Navigating the emerging market context: Performance implications of effectuation and causation for small and medium enterprises during adverse economic conditions in Russia

• DOI: http://doi.org/10.1002/sej.1353
• Author: Anastasiia Laskovaia,Hossein MahdaviMazdeh,Galina Shirokova,Oleksiy Osiyevskyy
• Published date: 01 September 2020
• Date: 01 September 2020

SPECIAL ISSUE ARTICLE

Navigating the emerging market context:

Performance implications of effectuation and

causation for small and medium enterprises during

adverse economic conditions in Russia

Galina Shirokova

1

| Oleksiy Osiyevskyy

2

|

Anastasiia Laskovaia

1

| Hossein MahdaviMazdeh

2

1

Graduate School of Management, St.

Petersburg University, St. Petersburg, Russia

2

Haskayne School of Business, University of

Calgary, Calgary, Alberta, Canada

Correspondence

Oleksiy Osiyevskyy, Haskayne School of

Business, University of Calgary, 2500

University Dr NW, Calgary, AB T2N 1N4,

Canada.

Email: oosiyevs@ucalgary.ca

Funding information

Russian Science Foundation, Grant/Award

Number: 19-18-00081

Abstract

Research Summary: This study aims to broaden the under-

standing of effectuation and causation by investigating their

effectiveness for small and medium enterprises (SMEs) in

the emerging market context during adverse economic con-

ditions. We embrace a holistic view of the performance

implications of these behavioral logics, theorizing and

empirically testing their impact not only on the level of firm

performance but also on its variability. The findings suggest

that emerging market conditions create significant contin-

gencies in the relationships between effectuation, causa-

tion, and firm performance, substantively affecting their

effectiveness. In particular, we demonstrate that for the

firms affected by adverse conditions, causation brings mar-

ginal performance improvements while also making it highly

unreliable (variable), whereas effectuation leads to perfor-

mance improvements coupled with higher reliability.

Managerial Summary: Entrepreneurial actions can be based

on one of two behavioral logics: causation (rigorous

forward-looking analysis, relying on well-prepared plans,

pre-defined goals, and required resources) or effectuation

(leveraging the existing resources and controlling the

Received: 14 February 2019 Revised: 29 February 2020 Accepted: 3 March 2020 Published on: 25 May 2020

DOI: 10.1002/sej.1353

This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and

reproduction in any medium, provided the original work is properly cited.

© 2020 The Authors.Strategic EntrepreneurshipJournal published by John Wiley & Sons,Ltd. on behalf of Strategic Management

Society.

470 Strategic Entrepreneurship Journal. 2020;14:470–500.wileyonlinelibrary.com/journal/sej

environmental uncertainty through creating new markets,

products, and opportunities). We investigate the effective-

ness of these logics for Russian SMEs navigating adversity

in the emerging market context. The results suggest that

causation leads to performance improvements, yet these

become marginal and highly unreliable if a firm finds itself in

adverse conditions. Effectuation, on the other hand, is a

costly and unreliable strategy in stable times, yet leads to

reliable performance improvements in volatile contexts.

KEYWORDS

causation, effectuation, emerging market, performance variability,

Russia

1|INTRODUCTION

A substantial number of studies in the entrepreneurship and strategic management literature examine the role of

context in shaping and setting the boundary conditions for particular theoretical mechanisms (e.g., Jia, You, &

Du, 2012; Meyer, 2015; Tsui, 2006). Nowadays, emerging markets represent very specific and interesting contexts

characterized by rapid changes and high environmental uncertainty (Khanna & Palepu, 1999; Peng, 2003), coupled

with severe resource constraints (Bruton, Filatotchev, Si, & Wright, 2013; Lingelbach, Sriram, Mersha, &

Saffu, 2015). Moreover, emerging economies are characterized by uncertain, ambiguous, turbulent and weak institu-

tional frameworks (Welter & Smallbone, 2011), contributing to the creation of additional constraints for entrepre-

neurial activity. As such, emerging markets are distinctive settings to study both new and well-developed concepts

in entrepreneurship theory. In this study, we focus on one of the prominent concepts of entrepreneurial action

explicitly stemming from the need to manage resource scarcity and environmental uncertainty: effectuation theory.

Effectuation theory suggests two behavioral logics for entrepreneurial actions: causation and effectuation

(Sarasvathy, 2001). Causation is a structured approach to decision-making that relies on well-prepared plans, pre-

defined goals, and required resources. Firms using causal behavioral logic engage in rigorous forward-looking analysis

and planning to select the best means of achieving the predetermined strategic goals (Brettel, Bendig, Keller,

Friederichsen, & Rosenberg, 2014; Reymen et al., 2015). Effectuators, on the other hand, engage in the entrepre-

neurial decision-making process with the aim of achieving the best possible strategic results from leveraging the

available resources and controlling the environmental uncertainty (Arend, Sarooghi, & Burkemper, 2015;

Sarasvathy, 2001; Welter, Mauer, & Wuebker, 2016) through creating new markets, products, and opportunities.

Relying on the principles of available means, affordable loss, partnerships, leveraging contingencies and co-creation

(Read, Sarasvathy, Dew, Wiltbank, & Ohlsson, 2011), effectuating firms create large amounts of variation in new arti-

facts (Rondani, Andreassi, & Bernardes, 2013) by learning about their environment and selecting the best business

approaches while implementing them.

From a broader perspective, the causation versus effectuation choice may be referred to as an exemplar of the

long-standing “planning versus learning debate”in the management literature (Mauer, Wuebker, Schlüter, &

Brettel, 2018); both approaches have been stated as efficient ways to act in different contexts. However, effectua-

tion theory still “lacks an exact specification of what that context entails”(Arend et al., 2015: 639). In other words,

the “boundaries of generalizability”(Whetten, 1989: 492) of the relationship between the effectuation-causation

choice and firm performance are still far from clear (Arend et al., 2015); this knowledge is particularly poor for the

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