Entrepreneurs' Effectual Reasoning

KnowNOW!

Global Economic Watch

Syndication

Recent Posts

Tags

Archives

There is one school of thought that says entrepreneurs will lead the way toward economic recovery.  Whether or not that is the case, it is an interesting time to consider the entrepeneurial mind.  Saras Sarasvathy of the Darden School of Business at the University of Virginia has made a career of looking at what makes successful entrepreneurs tick.  Her 2001 paper, What Makes Entrepreneurs Entrepreneurial is a must read.  In that paper, she posits that effectual reasoning is a particular entrpreneurial characteristic:

The word “effectual” is the inverse of “causal”. In general, in MBA programs across the world, students are taught causal or predictive reasoning – in every functional area of business. Causal rationality begins with a pre-determined goal and a given set of means, and seeks to identify the optimal – fastest, cheapest, most efficient, etc. – alternative to achieve the given goal. The make-vs.-buy decision in production, or choosing the target market with the highest potential return in marketing, or picking a portfolio with the lowest risk in finance, or even hiring the best person for the job in human resources management, are all examples of problems of causal reasoning. A more interesting variation of causal reasoning involves the creation of additional alternatives to achieve the given goal. This form of creative causal reasoning is often used in strategic thinking.

And that effectual reasoning seems to create a bias toward action, or as Sarasvathy puts it, "effectual thinkers are like explorers setting out on voyages into uncharted waters."  In this video at BigThink, she discusses "action-oriented" entrepreneurs:


Posted 07-16-2009 12:42 PM by Graham Griffith
You must login to your account to comment. If you do not have an account, please register to enjoy the full benefits of the site!