Effectual Networks: A Pre-commitment Approach to Bridging the Gap Between Opportunism and Trust

One of the theoretical puzzles concerning how organizations and markets come to be has to do with our fundamental behavioral assumptions. While economic theories are built on assumptions of opportunism, organizational and sociological theories either look for existing structures of trust as ways to overcome opportunism, or emphasize the role of a third-party arbiter. In this paper, we bring together two existing concepts in previous literature, namely, docility and effectuation, to construct a pre-commitment approach to the creation of new networks that proceeds in the face of motivational uncertainty – i.e. irrespective of assumptions of opportunism or trust. We develop our synthesis within the context of new market creation in entrepreneurship. Instead of strong behavioral assumptions based on opportunism or trust, we begin with the far weaker assumption of docility – i.e. the fact that human beings are, to varying degrees, persuadable. Furthermore, in the context of extremely nascent or non-existent markets, actors may not only be uncertain about each others’ motivations, but may be unsure of their own future preferences and goals. Under such circumstances of combined motivational and environmental uncertainty, non-predictive strategies such as effectuation are called for in creating and managing new networks. The effectual pre-commitment approach we develop in this setting is analogous to other pre-commitment approaches developed in areas such as finance, jurisprudence, and economic psychology. A pre-commitment is defined as a self-imposed non-negotiable constraint that stacks the deck in favor of or against specific future choices.

Journal or Publication:
Academy of Management Conference
Saras Sarasvathy
Nick Dew
Year Published
Relevant Principles:
Crazy Quilt (Partnerships)
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