Effectuation

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Effectuation is a way of thinking that serves entrepreneurs in the processes of opportunity identification and new venture creation. Effectuation includes a set of decision-making principles expert entrepreneurs are observed to employ in situations of uncertainty. [1] Situations of uncertainty are situations in which the future is unpredictable, goals are not clearly known and there is no independent environment that serves as the ultimate selection mechanism. [2]

Decision-making cognitive process resulting in the selection of a belief or a course of action among several alternative possibilities

In psychology, decision-making is regarded as the cognitive process resulting in the selection of a belief or a course of action among several alternative possibilities. Every decision-making process produces a final choice, which may or may not prompt action.

Expert occupation

An expert is someone who has a prolonged or intense experience through practice and education in a particular field. Informally, an expert is someone widely recognized as a reliable source of technique or skill whose faculty for judging or deciding rightly, justly, or wisely is accorded authority and status by peers or the public in a specific well-distinguished domain. An expert, more generally, is a person with extensive knowledge or ability based on research, experience, or occupation and in a particular area of study. Experts are called in for advice on their respective subject, but they do not always agree on the particulars of a field of study. An expert can be believed, by virtue of credential, training, education, profession, publication or experience, to have special knowledge of a subject beyond that of the average person, sufficient that others may officially rely upon the individual's opinion. Historically, an expert was referred to as a sage (Sophos). The individual was usually a profound thinker distinguished for wisdom and sound judgment.

Uncertainty situation which involves imperfect and/or unknown information

Uncertainty refers to epistemic situations involving imperfect or unknown information. It applies to predictions of future events, to physical measurements that are already made, or to the unknown. Uncertainty arises in partially observable and/or stochastic environments, as well as due to ignorance, indolence, or both. It arises in any number of fields, including insurance, philosophy, physics, statistics, economics, finance, psychology, sociology, engineering, metrology, meteorology, ecology and information science.

Contents

Founding

Effectuation is a principle introduced by Saras Sarasvathy in 2001. Since 1997 Sarasvathy conducted a research among 45 expert entrepreneurs. Sarasvathy interviewed the entrepreneurs and let them solve cases in order to see how they think and where they start. It appeared that 89% of the expert entrepreneurs used effectuation more often than causation. Causation is the opposite of effectuation. Where effectuation is used in situations of uncertainty, causal reasoning is used when the future is predictable. [2] With causal reasoning, entrepreneurs will determine goals to achieve and look for the resources to do so. At the opposite with effectuation, entrepreneurs will determine goals according to the resources in their possession.

Research formal work undertaken systematically to increase the stock of knowledge

Research comprises "creative and systematic work undertaken to increase the stock of knowledge, including knowledge of humans, culture and society, and the use of this stock of knowledge to devise new applications." It is used to establish or confirm facts, reaffirm the results of previous work, solve new or existing problems, support theorems, or develop new theories. A research project may also be an expansion on past work in the field. Research projects can be used to develop further knowledge on a topic, or in the example of a school research project, they can be used to further a student's research prowess to prepare them for future jobs or reports. To test the validity of instruments, procedures, or experiments, research may replicate elements of prior projects or the project as a whole. The primary purposes of basic research are documentation, discovery, interpretation, or the research and development (R&D) of methods and systems for the advancement of human knowledge. Approaches to research depend on epistemologies, which vary considerably both within and between humanities and sciences. There are several forms of research: scientific, humanities, artistic, economic, social, business, marketing, practitioner research, life, technological, etc.

Causation is a belief that events occur in predictable ways and that one event leads to another. If the relationship between the variables is non-spurious, the temporal order is in line, and the study is longitudinal, it may be deduced that it is a causal relationship.

Causal reasoning is the process of identifying causality: the relationship between a cause and its effect. The study of causality extends from ancient philosophy to contemporary neuropsychology; assumptions about the nature of causality may be shown to be functions of a previous event preceding a later one. The first known protoscientific study of cause and effect occurred in Aristotle's Physics. Causal inference is an example of causal reasoning.

