effectuation in the age of technology
TRANSCRIPT
Effectuation in the age of technology:
A comparative analysis of tech and non-tech
entrepreneurs
Irene Manzanares Ayala
MSc in Innovation & Entrepreneurship
Faculty of Mathematics & Natural Sciences
UNIVERSITETET I OSLO
2 March 2018
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Effectuation in the age of technology:
A comparative analysis of tech and non-tech entrepreneurs
Irene Manzanares Ayala
Supervisor: Steffen Korsgaard
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Abstract
Effectuation and Causation have been intriguing theories which have assisted in understanding
entrepreneurs. However, due to the rapid technological advances in recent years, this has
spurred an increase in technology entrepreneurs and hence a developed profile of the
entrepreneur and the resources at their disposal.
This study investigates the use of effectuation principles by technology entrepreneurs. This
encompasses looking at various resources at their disposal such as their means, opportunities,
alliances and partnerships. Of importance is to look at the entrepreneurs’ usage and perception
of predictive tools such as business plans and delves into the reasons why tech entrepreneurs
shy away from such tools. Another central outcome is how co- creating and key collaborations
replaces market research. This is done by interviewing tech and non-tech entrepreneurs and
conducting a comparative analysis using the concepts of effectuation and causation.
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Acknowledgments
I want express my gratitude to:
All the entrepreneurs that have taken the time from their busy agendas to help me with this thesis. You
have inspired me with your resilient spirit, and I thank you from the bottom of my heart.
My mom Beka, thank you are such short words to express my endless gratitude for all the love and
opportunities you have provided for me with your encouragement, guidance, and support throughout
my life. I wish you could be here to see I have made it. Your immense and unconditional love is with
me forever as one of the greatest gifts I have received in my entire life.
The amazing people I met at the University of Oslo, classmates and teachers who have enriched the
experience of learning beyond the academic. I want to specially thank my supervisor Steffen for having
the disposition, time and patience for guiding me in writing this thesis.
Hanna, Rhoda, Einar, Kamer, Iris and Rodrigo. Working with you has taught me so much about work
ethic, hard work and solidarity, gracias!
My dear friend Chipo with whom I have shared precious moments full of joy and laughter, and whose
support and encouragement in the darkest moments helped me enormously. Your friendship is such a
gift.
The people working at the center of entrepreneurship at the University of Oslo for your support all these
years and for your constant understanding and willingness to help.
My father, for helping me discover from a young age the joy of learning. For all the hours in my early
school years you have dedicated to studying and reading my books so that you could explain the subjects
I did not understand. Thank you for showing me your love in a way that has shaped my life.
My brother Dante, one of my best friends for showing me what unconditional love and sacrifice means,
you have always inspired me and you’ll always do.
Lukas and Leo, my kids for being the biggest joy of my life, you are my motivation to be a better person
and to keep going despite of everything.
My husband Walter, this milestone couldn’t have been possible without your patience, encouragement
and support in so many ways. I love you and I feel so lucky to share my life with the amazing human
being you are.
Lastly to Norway, this wonderful country which social and economic configuration has given me the
unique opportunity to become the first woman in all my family’s generation to have finished a master
degree.
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Contents
Abstract ................................................................................................................................................... ii
Acknowledgments .................................................................................................................................. iii
1. INTRODUCTION ........................................................................................................................... 1
1.1. Purpose of the thesis .................................................................................................................... 1
1.2. Objective and research question .................................................................................................. 1
1.3. Motivation behind my research and topic ................................................................................... 2
1.3.1. Why entrepreneurship, why effectuation? ............................................................................... 2
1.3.2. Why compare technical and non-technical entrepreneurs? ..................................................... 3
1.4. Thesis layout ................................................................................................................................ 4
2. LITERATURE REVIEW ................................................................................................................ 5
2.1. Effectuation and causation .......................................................................................................... 5
2.1.1. Causation ................................................................................................................................. 6
2.1.2. Effectuation ............................................................................................................................. 6
1. Means - Bird in hand ............................................................................................................... 8
2. Leverage of contingencies - Lemonade ................................................................................... 8
3. Affordable loss ........................................................................................................................ 9
4. Partnership & alliances – crazy quilt ....................................................................................... 9
5. Control vs. prediction - Pilot in the plane .............................................................................. 10
2.2. Technology entrepreneurship .................................................................................................... 10
2.3. Studies of differences between tech and non-tech entrepreneurs .............................................. 12
2.4. Gaps on literature ...................................................................................................................... 12
2.5. Contributions of this thesis ........................................................................................................ 13
3. METHODOLOGY ........................................................................................................................ 14
3.1. Research approach ..................................................................................................................... 14
3.2. Study participant selection ........................................................................................................ 14
3.3. Data reliability ........................................................................................................................... 15
3.4. Data validity .............................................................................................................................. 15
3.5. Data collection process .............................................................................................................. 15
3.6. Data analysis process ................................................................................................................. 16
3.7. Anonymity and Identifiability ................................................................................................... 16
4. RESULTS AND ANALYSIS ....................................................................................................... 17
4.1. Alliances and partnerships ......................................................................................................... 17
4.1.1. Non-tech firms and alliances ................................................................................................. 17
4.1.2. Tech firms and alliances ........................................................................................................ 18
4.2. Competitors ............................................................................................................................... 22
4.2.1. Non-tech entrepreneurs’ view on competitors...................................................................... 23
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4.2.2. Tech view on competitors ..................................................................................................... 23
4.3. Business plan perspectives ........................................................................................................ 26
4.3.1. Non-tech entrepreneurs’ view of a business plan .................................................................. 26
4.3.2. Tech entrepreneur’s view of a business plan ......................................................................... 27
4.4. Entrepreneurial teams ................................................................................................................ 31
4.4.1. Non- tech companies founded by solo entrepreneurs ............................................................ 31
4.4.2. Tech firms founded by entrepreneurial teams ....................................................................... 32
4.5. Summary of differences in relation to causation and effectuation ............................................ 35
4.6. Additional findings .................................................................................................................... 35
4.6.1. The investors’ dilemma ......................................................................................................... 35
4.6.2. Similarities between tech and non-tech ................................................................................. 36
5. DISCUSSION ............................................................................................................................... 37
6. CONCLUSIONS AND RECOMMENDATIONS ........................................................................ 39
7. REFERENCES .............................................................................................................................. 42
8. APPENDICES ............................................................................................................................... 45
APPENDIX 1 : Interview guide ............................................................................................................ 45
List of Tables
Table 1: Study participants ....................................................................................................... 14
Table 2: Non-Tech entrepreneurs’ responses on alliances and partnerships ........................... 17
Table 3: Tech entrepreneurs’ responses on alliances and partnerships .................................... 19
Table 4: Tech entrepreneur’s responses on competitors .......................................................... 24
Table 5: Non-tech entrepreneurs' view of a business plan ....................................................... 27
Table 6: Tech entrepreneurs' view of a business plan .............................................................. 28
Table 7: Summary of differences between tech and non-tech entrepreneurs........................... 35
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1. INTRODUCTION
1.1. Purpose of the thesis
Technological entrepreneurship represents an underdeveloped field of research compared to
management, economics and entrepreneurship (Bailetti, 2012). So much so, that it does not
have a consensus definition at the present time. Moreover, with the uptake and increase of
technology entrepreneurship there is a lack of understanding of technology entrepreneurs that
difficult the use of appropriate tools, processes and policies to assist them.
In this thesis, I will identify and assess the potential differences between technological and
non-technological entrepreneurs. To do so, I will compare how these entrepreneurs make
decisions in their companies by using effectuation. Effectuation is an entrepreneurial theory
presented at the beginning of this century which is referred to as the way expert entrepreneurs
think or the logic they use to start companies (Action, 2017; Saras D. Sarasvathy, 2008).
1.2. Objective and research question
With the purpose of making the reading of this thesis easier, I will define the two types of
entrepreneurs as follows:
Spiegel (2011) stated that “Technology Entrepreneurship investigates all questions related to
the successful formation, exploitation and renewal of products, services and processes in
technology-oriented firms.” (Spiegel & Marxt, 2011).
Applying this definition to this thesis, technological (tech) entrepreneurs own a company
whose core product or service is based on technology. While non-technological (non–tech)
entrepreneurs are any other type of entrepreneurs who also deliver a product or service to the
market but whose core business is not technology-based.
The objective of this thesis is to identify and assess the potential differences between tech and
non-tech entrepreneurs through the lens of effectuation. Hence the research question is:
How do different types of entrepreneurs (tech vs non-tech) use causal and effectual logic?
This research question will assist me in the task to explore if these differences depend mainly
on the nature of the companies or are due to other aspects.
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1.3. Motivation behind my research and topic
1.3.1. Why entrepreneurship, why effectuation?
Back in 2007, I was an entrepreneur. In one of my first courses at the master at the
University of Oslo, we chose an article that we should reflect upon. I chose the effectuation
theory by Sara Sarasvathy. My primary source was her article from 2005 “What makes
entrepreneurs entrepreneurial.” (Saras D Sarasvathy, 2001b).
As I was writing my reflection report about my experience as an entrepreneur, I realized
that I have used many of Sarasvathy proposed principles for effectuation, which I could
easily map in my personal experience as an entrepreneur. And this, without even knowing
about effectuation at the time. I was by no means an expert entrepreneur as the ones
Sarasvathy interviewed, and I do not consider my enterprise as a big economic success.
Later on while doing my internship at an startups incubator. I was lucky to have the
opportunity to work in the startup of two serial Norwegian entrepreneurs. They had sold
two of their previous companies and in 2015 were working on building their third company.
Since I was familiarized with the effectuation theory and had the opportunity to work with
these entrepreneurs I observed the way they worked and compared it to effectuation theory.
To my surprise, I could once more observe how these entrepreneurs used effectuation. This
gave me a big motivation to learn more about effectuation. I was curious and I did not know
if the use of effectuation made them successful and able to capitalize by selling two big
companies. But could it be so? They did many things we were not taught in school. But,
was it because of effectuation or was it some other factor?
In both experiences of how these serial entrepreneurs and I used effectuation in the
operation of our companies, we did so without knowing about the existence of this
entrepreneurial theory. Was it just a coincidence or could this indeed be something other
entrepreneurs use as a natural way of doing things?
