Effectual Decision Making Essay

Decision making under uncertainty is the basis of entrepreneurship (Schumpeter, 1934) (Kirzner I. , 1979). It was Knight (1921) landmark thesis that put the issue at the very heart of entrepreneurship research. “The beauty of Knight’s argument was to show that the presence of true ‘uncertainty’ about the future might allow entrepreneurs to earn positive profits despite perfect competition, long-run equilibrium and product exhaustion” (Blaug, 1996).

Entrepreneurs whose ventures are faced with high uncertainty, effectual decision making is most appropriate for them (Chandler, DeTienne, McKelvie, & Mumford, 2011) . To control the future of venture when entrepreneurs have limited resources, Sarasvathy suggested four principles means focus, exploitation

Organizational decision making processes greatly depend on knowing the causal relations between choices and goals (Sarasvathy, 2001). Sarasvathy explained that theory of effectuation will be very effective rather than causation, where entrepreneurial goals are rapidly changing. Because causal decision making is inconclusive and inappropriate in entrepreneurial settings, where effectual decisions making focuses on exploiting unexpected events (Soh & Maine, 2013). Effectuation takes a set of means as given and generates opportunities from the contingencies that appear unexpectedly (Sarasvathy, 2001). The set of means is a function of who the entrepreneurs are, what they know and whom they know, which are manifested in their individual personalities, abilities and social networks (Sarasvathy, 2001). Selecting between imagined opportunities brings probable effects into the future, entails the “characteristics of the decision maker(s) and his or her (their) ability to identify and use contingencies over a dynamic process involving other decision makers interacting with one another” (Sarasvathy,

For the last few decades, international business literature has given importance on the relationship between internationalization and firm performance but there is no general agreement on the nature of this relationship (Manish & Dwivedi , 2017) . Export Intensity (EI) is a firm’s foreign sells to total sells and it is widely used for measuring level of internationalization ( Majocchi, Bacchiocchi, & Mayrhofer, 2005). Researchers have identified that there can be five types of relationship between level of internationalization and financial performance of a firm depending on the county the firm exist, the relations are Positive linear (Grant R. M., 1987) (Tallman & Li, 1996) ,Negative linear (Geringer, Tallman, & Olsen, 2000) ( Denis, Denis, & Yost, 2002), U-shaped ( Lu & Beamish, 2001) (Ruigrok & Wagner, 2003), (Contractor, Kumar, & Kundu, 2007), Inverted U-shaped (Geringer, Beamish, & DaCosta, 1989) (Hitt, Hoskisson, & Ireland, 1994) (Hsu & Boggs, 2003), S-shaped (Contractor, Kundu, & Hsu, 2003), (Lu & Beamish, 2004), (Johnson, Yin, & Tsai, 2009) . This highlights the difficulty and background dependency of this relationship (Manish & Dwivedi ,