Entrepreneurial Causation vs. Effectuation in a Business Incubation Context: Implications for Recruiting Policy and Management

Abstract Many business incubators aim to provide network resources and to stimulate the sharing of ideas, but previous research has shown that limited knowledge exchange takes place between incubated firms. In this paper, we examine if an entrepreneurial approach of causation vs. effectuation is associated with the proclivity to share ideas between firms and the perceived value of such inter-tenant network resources. A causation approach implies that entrepreneurs focus on a predefined goal and then aim to find the means to reach this goal. An effectuation approach implies that entrepreneurs focus on the means at hand, which they aim to materialize into one or more goals that were not necessarily predefined. We carry out a multiple case study of start-ups in a business incubator and find that entrepreneurs taking an effectuation approach have a proclivity to share ideas and they perceive such network resources as having a high value. Entrepreneurs taking a causation approach, on the other hand, have limited proclivity to share ideas with other incubator firms and they perceive such network resources as having a relatively low value. The findings are striking since many incubators implicitly or explicitly tend to recruit firms taking a causation approach by selecting candidates with a rigorous and predefined business plan. We discuss the findings’ implications for incubator recruiting policy and management.