entrepreneurial approaches?’ cannot be answered by for example filling in an online survey. The complexity of understanding these human issues is too high to be measured in a quantitative study. That is why this study applied one of the qualitative research methods, suggested by Ghauri and Grönhaug (2002).
Qualitative research methods Interviews
Observations Focus group(s)
Table 5. Qualitative research methods by Ghauri and Grönhaug (2002)
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Case selection
The selection of the cases has not been done at random. A choice has been made between product and service sectors. A business operating in the product sector sells visible products, such as a new medicine. A business operating in the service sector provides a service, such as Each of these two sectors will supply four cases. Within these two groups a further distinction will be made between businesses with a high knowledge intensity and businesses with a low knowledge intensity. Knowledge intensity is defined as the extent to which knowledge is a key factor in a firm’s competitive advantage (Lin, Huang, Du and Lin, 2012). For example, the knowledge intensity of a starting pharmaceutical company creating a new medicine is much higher than a starting hair dresser. The selection is summarized in table 6.
Product sector Service sector
High knowledge intensity Case A Case E
High knowledge intensity Case B Case F
Low knowledge intensity Case C Case G
Low knowledge intensity Case D Case H
Table 6. Case selection
The distinctions discussed led to the fact that the sample will be diverse. This selection has enhanced the generalizability of the results (Eisenhardt, 1989) which contributed to the extension of the theory. It would be illogical to interview eight businesses who are operating in the carpentry industry, because this would not be representative for the whole population of businesses. As Pettigrew, in Eisenhardt (1989) stated, “given the number of cases which can usually be studied, it makes sense to choose cases such as extreme situations and polar types in which the process of interest is transparently observable”. The two dimensions above (product vs. sector and high knowledge intensity vs. low knowledge intensity) led to the conclusion that the case selection was concerned with polar types. The last question of the interview determined where the case was situated in the section of the quadrant: “To what extent does knowledge contribute to your competitive advantage?”
Analysis of the cases
Two profiles have been developed to analyze the cases: an effectual profile and a bricolage profile. A business is performing in an effectual manner when it has the following profile.
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A business is performing in a bricolage like manner when it has the following profile.
Table 8. Analysis cases – bricolage profile
The answering possibilities of the effectuation and bricolage questions have been left blank deliberately in one of the models. It is about comparing the extent of effectual practices to the answers given in the “differences” section (questions 10 – 17).
The first challenge was to determine whether the entrepreneur was an effectuator or a bricoleur. If the entrepreneur was a bricoleur, the “differences between effectuation & bricolage – bricolage” profile above was compared to the answers given in questions 10 – 17. The next step was to discuss the discrepancies between the actual profile and the theoretical profile.
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The justification of the answering possibilities can be mapped as followed:
Question # Question Answering
possibilities
Interpretation Reference
Effectuation principles
1 How do you take decisions? Based on
your means or based your predefined goals? A = Means B =Goals A = Effectuation, B = Causation Sarasvathy (2001) & Sarasvathy (2008)
2 How do you take risk? Do you base it on
how much you are willing to spend or on how much profit it can generate (ROI)? And why? A = Affordable Loss B = ROI A = Effectuation, B = Causation Sarasvathy (2001) & Sarasvathy (2008)
3 How do you cope with contingencies?
And why? A = Exploit B = Avoid A = Effectuation, B = Causation Sarasvathy (2001) & Sarasvathy (2008)
4 How do you engage with customers,
suppliers or even competitors? And why? A = Collaboration B = No coll. A = Effectuation, B = Causation Sarasvathy (2001) & Sarasvathy (2008)
5 How do you view the future state of your
company? A = Not predictable B = Predictable A = Effectuation, B = Causation Sarasvathy (2001) & Sarasvathy (2008) Bricolage principles
6 How do you use forgotten, discarded,
worn or presumed resources? And why?
