The Role of Causation and Effectuation for SME Crisis Survival

Article 1: “The Role of Causation and Effectuation for SME Crisis Survival” by Osiyevskyy, Shirokova, and Ehsani

Research Background

Resilience, the ability to adapt and cope with adversity, is a crucial factor for small and medium-sized enterprises (SMEs) to survive and thrive in challenging environments. However, the mechanisms underlying resilience in SMEs remain poorly understood.

Two distinct behavioral strategies have been proposed to explain resilience: causation and effectuation. Causation emphasizes planning, forecasting, and control, relying on predefined goals and strategies. Effectuation, on the other hand, is characterized by flexibility, adaptability, and resourcefulness, utilizing available means to achieve goals.

Research Question

Do causation and effectuation play differential roles in influencing SME resilience during economic crises?

Hypothesis

SMEs adopting an effectuation approach are more likely to survive economic crises than those relying on causation.

Research Method

A longitudinal study was conducted on a sample of Russian SMEs during the 2015-2019 economic downturn. The researchers collected data on SME characteristics, decision-making styles, and performance outcomes.

Findings

SMEs exhibiting a higher level of effectuation were more likely to survive the economic crisis compared to those with a higher inclination towards causation. Additionally, effectuation was positively associated with agility, the ability to adapt rapidly to changing circumstances, while causation was positively associated with preparedness, the ability to anticipate and prepare for potential threats.

Implications

These findings suggest that SMEs should embrace an effectuation mindset to enhance their resilience and navigate economic downturns effectively. This involves adopting a flexible and adaptable approach, utilizing available resources creatively, and responding proactively to changing market conditions.

Article 2: “Entrepreneurial Decision-Making under Lockdown: The Path to Resilience” by Delladio, Caputo, Magrini, and Pellegrini

Research Background

The COVID-19 pandemic posed unprecedented challenges to businesses, particularly in the hospitality sector. Understanding how entrepreneurs made decisions during this period is crucial for fostering resilience and recovery.

Causation and effectuation, again, emerge as contrasting decision-making approaches. Causation emphasizes relying on pre-established plans to achieve predefined goals, while effectuation emphasizes adapting to the situation and using available resources to pursue opportunities.

Research Question

How does the interplay of causation and effectuation influence entrepreneurial decision-making during lockdown and contribute to SME resilience?

Hypothesis

A dualistic approach combining causation and effectuation leads to higher levels of resilience and agility in SME decision-making during crisis situations.

Research Method

A qualitative study was conducted with 80 Italian entrepreneurs operating in the hospitality sector during the early phase of the COVID-19 pandemic. Interviews explored their decision-making processes, strategies, and resilience outcomes.

Findings

The researchers identified a dualistic pattern in entrepreneurial decision-making, where causation and effectuation complemented each other. Causation provided a sense of direction and a framework for action, while effectuation facilitated adaptability and resourcefulness in response to the evolving crisis.

Implications

These findings suggest that entrepreneurs should adopt a balanced approach to decision-making, combining the structured planning of causation with the flexibility and resourcefulness of effectuation. This dualistic approach can enhance SME resilience and enable them to navigate unforeseen challenges effectively.

Overall Conclusion

Both studies highlight the importance of resilience in enabling SMEs to thrive despite adversity. Effectuation emerges as a crucial factor in promoting resilience, emphasizing flexibility, adaptability, and resourcefulness. However, a balanced approach that incorporates elements of causation, such as planning and goal setting, can further enhance resilience and agility. By adopting a dualistic decision-making style, SMEs can navigate challenging environments and emerge stronger.