Furthermore, this made me wonder if there were other entrepreneurs that used effectual
logic. Could it be the case that some of them used many principles, or all the principles,
just by intuition without knowing that they are actually using an entrepreneurial method
called effectuation? Sarasvathy in her first paper of 2001 where she presented effectuation
theory for the first time writes, “One could speculate that effectuation processes are more
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general and more ubiquitous than causation processes in human decisions.” (Saras D
Sarasvathy, 2001a)
Later in a group work for a course called research methods, we interviewed six technical
entrepreneurs whose companies were in the start-up stage. We again identified many
principles for both effectuation and causation. This time and in this case, it was more
difficult to map the effectuation principles than when I did so for my personal experience.
One important conclusion from our analysis for this group work was that this particular
group of tech entrepreneurs we interviewed used more effectuation than causation. Another
relevant conclusion was that the use of causation was externally influenced.
This last experience made me more curious about the possibility that some entrepreneurs
use effectuation without even knowing about the existence of this theory and lacking in
training on effectuation. So, some of my questions are: If I repeat the experiment by asking
technical entrepreneurs how they worked in the startup process, would I be able to find the
same or similar findings as when I worked with my group? How could I know that the use
of effectuation is exclusive to technical entrepreneurs? The company I had founded was a
non-technological company but I still used effectual logic. Do some entrepreneurs use
effectuation maybe just intuitively? Is the use of effectuation alone a guarantee of a
successful company?
1.3.2. Why compare technical and non-technical entrepreneurs?
Bailetti is surely right when he states that “Technology entrepreneurship is a vehicle that
facilitates prosperity in individuals, firms, regions, and nations.”(Bailetti, 2012). Because
technology is a part of our everyday more than ever before. I believe we do not realize and
reflect so often about the impact it has on our lives, added to the fact of how fast it has
advanced to the point where we are at now. My impression is that we do not reflect often
upon it. At least not as much as our grandparents did. I still remember the day I was leaving
the house to go to an Internet cafe with my diskette in hand and my 65-year-old grandfather
asked me: What is the Internet? I recall my inability to explain something I used almost
every day. Looking back, one realizes all the different technological innovations and
changes that have occurred since that day almost 20 years ago.
Skype, Spotify, Google, YouTube, Facebook and many others are now such a ubiquitous
part of everyday life that more often we do not think about the people behind those
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companies. These people are the so-called technological entrepreneurs. Do we really
understand them? Are they any different from other entrepreneurs not working with
technology?
For example, today whenever we wonder about something we can always look up the
answer on our smartphone. In keeping with this modern solution, I used my smartphone to
google the following: “What is the difference between technical entrepreneurs and non-
technical entrepreneurs?” The answer I got was: “Nothing except the product. The basic
characteristics are the same, their field of work is just different.”1 Is this so? Moreover, do
I need to write a thesis about this subject if the answer is so simple an easy to access on
Google? Even so, as a student of entrepreneurship and a former entrepreneur I suspect that
the search result I got back on Google is too simplistic and for all I know might be wrong
all together.
Another motivation for choosing my topic is the fact that the master program for innovation
and entrepreneurship at my university (University of Oslo) sets as a prerequisite that one
must have a background in natural science to gain entry to the program. This means that
the graduates are more likely to find themselves working in a tech enterprise.
1.4. Thesis layout
In chapter one, the motivations behind this thesis and the research question are presented.
In chapter two, I will present the literature review containing relevant information for this
thesis regarding effectuation, causation and technological entrepreneurship. In chapter
three, the methodology I have used in order to respond my research question is presented.
Chapter four, displays the results and analysis of the collected data, using the principles of
the effectuation theory. A discussion of the results is presented in chapter five. Chapter six
concludes the thesis and provides recommendations.
1 https://www.quora.com/What-is-the-difference-between-technical-entrepreneurs-and-non-technical-entrepreneurs
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2. LITERATURE REVIEW
In this section first the effectuation theory will be presented, then technology entrepreneurship.
Next, some papers relating both technology entrepreneurship and effectuation will be reviewed.
Of importance is an evaluation of a paper with a similar objectives to this study that will be
presented. This literature review will conclude with a presentation of the literature gaps.
2.1. Effectuation and causation
Effectuation has its roots in cognitive psychology, which is related to how a person processes
information, solves problems and makes decisions (Mauer, 2014). Hence, in this thesis, this
is where the reference to effectual logic and decision making for entrepreneurs emanates from.
In order to develop this theory, Saras Sarasvathy interviewed expert entrepreneurs and
discovered that they had a peculiar way of thinking, solving problems and making decisions
which she called effectuation (Mauer, 2014; Saras D. Sarasvathy, 2008). To make clear the
concept of effectuation she contrasted it with causation. Sarasvathy has several examples
related to meal preparation to make these concepts easier to grasp, which I have used as
inspiration to write mine.
To exemplify causation, we can look at the making of a meal like the Christmas dinner. For
the Christmas dinner, we make a list of all the ingredients and then go shopping to acquire
them. Since it is such an important dinner and we want it to be perfect, we need to have some
plans for the execution that most likely would include the following, a precise recipe, with
little or no room for improvisation. In other words, we start with a specific goal (Christmas
dinner), and as a second step, we look for the means to accomplish it.
To explain effectuation, we start from the standpoint of ingredients we have at hand. Any
random day we look in our fridge and kitchen cabinets to see what ingredients we have on
hand to prepare dinner. Later we prepare a meal that ends up being a dish with no specific
name like pasta Bolognese or pizza. In other words, we start with what we have at hand
(means) to later reach the goal (dinner).
Thus, by using causal reasoning one takes a particular goal as given and then focuses on
finding the right means to reach that goal. By using effectual reasoning instead, one starts with
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only a set of means and focuses on selecting the goals that will emerge by deploying those
preexisting means (Action, 2017; Saras D Sarasvathy, 2001a).
A recent longitudinal study on these two logics has shown that entrepreneurs use a “hybrid
decision-making logic” in the processes of new venture creation (Reymen, Andries, Berends,
Mauer, Stephan & Burg, 2015). In other words, entrepreneurs can shift between the use of
effectuation and causation at different times during the entrepreneurial cycle. Further, this
study recommends that entrepreneurs use effectuation with a broader venture scope and
causation with a narrow scope.
2.1.1. Causation
Causation is a term that Sarasvathy coined to describe the traditional view of entrepreneurship
(Fisher, 2012). Causation is also identified as one of the plan-based approaches to
entrepreneurship (Reymen et al., 2015).
According to Sarasvathy, causation rests on the logic of prediction and demands that the
entrepreneurs analyze the future based on which they decide which actions to take to manage
their ventures. The logic for using causation is ‘to the extent that we can foresee the future;
we can control it’ (Saras D Sarasvathy, 2001b).
Causal approaches to new venture building advocate; first defining the market, then selecting
segments within the market through detailed competitive analyses, and then using relevant
specifications and needs of the target market to determine which stakeholders to pursue and
acquire (Dew, Read, Sarasvathy, & Wiltbank, 2009; Kotler, 2000). In other words, the
Kotler’s textbook is the description of the causal model (Saras D. Sarasvathy, 2008).
2.1.2. Effectuation
In 2017, at the official webpage for effectuation (www.effectuation.org) this theory was
described as “A logic of thinking, discovered through scientific research, used by expert
entrepreneurs to build successful ventures.” (Action, 2017).
Sarasvathy and Dew (2013) describe effectual logic as “an empirical work in
entrepreneurship that has identified key elements of what might reside inside the ‘black box’
of entrepreneurial decision making.” (S. Sarasvathy & Dew, 2013).
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Sarasvathy argues that expert entrepreneurs start to build a company with their means, not
necessarily an idea. The concept of means in effectuation is more complex than just
personality traits, it has to do with networks, knowledge and even economical resources that
entrepreneurs starting a company possess (Saras D Sarasvathy, 2001a). In my opinion, these
attributes contribute much more than just an isolated business idea.
Further based on this concept of the means as the starting point in a company she proposes a
shift in the way entrepreneurship is taught nowadays. As she reflects “the focus in our journals
and classrooms, for example, would shift from how to build a successful firm or ‘how to
become a successful entrepreneur’ to ‘what types of ideas and opportunities should YOU
pursue?” and “Given who you are, what you know, and whom you know, what types of
economics and/or social artifacts can you create.” (Saras D Sarasvathy, 2001a). I am in
agreement with her because it is my perception that many of us think that the starting point
for any company is the idea. Thus, Sarasvathy’s conception takes away both (1) the idea and
(2) the discovery of an opportunity as central starting points of a company independently of
who the entrepreneur is or does.
Another significant contribution of Sarasvathy’s work is that she illuminates some
misconceptions and assumptions people often have about successful entrepreneurs. Many
times, entrepreneurs are seen almost as super humans who are not afraid to lose money and
have incredible intuition. Meaning the focus has been on the entrepreneur’s traits. As she
wrote, “The theory of effectuation brings another perspective to the table. It suggests we need
to give up ideas such as the successful personality or clearly superior characteristics of the
successful firm or organization”(Saras D Sarasvathy, 2001a). In other words, effectuation tells
us expert entrepreneurs are not super humans they “only” think and act differently (Mauer,
2014).
Even though, Sarasvathy is the proponent of effectuation, some researchers have contributed
and worked together through the years in the development, clarification, and validation of this
theory. Among them are Nicholas Dew, Stuart Read, and Robert Wiltbank. The four of them
together have written several papers. In one of those papers they compare novices with expert
entrepreneurs; the logic both types of entrepreneurs used to solve problems or making
decisions to start a company was evaluated and compared. One conclusion states: ”Clearly,
the study argues for rethinking what we teach MBA students about entrepreneurship[…] it
tempts us to speculate whether we need to rethink the MBA curriculum in terms of the logical
frame it generates to hinder entrepreneurial learning.”(Dew, Read, et al., 2009). The
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reference to the logical frame that could hinder entrepreneurship is the causation logic since
in this study it was observed that expert entrepreneurs used effectuation logic while novices
used causation logic. Further, it was proposed that entrepreneurship could be taught as a “two
toolboxes” approach where these two logics of business decision making were included (Dew,
Read, et al., 2009; Saras D. Sarasvathy, 2008).
