Effectuation – The best theory of entrepreneurship you actually follow, whether you’ve heard of it or not


University of Virginia Darden professor Saras Sarasvathy’s groundbreaking 2001 paper “What Makes Entrepreneurs Entrepreneurial” finally gained some widespread recognition when Vinod Khosla posted a copy on his website with some personal notes, one of which read: “First good paper I’ve seen”.

Professor Sarasvathy developed the Effectuation theory of entrepreneurship after exhaustively interviewing 27 serial entrepreneurs.  Her research findings greatly advanced the answer to the age-old-question – What do entrepreneurs actually do? (thus defining the process of entrepreneurship, which everyone seems to viscerally believe it is different from management).

Effectuation is generally defined as a form of reasoning or problem solving which assumes the future is largely unpredictable, but that it can be controlled through human action.   This is in stark contrast to another form of reasoning, Causality, which assumes the future is theoretically predictable based on prior events.

Sarasvathy argues casual thinkers start with an End in mind and try…

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