Mature Firm Innovation: Can Effectual Logic Be Emulated?

Abstract

Effectuation is a theory of entrepreneurial expertise and decision-making. Effectual logic (EL) has been identified as an organizational creation process or strategy that is thought to be used by expert entrepreneurs when creating their new organizations. Sarasvathy spells out four principles that form the core of the theory of effectuation: (1) Affordable loss rather than expected returns. (2) Strategic alliances rather than competitive analyses. (3) Exploitation of contingencies rather than exploitation of preexisting knowledge. (4) Controlling an unpredictable future rather than predicting an uncertain one. The authors propose that these principles can be emulated during the product development process by mature firms to create transformative product innovations. Thus, mature firms that employ a strong resource orientation and utilize cross-functional teams on a portfolio of R&D projects while becoming proficient in prototyping done early, rapidly, and repetitiously can emulate EL and more probably be able to create transformative product innovations. Moreover, rather than working individually, the emulating techniques act synergistically to emulate the EL process used by entrepreneurs and to thereby increase the likelihood of successful transformative product innovation.