In the same line, Reymen et al. (2015) recommends also that entrepreneurship education
should teach both effectual and causal reasoning. Moreover, they suggest that future
entrepreneurs should develop skills and the ability to know when to use either causation or
effectuation, or a combination of both (Reymen et al., 2015).
Effectuation principles
A merit and probably one of the more attractive characteristics of effectuation is the initial
effort by Sarasvathy to identify and propose principles. Effectuation idealizes that, expert
entrepreneurs make decisions in a non-predictive manner. They do so by employing five
principles that were coined as the following: bird in hand, lemonade, affordable loss, crazy
quilt and pilot in the plane (Action, 2017; Saras D. Sarasvathy, 2008).
1. Means - Bird in hand
Effectual entrepreneurs begin with a given number of means to reach different goals
that often times they do not even know beforehand. In other words, expert entrepreneurs
do not necessarily begin with an opportunity or market research. Instead, they start with
their means – namely who they are (tastes, traits, and abilities), what they know
(education, experience-based and other types of prior knowledge) and whom they know
(social and professional networks) (S. Sarasvathy & Dew, 2013).
2. Leverage of contingencies - Lemonade
Effectual entrepreneurs embrace surprises that arise from uncertain situations,
remaining flexible rather than bound to planned goals. This principle is the core of
entrepreneurial expertise. Namely, the ability to turn the unexpected into the profitable
(Saras D. Sarasvathy, 2008). Expert entrepreneurs are used to working with surprises
and also take advantage of them since they do not tie their idea to any theorized or
preconceived market. Anything and everything is potentially a surprise that can lead to
a valuable opportunity (Action, 2017).
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3. Affordable loss
Expert entrepreneurs do not focus on the rewards, economics or otherwise. The focus is
instead on how much time and money they are willing to lose in order to build a
company. (Dew, Read, et al., 2009). This principle is, in other words, related to the risk
they are willing to take. Notice that expert entrepreneurs build partnerships and alliances
that help them to share the risk with these stakeholders (Action, 2017).
4. Partnership & alliances – crazy quilt
Effectuation states that entrepreneurs are very good at finding and convincing partners
or collaborators in order to create an enterprise. Sarasvathy emphasizes that building a
company is a team effort. Therefore, this principle is about building a network of self-
selected partners (Sarasvathy et al. 2011).
An expert entrepreneur usually requests a pre-commitment from every potential partner
finding out what they are willing to commit and what they will put into the enterprise
(time, money, advice). These collaborators contribute to reducing the risk, or maybe it
would be better to say they share the risk with the effectual entrepreneur. Which
translates into a reduction of cash expenditure for the entrepreneur (Action, 2017).
Another interesting concept, in my opinion, is that customers are considered key
collaborators or partners. The entrepreneur does this by taking the product to the nearest
potential customer (Action, 2017; Saras D. Sarasvathy, 2008). As a result, the
entrepreneur is not the only one who designs a product and then convinces the client
that it is useful or a good product, instead the entrepreneur builds a product based
primarily on feedback from his or her customer (Fisher, 2012; Saras D. Sarasvathy,
2008).
These interactions and partnerships add new means to the firm. Consequently, they will
influence and determine the market the company will either create or enter. Thus, a
company is built together with collaborations with stakeholders in a so-called co-
creation process. Notably, effectual entrepreneurs focus on building partnerships
(strategic alliances) rather than competitive analysis (beating competitors) (Action,
2017; Saras D Sarasvathy, 2001a).
In sum, partners and alliances include suppliers, customers, and investors; in a general
sense any other actor outside of the company that can collaborate and co-create to build
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the firm. (Chandler, DeTienne, McKelvie, & Mumford, 2011; Fisher, 2012; Reymen et
al., 2015).
5. Control vs. prediction - Pilot in the plane
Effectuation argues that expert entrepreneurs have a particular vision of the future. They
do not strive to predict it; instead, they think it is better to control it with what they have
and what they are currently doing (Saras D Sarasvathy, 2001b).
“Non-predictive control is defined as eschewing predictive information in favor of what
the decision maker and her stakeholders can actually control at any given point in time”
(Robert Wiltbank, Dew, Read, & Sarasvathy, 2006). In other words, effectual
entrepreneurs primarily use a logic of non-predictive control to deal with unforeseen
circumstances and not using predictive information in order to address what the
entrepreneur can control at a given time.
The pilot in the plane expression makes allusion to the entrepreneur to be in control as
to where he or she will guide the company (plane) without trusting an autopilot or
intelligent machine that will guide a plane (company) based on predictive information.
2.2. Technology entrepreneurship
In 2012, Bailetti issued a review of all the published journal articles containing “technology
entrepreneurship” or “technical entrepreneurship” from 1970 to 2011(Bailetti, 2012).
Some relevant findings by Bailetti are as follows:
- The number of scholars contributing to the field of technology entrepreneurship was not
large back in 2011.
- Only one of the 93 articles focused on a contribution made to another field despite the
relationship between entrepreneurship and the wider environment.
- The field of technology entrepreneurship is in its infancy when compared to other fields
such as economics, entrepreneurship, and management.
- From all the papers and definitions, he summarized that technology entrepreneurship is
about:
o Operating small businesses owned by engineers or scientists.
o Finding problems or applications for a particular technology.
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o Launching new ventures, introducing new applications, or exploiting opportunities
that rely on scientific and technical knowledge.
o Working with others to produce technology change (Bailetti, 2012).
As a result of this review Bailetti proposed the following definition:
“Technology Entrepreneurship is an investment in a project that assembles and deploys
specialized individuals and heterogeneous assets that are intricately related to advances
in scientific and technological knowledge for the purpose of creating and capturing
value for a firm”(Bailetti, 2012).
This definition is quite complete compared with other definitions I have found during
my research and takes a holistic view of technology entrepreneurship where many key
elements such value of the firm, advances in technological knowledge and the
individuals who conform it are taken into account.
After reading Bailetti’s review, I have learnt further that the classical definitions of an
entrepreneur have been narrowly focused on the individual. In fact, Bailetti (2012)
emphasizes the importance of a group effort when he highlights “the shared vision of
future changes” explaining that technology entrepreneurship is a team effort instead of
an individual one, which is admittedly a big difference from other type of enterprises.
Thus, technology entrepreneurship (TE) is about a group of individuals collaborating
and cooperating to build a firm. As he writes in his review, “technology
entrepreneurship has more to do with collaborative production based on a shared vision
of future changes in technology. This shared vision of change in technology influences
why, when, and how a firm creates and captures value.” (Bailetti, 2012). This statement
brings to mind the entrepreneurial teams that many times are the preferred model for
the founding of a tech company.
Another definition of technology entrepreneurship was proposed by Spiegel et al. in
2011 “Technology Entrepreneurship investigates all questions related to the successful
formation, exploitation and renewal of products, services and processes in technology-
oriented firms. To do so researchers in TE apply different perspectives and levels of
granularity to investigate the question, how technology-oriented companies can build,
sustain or expand their competitive position in an ever-changing environment. This
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includes new technology-based firms (NTBF’s) as well as incumbent technology-based
firms (ITBF’s).”(Spiegel & Marxt, 2011).
I believe a distinctive point from this definition is the reference to the technology
environment as “an ever-changing environment.” Moreover, this last definition makes
a distinction between new and incumbent firms. Tech companies are referred to as
“technology-based firms (TBF’s)” and new companies are NTBF’s (New Technology
Based Firms). In Bailetti’s work however these type of ventures are called technological.
I have reflected that the fact that there are no defined labels to name technological firms
or technology-based companies could somehow explain why around 2011 two papers
were written to define technology entrepreneurship.
2.3. Studies of differences between tech and non-tech entrepreneurs
There is a quantitative study from 2008 by Liao & Welsch that focuses on the activities that
both non-tech and tech enterprises engage in during the venture creation or formation process.
Being one of the first empirical studies that explored the venture creation process. The study
ascertained that technology-based firms take longer time to complete gestation; seemed to
engage more with activities such as planning, establishing legitimacy as well as acquisition of
resources; and not in marketing (Liao & Welsch, 2008).
It is important to notice two things about this study. The first one is that it is concentrated in
the startup stage. The second one is the fact that it was issued nine years ago in a field that
was not well defined at the time and that has evolved over the last years.
These findings are relevant for my study since it is of interest to explore (1) if similar results
could be achieved by using the effectuation theory (2) to understand the reasons why tech
ventures take longer time to complete gestation than non-tech ventures do.
2.4. Gaps on literature
As noted in the previous section (2.4), there is a study where some differences between tech
and non-tech entrepreneurs have been identified. The particularity of this early study is the
use of a qualitative approach and the focus on the venture creation process. So far, however,
no research has explored the differences between tech and non-tech entrepreneurs using a
qualitative approach.
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Thus, my thesis addresses this gap by shedding light on whether the differences earlier
identified in the study by Liao & Welsch are confirmed or maybe new ones are found after
my study, as well as the possible reasons for those differences. The approach to identify
potential dissimilarities is also different since I am using the effectuation theory.
Regarding effectuation, Perry et al. (2012) states that in order to advance to the next stage in
the effectuation theory there is a need for both qualitative and quantitative data. Moreover,
Perry et al. (2012) highlighted that three of the main effectuation experiments developed so
far had compared expert to non-entrepreneurs. These non-entrepreneurs had been bankers,
managers and master of business administration students; that are not representatives of the
phenomena of interest (entrepreneurs). Therefore, researchers are advised to sample actual
novice entrepreneurs. My work in this thesis represents an advance in this regard since novices
entrepreneurs will be part of the data collection.
2.5. Contributions of this thesis
In this section two, I have reviewed literature of effectuation and technological
entrepreneurship. This process helped me to learn that the research on effectuation is in its
intermediate stage while the study of technological entrepreneurship is in its infancy with few
studies that have contributed to other fields. Meaning both research fields still require
contributions to move to the advanced research level.
