University of Twente Student Theses


Firm survival explained by causation, effectuation, and the degree of industry dynamism

Reckermann, A. (2016) Firm survival explained by causation, effectuation, and the degree of industry dynamism.

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Abstract:This study analyses the relationship between the level of causation and effectuation as displayed in a firm’s business plan and the survival data on those firms taking the level of industry dynamism into account. It is hypothesized that effectuation and its sub-dimensions lead to more firm survival than causation and that businesses operating in environments showing higher levels of industry dynamism increase their chances of survival when they employ an effectual entrepreneurial approach. To test this, data on causation, effectuation and firm survival was collected by coding 228 business plans. Data on industry dynamism was obtained from allocating each business plan into a specific NAICS sector and then calculating the uncertainty value (i.e. industry dynamism) for each sector according to Ensley et al. (2006). The findings indicate that effectuation and partially industry dynamism can indeed explain firm survival, but causation seems to not contribute to the explanatory value of the models. Furthermore, it was established that businesses operating in higher uncertainty do not employ more effectuation to begin with. The general perception in literature that effectuation is the superior entrepreneurial approach under conditions of uncertainty can therefore be cautiously confirmed. Effectuation seems to be superior to causation, but additional conditions may mitigate the positive effect of effectuation. Objective uncertainty also contributes to the explanatory effect of firm survival – at least to a certain degree. Further research analyzing the effects of perceived environmental uncertainty in combination with objective uncertainty is required as well as a consideration of other factors affecting the start-up.
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Business Administration MSc (60644)
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