A = No use B = Use
A = - , B = Bricolage Baker and Nelson (2005)
7 How do you involve customers, suppliers
and hangers-on in your daily affairs? And why?
A = Involving B = Not involving
A = Bricolage, B = - Baker and Nelson (2005)
8 How do you obtain your knowledge? Did
you encourage the use of amateur and self-taught skills that would otherwise go unapplied? And why?
A = Externally B = Internally
A = -, B = Bricolage Baker and Nelson (2005)
9 How do you view the limitations of the
environment and therefore worked around rules and standards? And why?
A = Abide B = Reject
A = -, B = Bricolage Baker and Nelson (2005)
Differences E&B
10 How do you view goal-setting? And why? A = Set goals
B = No goals set
A = Bricolage, B = Effectuation
Fisher (2012)
11 How do you define your resources? And
why? A = Defined B = Not defined A = Effectuation, B = Bricolage Fisher (2012)
12 Do you call yourself an expert in your
field of work? Why do you think so?
A = Yes B = No
A = Effectuation, B = Bricolage
Hindle and Senderovitz (2010)
13 What are your motives to become an
entrepreneur? (Financial or non-financial)
A = Financial B = Non financial
A = Effectuation, B = Bricolage
Rotemberg - Shir and Wennberg (2011)
14 How would you judge your financial
wealth? A = Good/Normal B = Normal/Bad A = Effectuation, B = Bricolage
Rotemberg - Shir and Wennberg (2011)
15 What is your highest level of education? A = Master B =
Bachelor C = Voc. Education
Bricolage higher than Effectuation
Rotemberg - Shir and Wennberg (2011) & Hindle and Senderovitz (2010)
16 How would you judge your social capital? A = Large
B = Normal C = Small
Effectuation higher than Bricolage
Rotemberg - Shir and Wennberg (2011)
17 To what extent do you agree with the
following statement: If I want to achieve something, I am able to do it.
A = Agree B = Disagree
A = Effectuation, B = Bricolage
Rotemberg - Shir and Wennberg (2011)
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Table 9 is a summary of the concepts and differences described in the theory section. Further theoretical explanation of the concepts is given there. It is important to state that the answering possibilities given in table 9 – column 3 are not being read out loud during the interview. It is the interviewers task to ask the open question, interpreting the answers given and allocating the answer to one answering possibility. Further methodological explanation is given in the appendices I to IV. Furthermore, a modest form of triangulation has been applied. Prior and after the interview the website of the company and the LinkedIn profile of the entrepreneur have been viewed. The goal to view it up front was to obtain a clear view of the company in order to minimize the interviewers bias. The goal to view it after the interview was to look for inconsistencies in the results gathered by the interview. However, no inconsistencies have been found.
Lastly, a while after all the interviews had been conducted the entrepreneurs involved have been asked by phone about their industry experience and the fact if they have had a previous business before the current one. This has been done to enforce the “expert question” (number 12 in table 9).
Table 10 summarizes the methodology including the justification of the controllability, validity and reliability of the research.
Type of research Qualitative
Reliability Case study protocol / semi-structured interviews. Interviewing different types of entrepreneurs (age/gender) within the organizations. Random selection of cases (Service vs. product industry and high knowledge intensity vs. low knowledge intensity).
Controllability Revealing how the study is executed. Meeting the requirements of the University of Groningen.
Validity Multiple cases (random) and member check (discussing intermediate results). Triangulation.
Data collection Interviews
Case studies Made available by SBGG and the personal network of the researcher
Industry Random (Service vs. product industry and high knowledge intensity vs. low knowledge intensity)
# of case studies 8
Feasibility Cooperation SBGG, no problems foreseen. Merely desk research, additional costs will be taken into account by the student. Tuning with the supervisor to ensure the student will be heading in the right direction.
