The Mechanisms of Transition from Effectual to Causal thinking in Entrepreneurial Contingency
Most entrepreneurial research has not addressed the phenomena of entrepreneurial teams adjusting their cognitive styles based on the different challenges they face during the new venture life cycle under startups, accelerators and incubators. Our objective in this article is to attempt to investigate the mechanism between effectuation and causation over the life cycle of ventures; and to explore the consequences of this transition and these mechanisms. Drawing on data from 64 in-depth interviews with 28 executive members, we recorded 172 key decisions chronologically and examined the pattern of decision-making processes. According to our observations and interviews, many companies remain at the survival stage for some time even when they know their breakeven point is reachable. We found that the remaining decision, the decision to remain below breakeven, is a signal of cognitive style transition from a dominantly effectual model of decision-making and action to a causation model. Our examination supported the mechanisms with effectuation principles and explored how the transitions between the two decision-making processes impact start-up teams. Our study not only extends effectuation research by examining the significant timing for transition timing, but also sheds light on entrepreneurial research by integrating and synthesizing transaction cost economics.