I believe the distinction in my research is first of all that I will study novice entrepreneurs to
explore to what extent it is true that effectuation is only used by expert entrepreneurs. Further,
I will use a unique approach using effectuation to identify differences between tech and non-
tech entrepreneurs that hopefully will contribute to the research in technological
entrepreneurship, and, in a broader sense, will provide some new input into the body of
research in effectuation.
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3. METHODOLOGY
3.1. Research approach The research approach to address the research question was a qualitative case study. Further,
the “how” in my research question led me to the case study as the appropriate method. Since
I seek to explain some present circumstances of the social phenomenon in relation to tech and
non-tech companies. The present case study is exploratory since my question deals with
operational links needing to be traced over time as I am seeking to answer a question that
sought to explain the presumed causal links in real-life interventions that are too complex for
the survey or experimental strategies (Wilson, 2010).
The case study will help me to understand tech entrepreneurs through the lens of effectuation,
a subject that is still ongoing and has no substantial reference literature. Exploratory research
aims to develop better insight on the topic (Wilson, 2010). The case study offers an approach
to understand what is happening in a particular instance and why things are happening (Yin,
2009). Qualitative research is a noted interpretive method that is used to explain a social
phenomenon in a particular environment in order to examine data that is narrative in nature
(Creswell, 2014; Wilson, 2010).
3.2. Study participant selection
Study participants were selected from the network that I had and the definition of what a tech
entrepreneur is. Once the unit of analysis was defined as entrepreneurs, the number of
entrepreneurs was determined by the timeframe I had to complete the thesis. These were not
industry specific.
Table 1: Study participants
INTERVIEWEE COMPANY’S DESCRIPTION
Technology Entrepreneur 1 Company that developed a software to edit videos that saves time in the
video production process.
Technology Entrepreneur 2 Company that uses digital tools to build products for higher education.
Technology Entrepreneur 3 Company that provides the development of software for applications.
Technology Entrepreneur 4 Company that provides software for electrical vehicles chargers.
Non-Technology Entrepreneur 1 Company that provides beauty treatments, rejuvenating and massages.
Spa type business. Non-Technology Entrepreneur 2 Outsourcing company providing everything within marketing for small
companies. It works as an external marketing department.
Non-Technology Entrepreneur 3 Company that sells vintage used furniture with Nordic design.
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3.3. Data reliability
To ensure concerns about consistency in the data the following best practices were addressed
to improve data reliability:
Chain of evidence: All interviews were recorded with the interviewees’ permission.
A case study database: Once the interviews were completed, they were transcribed in word
and later on introduced in Nvivo to be coded and analysed. I personally transcribed the
interviews and this helped me to reflect on the themes for analysis and note patterns and
conecctions between the respondent’s answers. The Nvivo software facilitated the discovery
of new patterns and also helped me to easily access quotations that I included in my analysis.
3.4. Data validity
A semi-structured interview guide served as a guideline for data collection. The interview
guide was constructed from the literature review and had thematic questions using the
principles of effectuation to map out how the entrepreneurs used this theory.
Multiple perspectives: I interviewed multiple informants with different types of businesses to
shed light on the firms’ thought processes
Generalisation: By selecting entrepreneurs in Oslo this has marginalised the study to the
Norwegian context. This has made the study particular to a geographic location so it cannot
have representational or population generalisation (Yin, 2009).
Skewness: Some companies that I contacted either declined or did not have time to be
interviewed so this reduced the number of my study participants.
3.5. Data collection process Primary data was collected through semi-structured interviews. Thus, 16 interview questions2
formulated based on the five principles of effectuation. The interviews provided an ability to
engage in both verbal and non-verbal communication as well as record the information for
accuracy. I had also taken notes of the expressions or reactions to some questions.
In total 7 face to face interviews were conducted subdivided as 4 tech entrepreneurs and 3
non-tech entrepreneurs.
2 See appendix 1 ”Interview guide”
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3.6. Data analysis process
Once the interviews were recorded in both shorthand and audio I proceeded to transcribe them
into word documents. Next, I introduced this data into Nvivo which helped me to recognize
some patterns. However, I was not familiar with the software so I could not code my data
using it. Thus, I printed out the interviews and coded them by hand. Later on, I grouped the
answers in a big table where I had an overview of all the codes to facilitate the process of
comparing answers. In a second iteration cycle I coded them using the five effectuation
principles (bird in hand, affordable loss, lemonade, crazy quilt and pilot in the plane). In the
third iteration, I identified the differences and similarities that emerged from the data. Once I
identified four relevant differences and already saw some patterns I looked at the data a second
time asking “why-questions” to go deeper into my analysis.
3.7. Anonymity and Identifiability
In order to have as many respondents as possible and more truthful feedback, interviewees
were told their participation would remain anonymous.
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4. RESULTS AND ANALYSIS
This section presents the results and analysis of four relevant differences that have been
identified. First will be a discourse on alliances and partnerships as well as competitors, then
a view of the use of business plans and finally dynamics of the entrepreneurial team.
Thereafter, a summary is presented. At the end, additional findings are presented.
4.1. Alliances and partnerships The data indicated that all of the tech entrepreneurs either had several collaborators or were
actively looking for them. Whereas non-technical entrepreneurs seldom had partners. In
effectuation, partnerships and alliances are related with the ‘crazy quilt’ principle. By
primarily comparing the answers from both type of entrepreneurs to this effectuation principle
I could identify relevant differences between them that I will explain in this section.
4.1.1. Non-tech firms and alliances Non-tech firms mentioned alliances with distributors and companies that assisted them by
promoting their products and services which in turn attracted customers. Table 2 below
outlines illustrative responses from the non-tech entrepreneurs related to alliances and
partnerships.
Table 2: Non-Tech entrepreneurs’ responses on alliances and partnerships
Company
acronym Illustrative responses
NT 1 “ Umm no,… well now we have signed an agreement with… Um no, yes, wait…we have
(X) the company which we have bought the online booking from, they promote us, they
position us. There is also another company that has an easy booking system according
to the location of where the client is. We have signed an agreement with a university so
we appear in a student magazine. Other informal agreements are with satisfied
customers that bring others clients. Some bring clients and get some treatments for free
or a discount.”
NT 2
“No we don’t have alliances. I think if initially the concept isn’t truly unique and it is not
easy to copy or if it is some unique technology that someone is missing I think then you
can make partnerships early on. If you have a crucial little genius technology that
someone is missing then you can have partnerships. However, as a small company it is
very hard to get partnerships to begin with. You can maybe get some letter of intent or
some mambo jambo kind of partnership, but I think a real partnership comes from
bringing real value to the table but this is not the case.”
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NT 3
“No…are you thinking of something like….well yeah… we have been talking to two
people about investment. We were thinking about opening the store with a partner but
the communication was not good. Now we have contact with TNT because we sell our
products outside Norway.”
Alliances and partnership were not considered to be a crucial element for the non-tech
entrepreneurs. Instead, when discussing collaborations, non-tech entrepreneurs perceive the
mentioned companies as means to conserve their competitive advantage in their markets. An
example could be a company that is a supplier of a specific product that no one else is selling
in Norway, another could be the courier company that distributes their products. In other words,
a non-tech company pays a fee to these "partners" for a service that assists them to reach a
client.
This is in stark contrast to effectuation which emphasizes that “an effectual entrepreneur asks
a pre-commitment from every cooperation partner finding out what these partners are willing
to commit and what they will put into the enterprise in terms of time, money or advice.” (Action,
2017). It was evident by the answers of these entrepreneurs that these partners did not commit
something that could reduce the risk of the non-tech entrepreneurs hence the perception of them.
Not having alliances and focusing instead on competitors is causal reasoning as defined by
Sarasvathy.(Saras D. Sarasvathy, 2008) Thus, non-tech entrepreneurs in this study showed a
preference for a causal reasoning when it came to the ‘crazy quilt’ principle.
4.1.2. Tech firms and alliances
Tech ventures formed alliances and partnerships with other companies who were similar to
them and on some occasions alliances even with competitors. Also, alliances were formed
with customers to develop their products further. Hence the name of ‘crazy quilt’. This way
of acting aligns with the effectual reasoning which states “effectuation emphasizes strategic
alliances and pre-commitments from stakeholders as a way to reduce and/or eliminate
uncertainty and to erect entry barriers” (Sarasvathy 2001)
Table 3 below outlines the responses from the tech entrepreneurs related to alliances and
partnerships.
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Table 3: Tech entrepreneurs’ responses on alliances and partnerships
Company
acronym Illustrative responses
TE1 “We are working on that. That is a key strategic direction. Finding strategic partners that give us
visibility in different markets, we need that as a small company. Our strategy at the moment is to
find partner companies who are already more stablished in their markets. In markets where we
want to go as well and where we can bring something to the table that helps them and they promote
us in a way. We are building those partnerships now, we have one with a Canadian company. We
have already done a second mini product based on our technology integrated into their product..
We have certain other companies who put us in their partner programs but that is not substantial
at the moment, we are just in a list with other companies.”
TE2 “It has been important for us to have universities as partners .Well we have only one official
partner. But we go into schools with this pilot projects. So let’s say a school in the US wants to try
something new, so we engage contact with them and let them try our products against some fee. It
is super valuable for us because we get to test our products and it is valuable for them because
they get the chance to get something new and innovative. So it is not official partnerships. But it is
something we could use to leverage later because we are inside that institution, we have our
product we can leverage that when we sell our product elsewhere.”
TE3 “Aside from the new joint venture we have, we don’t have sort of formal arrangements with other
companies but we shared offices with another company who were good friends of us. Of course,
there was a lot of knowledge transfer we talk to each other we help each other out that was very
informal. We are friends sharing offices working in our separate things but you know still help
each other. We know people here at Forskningsparken, we talk to people and help them if they
need help. That is more like a contact network than close alliances. So there is certain level of
sympathy and understanding for people working in small companies”
TE4 “We have multiple partnerships and alliances in Norway and on the European level. The company
is a big fan of what we call co-cooperation or compete and cooperate. Sometimes we do
partnerships with our competitors in one market that are not necessarily our competitors in
another market. Sometimes we identify partners that it is just mutual beneficial in all markets so it
depends.”