Principles of effectuation

There are five core principles that define Effectual Logic. These are: [1] [3]

Education Learning in which knowledge and skills is transferred through teaching

Education is the process of facilitating learning, or the acquisition of knowledge, skills, values, beliefs, and habits. Educational methods include storytelling, discussion, teaching, training, and directed research. Education frequently takes place under the guidance of educators and also learners may also educate themselves. Education can take place in formal or informal settings and any experience that has a formative effect on the way one thinks, feels, or acts may be considered educational. The methodology of teaching is called pedagogy.

In sociology, taste is an individual's personal and cultural patterns of choice and preference. Taste is drawing distinctions between things such as styles, manners, consumer goods, and works of art and relating to these. Social inquiry of taste is about the human ability to judge what is beautiful, good, and proper.

Experience is the knowledge or mastery of an event or subject gained through involvement in or exposure to it. Terms in philosophy such as "empirical knowledge" or "a posteriori knowledge" are used to refer to knowledge based on experience. A person with considerable experience in a specific field can gain a reputation as an expert. The concept of experience generally refers to know-how or procedural knowledge, rather than propositional knowledge: on-the-job training rather than book-learning.

An example

The most simple and clear example Saras Sarasvathy gives to describe effectual reasoning and to distinguish effectual reasoning from causation is about a chef cooking a meal. [2] By using causation, the client chooses a menu in advance and the chef prepares this menu by looking for the right ingredients and following the recipes to make the dishes. In the effectual process, the approach would be rather different. The client would not ask for a specific menu, but he asks the chef to make something with the ingredients available. The chef chooses one of the many different meals he is able to make with the available ingredients.

The most important difference between causal reasoning and effectuation is therefore that an entrepreneur using causation has a given goal and searches for means to reach his goal. If the entrepreneur uses effectuation instead, he will start with the means he has and from this point he looks at possible goals.

See also

Related Research Articles

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Determinism is the philosophical idea that all events, including moral choices, are determined completely by previously existing causes. Determinism is at times understood to preclude free will because it entails that humans cannot act otherwise than they do. It can also be called hard determinism from this point of view. Hard determinism is a position on the relationship of determinism to free will. The theory holds that the universe is utterly rational because complete knowledge of any given situation assures that unerring knowledge of its future is also possible. Some philosophers suggest variants around this basic definition. Deterministic theories throughout the history of philosophy have sprung from diverse and sometimes overlapping motives and considerations. The opposite of determinism is some kind of indeterminism. Determinism is often contrasted with free will.

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<i>Bailey v Ministry of Defence</i>

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  1. Principle of Causality and,
  2. Principle of Analogy.

Causal inference is the process of drawing a conclusion about a causal connection based on the conditions of the occurrence of an effect. The main difference between causal inference and inference of association is that the former analyzes the response of the effect variable when the cause is changed. The science of why things occur is called etiology. Causal inference is an example of causal reasoning.

Forensic epidemiology

The discipline of forensic epidemiology (FE) is a hybrid of principles and practices common to both forensic medicine and epidemiology. FE is directed at filling the gap between clinical judgment and epidemiologic data for determinations of causality in civil lawsuits and criminal prosecution and defense.

MasterChef Korea Celebrity is a South Korean competitive cooking game show. It is spin-off of MasterChef Korea, itself an adaptation of the British show MasterChef, and features celebrity contestants. The program was broadcast on O'live from February 22 to April 12, 2013 for 8 episodes. The last winner received ₩100,000,000 and a refrigerator of the sponsor as prize.

References

  1. 1 2 Society for Effectual Action (2012). "Principles". Batten Institute, Darden School of Business. Archived from the original on 2014-02-01. Retrieved 2014-01-26.
  2. 1 2 3 Saras Sarasvathy; et al. (2001). "Effectual Entrepreneurial Expertise: Existence and Bounds". pennState: 46. CiteSeerX   10.1.1.110.2635 .
  3. Saras Sarasvathy (2001). "What makes entrepreneurs entrepreneurial?" (PDF). Harvard Business Review: 9. Retrieved 2014-01-26.[ permanent dead link ]

Further reading

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