Decision making for business model development: a process study of effectuation and causation in new technology-based ventures

Decision making for business model development: a process study of effectuation and causation in new technology-based ventures

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Article ID: iaor20173435
Volume: 47
Issue: 4
Start Page Number: 595
End Page Number: 606
Publication Date: Sep 2017
Journal: R&D Management
Authors: , , ,
Keywords: management, behaviour
Abstract:

This study investigates the decision‐making logics used by new ventures to develop their business models. In particular, they focussed on the logics of effectuation and causation and how their dynamics shape the development of business models over time. They found that the effectual decision‐making logic was used dominantly to generate a viable value proposition for a specific customer segment. Causal logic is then used dominantly to define the other business model components in relation to the value proposition and customer segment. When a shortage of resources emerges, causal logic is replaced by an increase in effectual decision‐making again. They concluded that before investing significant resources in a business model it was crucial for firms to reduce, as far as possible, technological and market uncertainty through effectual strategies to avoid high re‐configuration costs later.

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