It was observed that technical entrepreneurs collaborated with other companies for a number of
reasons (1) to access markets, (2) to be linked with the advances in the industry and (3) to build
and test their products.
1) Access to markets
Tech companies use alliances and collaboration with other companies in their industries to
promote their products and access international markets as explained next:
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“As a small company we need alliances. Our strategy at the moment is to find partner
companies who are already more established in their markets. In markets where we want
to go. As an exchange we bring some value to the table for them and they promote us in a
way.” TE1
Liao et al. study (2008) concludes that technology based entrepreneurs do not engage in
marketing activities at their formation phase which was partially supported by the data since
one of the three tech firms started marketing activities in a later stage (after completing
development)(Liao & Welsch, 2008). However, the majority of the tech firms started
marketing their products using the strategy of establishing connections with other
companies.
2) Access to advances in the industry
Partnerships assist tech enterprises to access information about their industries as explained
by TE4 in the following statement:
“We are very lucky to have some inside information which not everyone else has, because
of our partnerships. Since we are talking to everybody, we also see some changes that can
happen. Thus, we can adapt business models for our customers before the change is really
happening. I think that is how we can slightly look into the future and how we can predict
the market.” TE 4
Bailetti (2012) emphasizes that Technology Entrepreneurship (TE) is about a collaborative
production that has as a fundament a shared view of technology (Bailetti 2012). Meaning
changes in technology occur as collaborative production from stakeholders within an
industry who share a vision of the future. He further elaborates that what distinguishes TE
from other entrepreneurship types is the interdependence between scientific and
technological change. Hence, tech entrepreneurs through their alliances are in constant
dialog with stakeholders from the ‘crazy quilt’ they build to be aware about technological
changes.
3) Build and test products (R&D)
This is a crucial and maybe obvious difference between tech and non-tech entrepreneurs
since tech entrepreneurs are mostly offering new products that they are building and
creating themselves from scratch.
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The data indicated that all the interviewed tech entrepreneurs co-created their products with
their customers. Some mentioned the lean method and talked about having a minimal viable
product (MVP) to test with pilot customers and make as many modifications as necessary
before lunching this product into the market.
The following statement by one tech entrepreneur describes two of the reasons explained
above. A partnership with customers helps this firm to both test their products and as a way
to market their products and enterprise.
“It has been important for us to have universities as partners. We go into schools with this
pilot projects. So let’s say a school in the US wants to try something new, so we engage
contact with them and let them try our products against some fee. It is super valuable for
us because we get to test our products...[]... So it is not official partnerships. But it is
something we could use to leverage later because we are inside that institution, we have
our product we can leverage that when we sell our product elsewhere.” TE2
It is relevant to note that this company was founded right after landing its first customer;
even before having a fully developed product being this the most successful tech firm
among the interviewed. Which might indicate that for a tech firm a first customer can be
crucial. This finding supports the concept of pre-commitments in effectuation when the
entrepreneur “negotiates there are with other parties prior to having a fully developed
product or service” (Fisher, 2012).
One of Oslo’s incubators started recently an initiative called «Meet the corporates» which
is an arrangement that facilitates tech companies’ access to partnerships with other bigger
companies. As one can read in the newsletter for this event “one of the key activities
at StartupLab is connecting the established corporates with Norwegian startups, as we
strongly emphasize the value of the first customer.” 3. The core idea of this recent initiative
correlates with the co-creation principle of effectuation that states that the ideal beginning
of a successful startup is having strategic partnerships with customers.
Although, involving customers from the beginning might be an obvious first step for all the
tech ventures, my own experience at one of Oslo’s incubators indicates otherwise. During
my internship, I observed some tech entrepreneurs developing products based on personal
3 http://startuplab.no/ https://us9.campaign-archive.com/?u=b0560a2bfbaed4734394445d0&id=ce0375266c
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assumptions of what the customers would want or need without asking them first. For
example, entrepreneurs could work on an app’s feature for weeks to later discover that this
feature was something the user did not understand or valued as useful. This eventually
failed, and represented a waste of time and work for the company, which could have easily
been avoided by asking some potential customers for feedback early in the process.
Notably, some tech ventures develop their products and services in collaborations and
partnerships with other companies and customers in a trial and error effort. Which is well
captured by Bailetti’s definition when he includes the “collaborative exploration and
experimentation” that distinguishes technology entrepreneurship (Bailetti, 2012).
Therefore, there is a link between the definition of technology entrepreneurship and the
crazy quilt principle in effectuation.
Establishing alliances and partnerships instead of focusing on competitors is effectual reasoning
as defined by effectuation. Thus, tech entrepreneurs of this study showed a preference for
effectual reasoning when it came to the crazy quilt principle.
In sum, the information presented in this section revealed that tech companies aligned with the
effectual reasoning while non-tech aligned with causal reasoning when it comes to the ‘crazy
quilt principle’ of effectuation. Since the crazy quilt principle is related to both (1) alliances and
(2) competitors, a clearer picture of these differences will be possible by looking at the
information about competitors presented in the next section.
4.2. Competitors
The data from this study indicated that tech companies do not focus on their competitors while
non-tech are very aware of them and evaluate them often.
The crazy quilt principle from effectuation is related to partnerships and competitors. As
mentioned in the previous section, it was in this principle where I could distinguish relevant
differences between these two types of entrepreneurs. Hence, the results of this section on
competitors are related to the previous section regarding alliances and partnerships.
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4.2.1. Non-tech entrepreneurs’ view on competitors
It could be observed that non - tech entrepreneurs have done well in identifying their
competitors and follow them carefully, which aligns with the causal logic. One reason could
be that their products or services are more susceptible to being copied by other entrepreneurs.
Another reason could be the established markets or industries where they operate, where
identifying competitors is relatively easy.
As an example of them identifying the competitors:
“In Oslo there are probably fifteen companies of furniture design but only three of them have
a webpage. None of them has a listed price for their products so we are the only ones that has
this feature. Some companies also sell used midcentury design. But they don’t have prices.
They are competitors but they are a bit different, because one of them sells Italian design more
like a super wow design at a high price. We think our prices have to be reasonable but have
a good quality.” NT 3
Both, NT3 and NT1 express that following competitors through social media and looking their
webpages gave these entrepreneurs a good understanding of what competitors were doing,
especially regarding prices or some sales they might be offering.
“I follow the competition on Facebook so every time they do something I see it there and
annotate it. I do that almost every day, not once a month. When I am not selling enough for
example I wonder why is this, what are my competitors doing. Then I check them and realize
that some had lowered the prices. Normally no one in Oslo made discounts and suddenly I
realized that everyone was having 50% off.” NT 1
The data presented above shows that non-tech entrepreneurs assessed and checked
competitors often. This behavior aligns well with causation models such as the Porter model
in strategy that lay emphasis on detailed competitive analysis (Porter, 1980; Saras D
Sarasvathy, 2001a)
4.2.2. Tech view on competitors
The data indicated that the majority of tech-entrepreneurs were not so interested, or even
sometimes disregarded their competitors. One reason was that they did not want to copy them.
Others expressed that they did not have direct competitors or any at all. Which contradicts the
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Porter’s five forces model that emphasizes detailed competitive analyses in order to have a
cutting edge. Only one tech venture became recently concerned about competitors. The
responses about competitors are displayed in Table 4
Table 4: Tech entrepreneur’s responses on competitors
Company
acronym Tech’s view on competitors
TE 1 “Umm yes I mean we do have competitors, we don’t have any who does exactly what we do.
We have several probably more 20 that have some overlaps”
TE 2 “I think it is more important for us to actually build something that solves a problem. We
weirdly do these kind of predictions or take a look at competitors. “Because to really nail the
problem we are trying to fix I think you need to just go as deep as you can to figure it out and
really see what the frustrations are. Not take a look to what other app does so maybe we can
steel feature A and B from them and just create something that might work. We focus instead
100% on what we do and look back at the feedback we get to really solve a problem”
TE 3 “We don’t have competitors, you could argue that we have competitors but we don’t feel really
like we are in a very competitive market. I think partly because the market is pretty big for us
and also because we are small and have very specific competencies. So at this point we don’t
feel like we have to struggle with competitors. That has never being the case. ”
TE 4 “We have been doing a competitor analysis since at least April continuously, because this is
a very fast market. There are always new players coming. We have one team member that is
more or less in charge of that.”
There might be three reasons for this difference. The first being, the nature of the products,
secondly the type of markets where these companies operate, and finally the lack of resources
(time and personal) to analyze and follow competitors.
1) The nature of the products these companies offer to the market
Tech products are less prompt to be copied compared to the ones offered by their counterparts.
Duplicating or copying a tech product is not an easy task. In addition, these products
sometimes even have patents making it harder for competitors to copy them.
2) Established markets vs new markets
Tech companies might enter or even sometimes be the creators of new markets where it is
difficult to identify competitors in the first place. While non-tech companies usually are
players in an established market. Market research in general could be a challenging task in a
new technological market as TE 4 explains:
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“We had lots of market research, some good some bad. I think we spent about 200 000 on a
market research report in the beginning of 2014 for a product towards a customer that didn’t
want to pay for it. So we didn’t ask enough at that time to realize but now we do.” TE 4
This last statement also points out to an important fact, which is that these markets could
change or ‘evolve’ over time. Consequently, competitors and customers could also change.
To exemplify this point TE said
“We learned much about the market over these past years and also the market has really
changed. Maybe it is not the right word; it is more that it has evolved. When more electrical
vehicles came into the market more problems arrived.” TE 4
On some occasions, tech ventures have to pivot and change their products or services which
will consequently change its market, clients and competitors. Therefore, competitive analysis
is not relevant or a first step for a company that operates in a new market. Here lies the
relevance of effectuation to entrepreneurship because it helps us to better describe, “how
startups come into existence in the absence of a current market for goods and services” (Perry,
Chandler, & Markova, 2012; Venkataraman, 1997).
Tech companies that were part this study had other companies as clients (B2B) while non-
tech had end consumers as clients (B2C). Being the case that for companies who sell to end
consumers (B2C) it is relatively easy to know what their competitors are doing in terms of
prices and services just by looking at the information they display in their webpages or social
media. Instead, it is somehow more difficult to gather information about competitor’s prices
or services when these sell their products to other firms.
