AOM 02 Noteffn

What effectuation is not:  Further development of an alternative to rational choice

The theory of effectual reasoning advanced by Sarasvathy (2001a) proposes a decision process employed by entrepreneurs that differs substantially from the rational choice paradigm. This paper seeks to clarify this distinctive point of view on entrepreneurial decision-making by pointing to nine things that effectuation is not. The paper further explains the effectual paradigm and illustrates how effectuation integrates with other theories used in management science.

The nine things effectuation is not include:

  1. Effectuation is not merely a set of heuristic deviations from rational choice – it is a non-overlapping alternative paradigm to rational choice.
  2. Effectuation is not a wholesale replacement for predictive rationality – it exists in parallel to it.
  3. Effectuation is not irrational or non-rational – it helps, along with other notions, to pluralize the notion of rationality, not to negate it.
  4. Effectuation is not a random process – it is textured and systematic with eminently learnable and teachable principles, and practical prescriptions of its own.
  5. Effectuation is not a theory of "anything goes" – it is a theory of constrained creativity.
  6. Effectuation is not a resource-based view of individual decision making – it does not assume valuable resources, it inquires into what makes things valuable and how one can acquire and/or create value in resources.
  7. Effectuation is not just for small, start-up firms – it can be applied to large firms and economies as well.
  8. Effectuation is not restricted to the domain of entrepreneurship -- just like the philosophy of rational choice, it can under-gird all the sciences of human action.
  9. Effectuation is not an independent theory – it builds on and integrates the work of several well-received theories in economics and management.