Table 10. Summary methodology
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4. Results
In this section the results of the in-depth interviews with the entrepreneurs are provided. First, the core business of each business is explained shortly. Subsequently, the results regarding the different variables of the conceptual model are provided. This section closes with a cross case analysis
regarding the cases described. The table below is a summary of the businesses from which the entrepreneurs have been interviewed. The extended elaboration of the interviews is situated in appendix V.
Product sector Service sector High knowledge intensity Case A: Dog-Back Case E: DYSI High knowledge intensity Case B: 101 Solutions Case F: TI WMC Low knowledge intensity Case C: Health2Work Case G: Haar’ Salon Low knowledge intensity Case D: Case2Go Case H: Foeke Dijkstra
Ongediertebeheersing
Table 11. Summary case studies
Case A: Dog Back | Design Solutions
Dog Back Design Solutions provides tailored and innovative design services that enable customers to turn their ideas into products. From their background Dog Back has specialized knowledge and experience in the field of wireless communication, low power (battery driven), highly integrated and mass volume product engineering. Their three principles for new product development are: (a new product has to be) wireless, wearable and walk able.
This entrepreneur shows clear signs of effectual practices. It is no surprise that he exhibits practices which conform with four of the five effectuation principles. He clearly makes decisions based on their/his own means. For example, whilst starting a new business the means he had were his main focus. He came up with an idea his current employer would not finance. He believed in the idea and started to commercialize it on his own. He did not set any goals, but merely a general idea to work on (means principle). He invests on the bases of affordable loss. He states: “We have never made a profit. I cannot afford it to be on a spending spree.” He looks at the amount of money he is willing to lose. Product development can be very expensive and most ideas will not be a success (affordable loss principle). Dog Back judges opportunities and threats. They like to exploit them. The organization is flexible enough for this reason. They operate in a highly dynamic environment. In this
environment, innovations are introduced at a high pace and trends are changing on a weekly base. It is key to judge these opportunities and threats in order to be successful. One does not simply ignore these aspects which arise in the market (leveraging contingencies principle). The interaction with suppliers and certainly customers is highly intensive. The entrepreneur argues : ”Mostly, our products are the result of co-creation. Companies have their own infrastructure when it comes to software and hardware. Our product has to be in sync with this infrastructure.” (partnership principle). The only
Additional information
Firm name Dog Back
Industry Product
Knowledge intensity High Firm age (in years) 3 Amount of employees 8
Name entrepreneur Michaël Hoonakker
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effectual practice he does not perform is the world view principle. The entrepreneur does analyze a lot and this is a non effectual practice. Although the entrepreneur does have good reasons for this: “Customer acquisition usually takes long in our market. It usually lasts a whole year to get a GO from the customer. Prior to this is a period of concept versions and testing with the customers technology. To make this all organized, I conduct analysis.”
The entrepreneur is not a typical bricoleur. He does not use useless resources for other purposes than they were initially intended. He does combine components of hard and software to create better products. This is kind of logical since the company is engaging in new product development. However, these components are not worthless or useless so this does not count as a bricolage like practice (psychical inputs principle). Moreover, he obtains new knowledge externally and via trial and error: “Trial and error activities are not done, because the knowledge is too specific. You can try a million things without having any results.” This is not in line with the skill inputs principle of the bricolage theory. Furthermore, he does not reject the limitations of the institutional and regulatory environment. Quality certificates and labels are very important in their field of work: “Our products need to fulfill certain quality standards, for example the CE standard”. It is the nature of the products that force them not to reject these limitations (Institutional and regulatory environment principle). As discussed before, the cooperation with customers and suppliers is highly intensive. Co-creating products together with customers and suppliers requires intensive contact with all parties involved (Labor inputs / Market & customer principle). This principle is the only principle in which the entrepreneur engages in bricolage like practices.
It turns out to be that the entrepreneur is an effectuator. This fact should also arise in the second section of the interview. According to the theory the entrepreneur would show the left underlying profile. However, the results indicate a slightly different profile, the right profile. These
inconsistencies are being discussed right now.
Table 12. Differences Dog Back Case