3) Lack of time and resources:
Both type of entrepreneurs considered time an important resource. Meaning there were a
number of things in the company that they could not do for the lack of time. Worth noting
here is the small number of employees working in these companies. Therefore, at some point
it really is a matter of choosing where to allocate their resources, in this case time and labor.
Thus, tech entrepreneurs focus on forming alliances while non-tech focus on monitor their
competitors.
Focusing on competitors instead of building alliances and partnerships aligns with the causal
reasoning as defined by effectuation. Thus, non-tech entrepreneurs of this study showed a
preference for causal reasoning. As we displayed in section (4.1) ‘Alliances and partnerships’,
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tech ventures had more alliances than non-tech companies did. In this section, the displayed
information revealed that non-tech firms were more focus in their competitors than non-tech
companies were.
The results are consistent with Sarasvathy hypothesis that entrepreneurs prefer either the causal
or the effectual approach when it comes to stablish alliances and monitor competitors. Being
the case that the non-tech entrepreneurs in the present study did in fact focus their attention in
competitors while tech entrepreneurs focus theirs in forming strategic alliances and pre-
commitments from stakeholders (Saras D Sarasvathy, 2001a). Accordingly, non-tech
entrepreneurs use this the ‘crazy quilt’ principle in a causal way while tech entrepreneurs use it
in an effectual way.
4.3. Business plan perspectives
A business plan is mainly related to the causal logic, where one decides on some goals before
hand and then looks for the means to reach that goal. There are parts of the business plan such
as the estimation of cash flow and break-even point where one has to forecast how the company
will perform financially in the coming months or even years. Which are related to prediction
logic and therefore align with the causal reasoning as well.
The idea of a business plan for people without formal business administration knowledge might
be not as clear. Thus, “A business plan is a document that describes the opportunity, product,
context, strategy, team, required resources, financial return, and harvest of a business
venture.” (Byers, Dorf, & Nelson, 2011). In short, a business plan is a comprehensive document
that includes different aspects of an enterprise.
Non-tech entrepreneurs conceived the business plan as a strategic tool whereas tech
entrepreneurs perceives it as a constrictive predictive tool. The subjects of my interviews had
little to no formal training in business administration.
4.3.1. Non-tech entrepreneurs’ view of a business plan
It was noticeable that founders of non-tech companies link the business plan to projecting or
planning. A business plan represented a tool that assist them to foresee what was going to
happen in a timeframe of a few months to a year. As the answers collected in Table 4 below
describe:
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Table 5: Non-tech entrepreneurs' view of a business plan
Company
acronym Does the company have a business plan?
NT 1 “Yes we have one, but we did not have it from the beginning. I had it in my head, but that was
a mistake, that is wrong. I had just written down the financial table things like how I wanted
sales, expenses, investments and everything to evolve. How many people I began with, how
many I was going to hire after six months and a year; when I was going to move to a new office.
I had everything there on that table. When my business partner joined, he was studying business
management online. He wrote the business plan for our company as the final exercise of the
course, and it was then when we started to include other things.”
NT 2 “We always have a business plan, but it is very weirdly written down in one document. It is sort
of a mental thing. It is shared in some PowerPoints or just discussions. The most specific
manifest of the business plan is usually some budget or prognosis about what are we gonna do.
It contains who are we going to hire, when, how much are we going to pay them. How much
are they going to sell, what is the average sale, who are you going to sell it to, so if you know
that excel sheet there, it tells you a lot about everything that is actually in the business plan.”
NT 3 “We tried to write one down but since I don’t a clue about how to do it we did not. Added to
the fact that we don’t have time, there are many things we need to do all the time. My cofounder
is more the planning type but not we don’t have a business plan because we don’t know how to
do it. I think it can somehow help us to predict the future.”
A relevant fact is that two of these entrepreneurs have founded a company before; both used
the money from selling that previous company to invest in the current one. Besides both had
cofounders who invested as well. Therefore, these non-tech firms did not need external
investment, which was a noticeable difference from their counterparts. This finding brings to
mind the ‘bird in hand’ and ‘crazy quilt’ principles from effectuation (Saras D. Sarasvathy,
2008). As it is a clear example that the inclusion of partners (crazy quilt) translates into
valuable added means to start any company.
4.3.2. Tech entrepreneur’s view of a business plan
Tech entrepreneurs linked the business plan right away with investment. The general
impression is that the primary purpose of writing a business plan is to show an investor that
this particular venture will be profitable in the future. It is worth noticing the fact that these
founders do not see the value of having one for their company. A business plan is perceived
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as passive, static, and time wasting document as one can read in the following examples in
Table 6.
Table 6: Tech entrepreneurs' view of a business plan
Company
acronym Does the company have a business plan?
TE 1 “ No we don’t have one, unless you are talking to an investor…I mean a business plan for yourself
is more or less like trying to predict the future, in something that has so many variables. We
thought that a business plan would not help us because the range of things that could happen was
so huge. Ok if we predict let’s say in the first month we are selling this many licenses and the
second this many and we then project this….ummm… we did not see the value for us as a planning
tool or wherever so we didn’t make one.”
TE 2
“We have created a couple of business plans but mainly just for investors to see that there is
actually money in this. But we don’t let the business plan guide us in any way; it is just a passive
document that lies there for investors. It is something that is still required, so we do it.”
TE 3 “No, maybe partly because our product idea to begin with was so vague. As a startup you almost
never get the initial idea correct so you are going to pivot or change your strategy several times
before you get it right. So sitting down and writing a business plan for something you know it is
going to be wrong and invalid in half a year to three months it is somewhat pointless to the point
of being a waste of time. I think that is why there is less and less focus on planning and rather
trying to actually see what you have done wrong, because that is most of the time the case.”
TE 4
“For once I have to say yes. So we are living in a dynamic world, and the business plan is quite
static, so we don’t make one all the time only when we are about to ask for investment, so we
make a new one. We have our long-term plans, but they are always changing so much that we do
not update any documents before we need to. Investors ask for one, don’t ask me why, but they
still do. Since we don’t have a vast cash reserve ourselves, then we have to accommodate to that.”
One can grasp the reason why they do not see the value of a business plan for their companies
by their statements where some keywords are change, data set, variables and prediction. Tech
entrepreneurs do not think it is possible to predict the future because technology changes so
much in a short period, as TE 4 below expressed:
“In a data-driven world, your decision can’t be better than your data set. A business plan is
a view of a business at a given point without you knowing the data set. Meaning at least in
our industry, which is changing quite rapidly, what was right today it is not necessarily right
tomorrow, and then I am literally talking about tomorrow. Whatever I present in a big
document it is not necessarily usable the next day. If I showed you the different business plans
in half a year, you would see how much the business has changed and we are still doing the
29
same thing. For me, the business plan is a document which is not anything else than an
academic exercise.” TE 4
Thus, tech entrepreneurs earnestly proclaim that they do not trust prediction because of the
uncertain nature of future events. Being this is one of the main reasons tech entrepreneurs
dislike writing business plans. They neither dare nor have the desire to predict what will
happen in a rapidly changing world.
The fact that tech entrepreneurs do not want to write a business plan could sometimes
misinterpreted as a lack of planning or prevision. This might not be the case, since they use
other tools instead of a business plan such as the lean method and the canvas model. Below
the comments of TE 4 and T3 regarding these tools.
“I must say a much more useful tool for us is the business model canvas and business value
canvas. Those tools are much more interesting for us. So we are doing the canvas model based
on each type of customer.” TE 4
The reasons for the employing of these tools could be that they take shorter time to finish and
requires less financial and management skills. Other communalities of these two tools tech
entrepreneurs employ are the agile decisions and not making long-term plans.
“I mean basically and this is why you have to try it out. I mean you have the whole lean start
up approach with failing as early as possible, testing your hypothesis as cheaply and as early
as possible. I think it is a very good set of ideas. I started using it gradually after I read the
book.” TE 3
From the above statements one can grasp that the other reason for not relying in a business
plan are the constraints that this document represents regarding flexibility and
experimentation which are on the other hand the advantages of the lean method and canvas
model.
Some of the reasons for the different views on the business plan could be as follows:
1) Amount of investment
Tech ventures require higher amounts of investment compared to non-tech. Which means they
might actively seek external financing and for this reason will have to present a business plan.
A higher amount of investment could be due to two main reasons (1) long time to develop
products and (2) skilled workers.
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Development time: The development time can be prolonged due to the trial and error process
to develop a technological product. In some cases, it takes years before these products are
ready to be launched into the market. As a result tech firms have a negative revenue flow, with
high expenses and low to no income but once the product/service takes up returns are also
high. As an example of the trial and error process, TE3 elaborates:
“My experience or intuition on this it that yeah to a certain degree you can know what your
customer wants with your scratching knowledge, you have a better idea of what it is needed
but you can never know a 100%, it is always a guess work. You can be extremely lucky and
hit a 100% without asking anyone but most of the time I think we all are more or less wrong
and we just have to correct by build, measure, learn. Like test out your hypothesis see where
you were right or wrong and adjust and then find your way.”TE3
Skilled workers: Tech firms rely on a highly skilled workforce from multiple domains,
which, in turn, commands high salaries, resulting in higher cost to the firm (Bailetti, 2012).
2) Business administration knowledge
Since a business plan is a comprehensive document some previous knowledge and skills may
be needed in order to write one. During my internship at an incubator company where many
of my co-students were also interns, I could observe that the majority of us (entrepreneurship
students) were either writing a business or marketing plan as part of our job. I could notice it
was because tech entrepreneurs did not have the skills nor the time to develop a business plan.
Another relevant point from our findings in this study is that the three companies that did have
a business plan had a team member with business administration knowledge. Of importance
is to note that these two companies obtained external investment both from the government
and private investors.
3) Entrepreneur’s background (doers not planers)
Since effectuation has its roots in cognitive psychology maybe the preference to use causal or
effectual logic based on their own backgrounds just because that is closer to who they are. As
a result non-tech entrepreneurs prefer a causal reasoning when it comes to plan the future,
while tech entrepreneurs prefer an effectual reasoning where experimentation and flexibility
is possible.
