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Growth Strategies and Organizational Challenges (summary articles - for exam)
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- Vrije Universiteit Amsterdam (VU)
Growth Strategies and Organizational Challenges (summary articles - for exam)
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Brinckmann, J., Grichnik, D., & Kapsa, D. (2010). Should entrepreneurs plan or just storm thecastle? A meta-analysis on contextual factors impacting the business planning–performance
relationship in small firms. Journal of Business Venturing, 25(1), 24-40
Implications for Academia:
Positive Relationship: The study found a positive relationship between business
planning and firm performance. This suggests that, in general, business planning contributes
to improved performance in both new and established small businesses.
Context Matters: Contextual factors play a significant role in moderating the planning-
performance relationship. The development stage of the firm (new vs. established) and the
cultural context of the organization are two important contextual variables.
Development Stage: The study revealed that the positive impact of business
planning on performance is stronger in established small firms compared to new small firms.
This challenges the common assumption that planning is more critical for new ventures.
Established firms benefit from their prior information and processes, making planning more
effective.
Cultural Context: The cultural context of the organization, specifically the level of
uncertainty avoidance in a given culture, influences the effectiveness of business planning.
In cultures with high uncertainty avoidance, the benefits of planning on firm performance
are reduced, possibly due to a tendency to adhere closely to predetermined plans.
Planning Outcome vs. Process: Both the output (written plans) and the process
(e.g., planning meetings, market analysis) of business planning have a positive impact on
firm performance. This suggests that the act of planning itself, as well as the formal
documentation, contribute to improved performance.
Methodological Considerations: The study highlighted the importance of using
objective performance measures and conducting longitudinal research to obtain more
accurate assessments of the planning-performance relationship.
Implications for Practitioners
Value of Business Planning: Both entrepreneurs starting new ventures and
managers of established small firms can benefit from business planning. However, the study
suggests that the positive effects of planning are more pronounced for small business
managers.
Assess Context: Entrepreneurs should assess their specific context before investing
heavily in planning. In situations with limited information and high uncertainty, basic
business planning may be sufficient. As the information base improves, it becomes more
economical to allocate more resources to planning.
,Flexibility: A flexible and adaptive approach to business planning is important, as plans
may need to be adjusted over time. Planning and execution should occur simultaneously,
and a willingness to adapt plans is crucial.
Formalization: Developing formal written documentation of business plans can
significantly improve firm performance. Planning processes should be institutionalized
within business routines to promote systematic planning.
Limitations:
Sample Overlaps: There may be overlaps between the samples of new and
established small firms, potentially impacting the results.
Sample Size: The number of studies focusing on new firms was relatively small, which
could affect the robustness of the findings. Larger sample sizes could strengthen the
planning-performance relationship.
Cultural Framework: The study used Hofstede's cultural framework, which has been
criticized for oversimplification. Future research could explore other cultural dimensions.
Sarasvathy, S.D. (2001). Causation and effectuation: Toward a theoretical shift from
economic inevitability to entrepreneurial contingency. Academy of Management Review,
26(2), 243-263
Causation and Effectuation Defined: The passage introduces two decision-
making processes: causation and effectuation. Causation involves selecting means to achieve
a given effect, while effectuation involves selecting possible effects based on a given set of
means. In other words, causation focuses on predicting outcomes, while effectuation
focuses on controlling outcomes.
Example: Curry in a Hurry: The passage uses a hypothetical example of opening
an Indian restaurant called "Curry in a Hurry" to illustrate the differences between causation
and effectuation. It shows how entrepreneurs can approach the business differently based
on whether they follow a causation or effectuation process. Causation involves extensive
market research, segmentation, and planning, while effectuation involves creative, flexible
strategies to start the business with limited resources and adapt based on contingencies.
Example: U-Haul: Another example provided is the creation of U-Haul, a company
that revolutionized the do-it-yourself moving industry. The passage explains how the
founder, L. S. Shoen, used effectuation processes to establish U-Haul with minimal initial
resources. Instead of following conventional market analysis and planning, Shoen leveraged
personal networks, partnerships, and creativity to build the business.
Decision Maker's Role in Effectuation: The passage emphasizes the decision
maker's role in effectuation. It highlights that decision makers pursuing effectuation focus on
aspirations, take actions with no guarantees of success, and often create opportunities
,rather than merely identifying existing ones. Effectuators actively shape markets through
their actions and interactions.
