The Application of the Effectual Logic under Social Entrepreneurs: A study on the relationship between entrepreneurial experience and the decision-making processes under social entrepreneurs

In 2001 Saras Sarasvathy introduced a theory named effectuation, which she claims to entail the elements of entrepreneurial expertise. Effectuation is a decision-­‐making process that in contrast to causation beliefs that the future is not predictable and can only be controlled through the application of a set of principles. Saras Sarasvathy’s researches revealed that novices prefer the causal logic and experts prefer the effectual logic. Not much research has been done on the application of the effectual logic in relation to social entrepreneurship. Additionally, scholars have suggested in their research that the application of the effectual logic can provide new insights for the research domain (e.g. Haugh & Tracy, 2010). Therefore, this study examined the relationship between the entrepreneurial experience and the application of effectuation of social entrepreneurs in order to provide new insights that could possibly help to improve the success rate of the enterprises. Based on the theoretical explanations it was expected that novice social entrepreneurs, in contrast to their commercial counterparts, have a preference for the effectual logic in their thinking process. Furthermore, the assumption was that this preference is further increasing when a social entrepreneur is more experienced. These assumptions were tested in an empirical setting, using twelve case studies divided over three focus groups; novice, experienced and expert social entrepreneurs. Think aloud protocols were used to gain access to the cognitive process of decision-­‐making of the participants in exact the same way as Saras Sarasvathy had applied it in her research. The protocols were all transcribed before they were coded and analyzed. The results of this research provide empirical evidence for the assumptions described above on entrepreneurial experience and decision-­‐making processes by social entrepreneurs. In contrast to commercial novice entrepreneurs, which had been studied by Saras Sarasvathy, novice social entrepreneurs slightly prefer effectuation. Results also indicate that the amount of the effectual logic applied by social entrepreneurs is increasing with experience. An unexpected finding was that differentiation in the application of the effectual logic between the experienced and expert focus group is insignificant. This assumes that a social entrepreneur learn the effectual logic in an early stage of being a social entrepreneur. The findings on the application of the effectuation principles per focus group further underpin this assumption. Future research should extend the sample sizes of each focus group to further research this relationship.