Is effectuation Lachmannian? A response to Chiles, Bluedorn, and Gupta (2007)

In an excellent recent paper on Ludwig Lachmann’s contributions to entrepreneurship, Chiles, Bluedorn and Gupta draw parallels between Lachmann’s work and later contributions in the entrepreneurship literature, including Sarasvathy (2001), suggesting that, ‘Sarasvathy’s economic approach to entrepreneurship is decidedly Lachmannian’ (Chiles et al. 2007: 487). Our purpose in responding to the Chiles et al. article is twofold. First, our interpretation about how effectuation works differs in certain ways from the interpretations placed on it by these authors; we therefore wish to clarify our views on these matters. Second, we view the relationship between effectuation and Lachmann’s perspective on entrepreneurship somewhat differently than Chiles et al.; in this note we lay out this alternative view. The crux of our presentation is that, although Lachmann and Sarasvathy have much the same starting point (entrepreneurial action in the face of true uncertainty) and several overlaps in terms of the overall implications for dominant economic theories, there are crucial differences that draw upon recent developments in our understanding of how the human mind works and what knowledge is constituted of. In particular, there are at least three areas of possible conceptual confusion: The problem of knowledge — or What do we take as impossible? Strategies. The problem of resources — or What do we take as given? Players. The problem of institutions — or What do we take as outside our control? Rules.

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Organization Studies
Saras Sarasvathy
Nick Dew
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