Emerging Markets and the Internet: The passage suggests that effectuation is
particularly relevant in emerging markets and industries, such as the internet. It implies that
entrepreneurs in these spaces often engage in effectuation to create and shape markets
collaboratively with partners and customers.
Overall, the passage introduces the concepts of causation and effectuation in decision-
making and provides examples to illustrate how these processes differ in entrepreneurial
contexts. Effectuation, characterized by flexibility, creativity, and adaptability, is highlighted
as a valuable approach, particularly in dynamic and uncertain environments.
Introduction to Effectuation: The passage begins by highlighting that effectuation
processes are not presented as superior or more efficient than causation processes in
business. Instead, it suggests that the choice between the two depends on specific
circumstances, which should be explored through empirical studies.
Components of Decision-Making: The passage describes the components of a
decision-making process, emphasizing that causation processes involve well-defined goals,
alternative means or causes, constraints, and criteria based on expected return. Effectuation
processes, on the other hand, involve a set of given means, a range of possible effects,
constraints, and criteria based on affordable loss or acceptable risk.
Means in Effectuation: In effectuation, individuals start with three categories of
"means" - who they are (traits, abilities), what they know (knowledge), and whom they
know (social networks). At the firm level, these means translate to physical resources,
human resources, and organizational resources. At the economic level, they become
demographics, current technology regimes, and sociopolitical institutions.
General Applicability of Effectuation: The passage suggests that effectuation
processes may be more general and common in human decision-making than causation
processes. It uses the example of cooking dinner to illustrate this, implying that people often
use an effectuation approach (using available ingredients) rather than a causation approach
(meticulously planning a meal) in daily life.
Contrasting Characteristics: The passage provides a table summarizing the
distinguishing characteristics of causation and effectuation processes. Notable distinctions
include causation processes being effect-dependent and focused on exploiting knowledge,
while effectuation processes are actor-dependent, exploit contingencies, and focus on
controlling an unpredictable future.
Decision-Making Under Uncertainty: The passage briefly touches on decision-
making under uncertainty and how it has been approached in research. It mentions the
development of normative, rational decision models and empirical investigations into the
bounded rationality of decision-makers.
, Four Principles of Effectuation: The passage concludes by presenting four
principles that form the core of effectuation theory: affordable loss, strategic alliances,
exploitation of contingencies, and controlling an unpredictable future. These principles guide
the decision-making process in an effectual manner.
Overall, the passage introduces the concept of effectuation, discusses its components and
contrasts it with causation processes, and highlights its applicability in entrepreneurship and
decision-making under uncertainty. It also provides a basic framework for understanding
effectuation through its four core principles.
Klier, H., Schwens, C., Zapkau, F.B., & Dikova, D. (2017). Which Resources Matter How and
Where? A Meta‐ Analysis on Firms’ Foreign Establishment Mode Choice. Journal of
Management Studies, 54(3), 304–339
Introduction and Background: The paper begins by introducing the concept of
foreign establishment mode choice, which involves decisions about whether to enter a
foreign market through greenfield investments (building from scratch) or acquisitions
(purchasing an existing entity). It emphasizes the importance of firm resources in shaping
these choices.
Resource-Based View (RBV): The paper relies on the Resource-Based View (RBV)
theory, which suggests that firms' unique resources and capabilities can lead to sustainable
competitive advantages. It emphasizes the heterogeneity of firm resources and the need to
manage them effectively.
Classification of Establishment Mode Choices: The authors categorize
foreign market entry modes into non-equity and equity modes. Within equity modes, they
distinguish between establishment mode choice (greenfield vs. acquisition) and ownership
decisions (full vs. partial ownership). The focus of the paper is primarily on establishment
mode choice.
Resource Types: The authors differentiate between two main types of firm resources:
knowledge-based and experience-based resources.
Knowledge-Based Resources: These include technological resources (used for
innovation and product development) and marketing resources (used for brand
differentiation and market positioning).
Experience-Based Resources: These encompass general international
experience, host country experience, and establishment mode experience (related to prior
acquisitions or greenfield investments).
Cultural Distance: The paper highlights the significance of cultural distance, a concept
related to differences in shared norms and values between countries, in influencing
establishment mode choices. It suggests that greater cultural distance can lead firms to
prefer greenfield investments due to the challenges associated with managing acquisitions
in culturally distant environments.
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