In this present study the non- tech entrepreneurs had professions where planning was a big
part of their previous jobs, being one a strategist, a nurse and a surgeon. On the other hand,
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all the tech entrepreneurs interviewed were engineers, accustomed to the experimentation and
flexibility to create things.
Effectuation proclaims that effectual entrepreneurs do not do long term plans but they like to
experiment instead. On the other side are the causal entrepreneurs that prefer planning before
execution. Since effectuation was born in cognitive psychology and therefore referred to how
a person solves problems it could be the case that the backgrounds of the respondents influence
the preference for either logic. Meaning engineers have a different approach to solving
problems than medical personal. It is said that effectual entrepreneurs are not planners but
doers.
4) Predictive information
The business plan contains forecast on many variables, which are made based on what has
happened in the past to predict what could happen in the future. Tech entrepreneurs do not
think it is possible to predict the future in technology because it is a fact that it is ever changing.
Which aligns with the definition of technology entrepreneurship by Spiegel et al. when it
makes reference to the technology environment as ever changing (Spiegel & Marxt, 2011).
4.4. Entrepreneurial teams
The makeup of a team is one of the things can ultimately determine the success or downfall
of an entrepreneurial firm. Understanding the differences in the make-up of these teams for
tech and non-tech companies is important. Additionally, the process of team aligned with the
bird in hand looking at the means at hand, where an additional team member can be a source
of means and crazy quilt where future and present alliances are considered with the addition
of team members. Due to the technical nature of the tech entrepreneur’s ventures the study
started on the supposition that tech companies are always founded by an entrepreneurial team
while non-technical ones are usually founded by solo entrepreneurs.
4.4.1. Non- tech companies founded by solo entrepreneurs
Two of the non-tech entrepreneurs founded their companies as solo entrepreneurs and later on
included their spouses as cofounders. While the third non–tech company was founded by an
entrepreneurial team. Relevant here is to indicate that non-tech companies did not face big
challenges to find a cofounder while tech companies perceived it as major problem. None of
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them mentioned any conflicts or problems about forming their entrepreneurial teams. Which
could be due to the fact that these cofounders were known people for them.
4.4.2. Tech firms founded by entrepreneurial teams
All the tech ventures had entrepreneurial teams; two of them had an entrepreneurial team with
the technical part and the business part. The other two companies had only engineers as
cofounders. There was more of “multiple founders” for the tech companies.
In contrast to their counterparts tech entrepreneurs mentioned conflicts with their cofounders,
as TE1 expresses below
“My main worry was probably is if the team is going to work well together. I thought the
abilities we had and the idea that was on the table was good. But I already had some worries
for some patterns we had as a group, or some problems in the relationship between us that
might have become a problem. That was my main worried and it still is.”T1
These conflicts in this specific case, resulted eventually in the exclusion of one of the
cofounders;
“At some point we separated from the third partner (founder). It was not expected when we
started the company. There was mounting personal problems between us that almost lead to
the end of the company.”
Forming an entrepreneurial team for a tech company seems to be a challenging task, not only
because of conflicts but also because tech companies need certain skills as TE 4 expresses
below. It is worth noting the TE 4 does make references to the management and technical part
of the company.
“Since this is anonymous, I can be quite frank and open about it. We have had to fire about
three of the original entrepreneurial team. There has been many people that has been in the
team on test who was not able to make the cut. So it is always about finding the right person
with the right skill set that fits the group and product and fits the market we are entering. It
has taken some time to find the right individuals to fit into the team, both from a technical
point of view but also in business development and yeah the management side.”TE 4
It was perceptible that two of the tech companies that appeared to be doing better in a shorter
amount of time compared to the other two, had a complex entrepreneurial team. Complex
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meaning their teams had engineers and people with business administration knowledge.
Notably both firms have had obtained governmental investment and investors as well.
This finding could indicate that an entrepreneurial team for a tech company benefits by having
the technical and business side. Since each individual can focus and perform better at what
they are best at. As TE 2 explains below
“I guess the thing that makes us so effective in the way we do things is that we divide task
between us so the guy in charge of the business model gets to do his stuff and we technologist
do the stuff we do best.” TE 2
Tech entrepreneurs also valued complementary skills from their cofounders as TE1 explained.
“The two of us who started out in the old company, we bring different things to the table,
which really complement each other quite well. He is someone who does the rocket science,
the really hard technical problems at a level of quality that it is really hard to find, he is
someone who would not have a problem getting a job at Google or Facebook. I have work
with many people over the years, so that is amazing. I am more the idea guy, management guy
and the hands on kind of guy, someone who can fill any gap that might come up.” TE 1
While both types of company could be run by an individual as a solo entrepreneur it was
apparent that both benefit from having multiple founders. For tech companies though this
seem to be a fundamental characteristic due to the need of specialized individuals.
Tech companies require a complex and multidisciplinary entrepreneurial team while a non-
tech company can be run by an individual. Which aligns with Bailetti’s definition about
technology entrepreneurship as ‘an investment in a project that assembles and deploys
specialized individuals’(Bailetti 2012).
Overall both types of entrepreneurs valued complementary skills and the investment that
emanates from having an entrepreneurial team. The main differences in this team make-up
could be traced back to aspects around the products and market segments, background of the
entrepreneurs and investments needs.
1) Product related – the nature of the products
One of the biggest distinctions between tech and non-tech entrepreneurs is the novelty of
products or services they offer to their markets. Being the case that tech venture’s products
are based in scientific advances. According to Bailetti, technology entrepreneurship involves
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specialized individuals from multiple domains working collaboratively to explore and exploit
scientific change for the benefit of the firm (Bailetti, 2012).
In a non-tech company, it might be enough to have a background in business administration
or not at all as it was the case for all the respondents to the interview. However, for a tech
company it might be not enough to have a background in science or technology, there is a
need of business administration knowledge. Tech entrepreneurs tend to take a market push
strategy which constrains resources and contrary to what some tech entrepreneurs think “a
great product won’t not sell itself ” (Liao & Welsch, 2008). Having a mixed team enables for
activities such as marketing and co-creation to happen at the gestation period of the company
enabling survival of the firm.
2) Business administration knowledge
A relevant observation from the findings is that only two of the seven entrepreneurs had a
formal education on business administration. Although having a technical background may
seem like a good foundation for a tech firm, it does not guarantee success. Oakey (2003) noted
how management skills were essential when it comes to the success of tech firms and
something that entrepreneurs should consider (Oakey, 2003). Due to the time constraints
aligned with product development the tech entrepreneurs opt to take a team member that
complements what they lack to have a stable entrepreneurial team.
There seems to be a trend at least in Norway where tech companies are founded by an
entrepreneurial teams. My observations from my internship together with the results of the
present study suggest that many tech companies constitute their entrepreneurial teams with
individuals from different backgrounds. This is different to what Oakey proposed that a tech
entrepreneur could be trained to acquire abilities that would result in a technical and business
management skills though it would be ideal.
3) The amount of Investment – Added means
Notably, the common dynamic about cofounders for both tech and non-tech firms was that
they brought value to the table in terms of investment. This investment however was not only
in monetary terms as it included time, networks, motivation and advice which are all aspects
related to the means principle in effectuation. One tends to think of investment as only money
but advice, time and labor is an important investment. Motivation might be one of the most
important assets that a team member can provide.
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The more the number of founders the more added means but also the more complex the team
dynamics. In the case of tech entrepreneurs the most valuable aspect is “what do they know”
since technical entrepreneurship has to do with advances in science that add value to the firm.
On the other hand if we imagine the entrepreneur as a solo entrepreneur as it was the case for
the majority of non – tech entrepreneurs, convincing a partner to invest money, time and
advice it is related to the crazy quilt principle.
4.5. Summary of differences in relation to causation and effectuation
Table 7 below summarizes the difference and usage of effectuation and causation that were
highlighted by this study. What is interesting to note is how non-tech entrepreneurs are more
prone to using causation principles and tech entrepreneurs prefer a mix of different
effectuation principles.
Table 7: Summary of differences between tech and non-tech entrepreneurs
ASPECT TECH ENTREPRENEURS NON-TECH ENTREPRENEURS
Alliances And
Partnerships Very important
(means/crazy quilt/affordable loss ) Not so important
(causation)
Competitors Not important
(crazy quilt) Important
(Causation-Porter’s model)
Business Plan Usage Not important, prefer Business
Model/Lean canvas (crazy quilt/ pilot in plane)
Planning and Prediction tool (Causation –Predict the future)
Entrepreneurial Teams Multi-disciplinary
(crazy quilt/ bird-in hand)
Solo (bird in hand)
4.6. Additional findings
4.6.1. The investors’ dilemma
On one hand, tech entrepreneurs often times start a company as a means of change; meaning
a company is the vehicle to create or build something. All of the tech entrepreneurs
interviewed were engineers who enjoyed the freedom of the creating process which most of
the time, they admitted, was a learning process with a lot of trial and error. On the other hand,
36
some investors could interpret these tech entrepreneurs’ actions as a waste of time and money
with their exploration and experimentation processes.
Overall, this indicates that meeting an investor’s requirements is, in some way, a troublesome
issue for tech entrepreneurs. This could be the reason for the creation of new ways to fund
projects as the crowdfunding platforms that had appeared the last years and an evident reason
why governmental funding is relevant.
This finding is similar to what Oakey’s (2003) says about the fact that tech entrepreneurs
considered “independence, as of equal (or greater) importance to that of pure profit
maximization as a key goal for their businesses.”. Another relevant point that aligns with our
findings is related to investment “While surrendering equity for capital, or taking bank loans,
might allow the firm to grow faster, the danger that the involvement of external actors might
cause a dilution of the founder’s control over the firm often renders this option unattractive.”
(Oakey, 2003).
4.6.2. Similarities between tech and non-tech
All the entrepreneurs interviewed in this study, while having opted to start and work in their
own company, had the option of finding a normal job in an established company. This gave
them a kind of safety net that one could say reduced the overall risk.
Industry knowledge, experience, educational background, networks and some personal traits
played an important role when they started their companies.
Both types of entrepreneurs’ face many problems and difficulties which, many times, they
overcome by reverting back to the very motivation behind why they started their companies
in the first place.
