Lecture 1 Business Planning vs Effectuation strategies
contingencies: internal/external factors to deal with to make sure that the outcomes are the
one you desire
vb by going abroad, a contingency = country culture
start-up example: ergobag
really successful start up, but not all start-ups are successful
IPO: initial public offering, company becomes an open NV op beurs
growing a firm is quite complex + you can learn a lot from it
persistence is the most important ingredient for growing a firm
Brinckmann, J., Grichnik, D., & Kapsa, D. (2010).
Should entrepreneurs plan or just storm the castle? A meta-analysis on contextual factors
impacting the business planning–performance relationship in small firms.
is it important to engage in business planning or should we use scarce resources in start-ups
other than business planning
meta-analysis: combining results from different studies to generalize certain expectations,
relationships
focused on the importance of planning
small firms: both start-ups and more mature firms
conclusion of the paper: for all small firms business planning makes sense, it has a
contribution to firm performance.
in general, a positive relationship between business planning and performance, but it does
not mean that bp explains performance
in some circumstances bp make more sense than other: we think that bp is more important
for start-ups, but it’s more important for more mature firms, because they are more familiar
with the market circumstances and therefore easier to plan up on, getting the plans more
aligned with the circumstances
some factors/moderators influence the strength of the relationship between bp and
performance
- firm longevity, firm stage
young firms should not focus to much on bp, they could better use the recourses on
attracting people, finding money
- the higher the uncertainty avoidance, the less effective is bp. people want to stick to
their plan. if something unexpected happens, they just ignore it because it does not
fit with the plans
countries with low uncertainty avoidance, usually adapt their planning on unexpected
things, they are more flexible
, - is the process or the outcome of bp more important? (expected moderator) but they
did not find anything in the meta-analysis
overall conclusion: BP fosters firms’ development due to increased decision speed and more
efficient resource utilization. goal setting fosters the identification of effective steps to
realize these goals
the moderators support: BP prevents dedicating time to activities such as acquiring
resources or organizational development. BP can lead to cognitive rigidities, organizational
inertia and limited strategies
theory/research model:
H1: positive relationship BP –
performance
H2: stage has an effective impact on the
strength of the relationship
H3: distinction between outcome of bp
and the process. they tend to think that
the outcome is more important for
performance purposes than the process,
but the findings are not significant
main conclusion: there is a positive
relationship, but the strength depends on two concepts: stage of firm and cultural context
meta-analysis: merge conclusions of many studies to find out what the overall conclusion is
implications for theory
- overall BP is a value creating activity, but not always beneficial under all
circumstances
- findings of the paper challenge the entrepreneurship wisdom that bp is important for
new firms, it appears to be more important for mature firms
- both the process and outcome of bp is important
implications for practitioners
- basic bp activities sufficient in firms’ initial years
- start-ups should not spend too much time on bp, but more on finding money,
customers, because long pre-planning activities detached from market interaction
appear to be detrimental
Sarasvathy, S.D. (2001).
Causation and effectuation: Toward a theoretical shift from economic inevitability to
entrepreneurial contingency.
effectuation: dealing effectively with changing circumstances
opposite of effectuation = causation: something causes an effect
,bp perspective: certain goal and try to find a means to achieve this
effectuation: we have certain means and try to find the best goals
if we come across new circumstances, we maybe need to find new goals
we have certain resources, what can we make of it
effectuation is a kind of alternative or complementary tool on top of planning
paper is about growth principles related to the idea of effectuation, alternative of causation.
effectuation: effective or successful ventures deal effectively with the changing
circumstances. we indeed need to plan because it helps us get better decisions, but on top of
that we have to deal with changing contingencies
economic inevitability = planning
contingencies: factors that might change and that are really relevant for the functioning or
the performance of organisations
so planning is good, but there are some limitations
vb hard to make price decisions when the firm of market does not exist yet
how to plan the circumstances if there is no start of it yet
effectuation vs causation
its more about and and, not a dilemma
causation:
- the causator takes a particular effect as given and
focuses on selecting between means to create that
effect, what is the best way to achieve this effect
- managerial thinking
- selecting between given means to achieve a pre-
determined goal
effectuation:
- the effectuator takes a set of means as given and
focuses on selecting between possible effects that
can be created with that set of means, what kind of
resources do I have and what can I do with this
- entrepreneurial thinking
- imaging a possible new end using a given set of
means
basic principles of effectuation logic:
as soon as you have selected a certain end that you would like to achieve with the
means, then the entrepreneurial thinking journey starts
effectuators don’t try to maximize their risks, they think in terms of affordable losses
1) bird in hard (given means)
metaphor for the resources the entrepreneurs have. expert entrepreneurs seek to
build a new venture start with their given means, keeping in mind the affordable
losses
2) affordable losses
, entrepreneurs decide what they are willing to lose rather than what they expect to
make
dominant thinking: what are the losses and can I afford these losses
by this, entrepreneurs stop depending on predictors and focus on cultivating
opportunities with perceived low failure costs that generate future options
causator/planner tries to predict the future
3) lemonade
if you come across lemons, make lemonade
= contingency thinking: dealing effectively with different circumstances
expert entrepreneurs learn not only to work with surprises, but also take advantages
of them
the principle represents the willingness to leave audience and take advantage of new
circumstances
4) crazy quilt
it is important to engage in relationships with stakeholders
idea of coopetition to work instead of competition with the competitors
some of the interactions lead to commitments and self-selections into the new-
venture creation process: important to be aware of your means, what can we do with
it and then test whether idea is good enough or not
5) pilot in the plane
two options: trying to predict the future or work on things you can control yourself
pilot in the plane is about control of aspects, so the future
if you want to get something with which you have no experience, it might be difficult
what can you influence, what not, they focus on what can we control ourself, where
can we take the lead, take the pilot in the plane
5 principles expand the idea of effectuation theory, which is an extra tool for business
planning
Lecture 2: Growth vs. survival in international markets
should I go international or stay in home market?
vb Uber: story of early internationalization
= taxi platform, a born global: goes international immediately and always driven by
technology. this technology allow them to go international. they also benefit from local
differences
- benefit from technology
- able to exploit from the local differences
some firms decide to go international after decades, but also born globals
firms that are in a grow strategy make a lot of profits, but also losses because they are still
growing, its part of the strategy
Sapienza, Autio, George, Zahra (2006).
A capabilities perspective on effects of early internationalization on firm survival and growth
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