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Contesting Effectuation Theory: Why It Does Not Explain New Venture Creation

Rouse, Julia ORCID logoORCID: https://orcid.org/0000-0001-5967-6038 and Kitching, J (2020) Contesting Effectuation Theory: Why It Does Not Explain New Venture Creation. International Small Business Journal. ISSN 0266-2426

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We evaluate whether the theory of effectuation provides – or could provide – a powerful causal explanation of the process of new venture creation. We do this by conducting an analysis of the principal concepts introduced by effectuation theory. Effectuation theory has become a highly influential cognitive science-based approach to understanding how nascent entrepreneurs start businesses under conditions of uncertainty. But by reducing the process of venture creation to a decision-making logic, effectuation theory pays insufficient regard to the substantial, pervasive and enduring influence of social-structural and cultural contexts on venture creation. Powerful explanations should conceive of venture creation as a sociohistorical process emergent from the interaction of structural, cultural and agential causal powers and must be able to theorise, fallibly, how nascent entrepreneurs form particular firms in particular times and places. We conclude that effectuation’s contribution to entrepreneurship scholarship is more limited than its advocates claim because it can offer only an under-socialised, ahistorical account of venture creation. Failure to theorise adequately the influence of structural and cultural contexts on venture creation implicitly grants nascent entrepreneurs excessive powers of agency.

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