Changes in both kind of companies occur after interaction with customers. In most of the cases
those changes were (1) targeting a different kind of customer (2) expanding the segments of
their market or (3) adding new services or improving the product they offered. This could
indicate that often times a preliminary market research is not enough to select a determined
customer and to be right about what features of the product or service attract the customers.
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5. DISCUSSION
This section gives an overall comparison of how this thesis aligns other studies that have been
undertaken in terms of understanding effectuation and causation when it comes to
entrepreneurs, particularly technology entrepreneurs.
A. Usage of Effectuation
This study showed that novice entrepreneurs, either tech or non-tech, also use effectuation not
only expert entrepreneurs which aligns well with the work of Fisher (2012) and Reymen et al.
(2015). Effectuation has been linked with TE because of the uncertainty but another pattern
could be responsible for the use of causation particularly when it comes at cognitive ways
aligned with planers versus doers. Tech entrepreneurs are usually engineers that solve problems
with a similar logic to effectuation. Moreover, though both types of entrepreneurs use
effectuation and causation the degrees of usage vary when it comes to the context whether it be
alliances and partnerships. What would be of interest is to ensure that effectuation theories are
included in entrepreneurial education to ensure longevity of firms.
B. Technology entrepreneurship
The findings of this study when it comes to the use of effectuation by tech entrepreneurs is a
bit on its own as effectuation had been used to look at generic entrepreneurs or novice versus
serial entrepreneurs. However, the results still align with previous studies as the characteristics
such as multidisciplinary teams and dealing with means are issues all entrepreneurs deal with.
Notably, operating in multidisciplinary teams seem to get resource constrained firms such as
tech entrepreneurial firms funding faster. This is due to the stability offered by the team and the
likelihood for the firm to be more successful at creating relevant products and services that
already have an addressable market. However, there is still a need to offer a holistic and
universal definition of technology entrepreneurship that considers and includes the ever-
changing environment and multidisciplinary teams.
C. Tech and non-tech differences
This study is the first (to my knowledge) that explores the differences between tech and non-
tech using a qualitative method. Added to the fact, my approach was different because I used
effectuation to find, analyze and identify those differences. The fact that I did not use the
38
information from a previous paper by Liao & Welsch (2008) to design my research allowed me
to have a different angle that helped me to explain this phenomenon in a different way. Liao et
al. (2008) concluded that “tech firms engage in more startup activities in planning, legitimacy
establishment and resource acquisitions, but not in marketing. Tech firms take longer to
complete gestation” (Liao & Welsch, 2008).
In their study, Liao et al (2008) said that tech entrepreneurs do not focus on marketing. My
findings contradict this finding. Since some tech entrepreneurs already started with customers
before even having a fully developed product. 3 out of the 4 tech entrepreneurs co-created their
products with potential customers and users and thus positioned their company using alliances
and partnerships as a way to market them.
Additionally, the assertion given by Liao et al. (2008) that tech companies engage in more
startup activities in planning does not align completely with our findings where tech
entrepreneurs prefer flexibility and planning restricts that. Moreover, the tech firms seemed to
take a longer time during the gestation period due to trial, error and experimentation. The longer
the time to complete gestation due to ‘fail and trial’ experimentation in order to build something
new or lack of investment coincide with these findings. However, my findings indicate that
investment and the search of qualified individuals required to form an entrepreneurial team may
be some other reasons for that longer gestation period.
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6. CONCLUSIONS AND RECOMMENDATIONS
The main purpose of this study was to investigate the potential differences between tech and
non-tech entrepreneurs by using the effectuation theory. Hence my research question
How do different types of entrepreneurs (tech vs non-tech) use effectual logic?
In order to answer this question fully a definition of what technology and non-technology
entrepreneurs was presented. Then a literature review was undertaken to look at the aspects of
causation, effectuation and technological entrepreneurship when it comes to definitions and
context. The literature review assisted in looking at the gaps and reinforcing the relevance of
this study.
Seven entrepreneurs were interviewed of which four where technological entrepreneurs across
the IT and energy industries. These entrepreneurs were compared with three non-tech
entrepreneurs across various industries. The interview results were analysed to map how the
effectuation principles were being utilised by the entrepreneurs in their entrepreneurial journey.
These principles are bird in hand, lemonade, affordable risk, crazy quilt and pilot on the plane.
Overall, tech entrepreneurs used the crazy quilt and pilot in the plane principles when it came
to elements aligned with their entrepreneurial team and in the search for partners.
This study contributes to the understanding of how effectuation and causation are utilised by
tech and non-tech entrepreneurs. It points out the elements where different effectuation
principles are utilised and assists various actors in the entrepreneur’s network and value chain
in obtaining better knowledge on how to interact with entrepreneurs. It also offers a number of
theoretical implications.
Implications of the thesis
A number of studies have been undertaken that look at effectuation and entrepreneurship. From
these studies, it turns out that, few have compared real novice entrepreneurs with other groups.
Furthermore, not many have actually focussed on tech entrepreneurs and their understanding
and use of effectuation in their entrepreneurial journey. Added to the fact that only a small
amount of the studies on technological entrepreneurship have analysed the activities and actions
inside tech companies. This study is a step towards addressing that gap.
40
Implications to Investors
The results showed that tech entrepreneurs are looking for investors that offer them more than
financial support. It is understandable that investors are concerned about not losing their
investment but it is crucial for them to understand the logic and reasoning behind the
development of tech products. Here it could be useful for a potential investor to also do a means
evaluation in terms of his network, experiences and knowledge before deciding to invest in a
company. Thus, this potential investor could find companies where he or she can build stronger
relationship and be of more direct assistance. Perhaps a different tool than a business plan
should be considered, taking into account that the lean method or canvas model are tools that
many tech entrepreneurs utilize. Lastly, investors must be aware that tech entrepreneurs are
looking and finding alternative tools such as crowdfunding, which could potentially mean a
threat to individual investors.
Implications to Entrepreneurs
This study confirms that networking is a crucial tool for a company, especially for a tech firm.
It is recommended for tech entrepreneurs to start networking or thinking about alliances early
on, also considering their customers as co–creators or collaborators.
Implications to Researchers and Academics
Starting with a business idea and then writing a business plan is still, in many educational
institutions, what students of entrepreneurship are taught to do before starting a company.
Because my study demonstrates that the effectual logic is used by tech entrepreneurs, and that
there is a mismatch between what students are taught and what entrepreneurs actually do, it
could be advantageous to include it in the academic teaching plans.
Students could be instructed in the fact that the means to start a company are not only monetary.
Other relevant aspects of starting a company include the networks, team’s experience and
education. Lastly, some new concepts like lean and canvas should be included in the
curriculum.
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Limitations and implications for future research
Though the study has important significance, the results cannot be generalised due to the
following reasons.
Sample size: The number of interviews was minimal due to the time constraints of the study. In
order to really assess how entrepreneurs shift over time between the use of causation and
effectuation during the life span of a company it would be ideal to have a longitudinal study
and increase the number of respondents.
Regional and industry focus: A cross-industry study, focussing on entrepreneurs in the same
industry, where some entrepreneurs make products and other provide services, would yield
different perspectives.
Time constraints: Undertaking such a study in a 17 week period made analysis and
interpretation of data a bit rushed. Additional insights might have been achieved in a longer
time frame.
(Action, 2017; Archer, Baker, & Mauer, 2009; Bailetti, 2012; Baker & Welter, 2015; Baron & Ensley, 2006; Brettel, Mauer, Engelen, & Küpper, 2012; Byers et al., 2011; Chandler et al., 2011; Chandra, 2018; Cooper, 1973;
Creswell, 2014; Dew, 2009; Dew, Read, et al., 2009; Dew, Sarasvathy, Read, & Wiltbank, 2009; Donatiello & Gherardini, 2018; Fisher, 2012; Gioia, Corley, & Hamilton, 2013; Giones & Miralles, 2015; Gosens et al., 2018; Graff
& Birkenstein, 2014; Kotler, 2000; J. Liao & H. Welsch, 2003; J. J. Liao & H. Welsch, 2003; Liao & Welsch, 2008; Lyons & Zhang, 2018; Mauer, 2014; Miles & Huberman, 1994; Mosey, Guerrero, & Greenman, 2017; Oakey,
2003; Perry et al., 2012; Porter, 1980; Proksch, Stranz, & Pinkwart, 2018; Ratinho, Harms, & Walsh, 2015; Read, Dew, Sarasvathy, Song, & Wiltbank, 2009; Reymen et al., 2015; Reymen, Berends, Oudehand, & Stultiëns, 2017;
Rowley, 2012; Sapienza & De Clercq, 2000; S. Sarasvathy & Dew, 2013; Saras D Sarasvathy, 2001a, 2001b; Saras D. Sarasvathy, 2008; Saras D Sarasvathy & Dew, 2005; Siegel & Wright, 2015; Smolka, Verheul, Burmeister‐
Lamp, & Heugens, 2016; Sobel & Clark, 2017; Spiegel & Marxt, 2011; StartupLab, 2017; Venkataraman, 1997; Wilson, 2010; Robert Wiltbank et al., 2006; R. Wiltbank, Read, Dew, & Sarasvathy, 2009; Yin, 2009)
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8. APPENDICES
APPENDIX 1 : Interview guide
EFFECTUATION
PRINCIPLES QUESTIONS
Means
Bird in hand
1. How did you start your company?
2. Do you have an entrepreneurial team?
3. What resources are important to run your business?
4. Dreamed about becoming an entrepreneur?
Leverage of
contingencies
Lemonade
5. Changes
6. Problems and unexpected things
Affordable risk
7. What were you worried about when you first started?
a. What were the risk when you first started your company?
b. When things are difficult what motivates you to keep going?
Alliances
8. Does the company have any partnerships and alliances?
a. Do you have investors?
b. How do you know what your customers want?
No principle
9. Did you have a defined market or a customer in mind?
10. Did you do a market research? (new customers, how was the process)
11. Do you have competitors?
Pilot in the plane
12. Long term plans or go ahead with stuff
13. Do you have a business plan?
14. Have you taken any courses on business administration?
15. Do you think you can predict the future?
16. Have you heard about effectuation?