Formation and Constitution of Effectual Networks: A Systematic Review and Synthesis

• DOI: http://doi.org/10.1111/ijmr.12194
• Author: Jon Kerr,Nicole Coviello
• Published date: 01 July 2019
• Date: 01 July 2019

International Journal of Management Reviews, Vol. 21, 370–397 (2019)

DOI: 10.1111/ijmr.12194

Formation and Constitution of Effectual

Networks: A Systematic Review and

Synthesis

Jon Kerr and Nicole Coviello1

York University, 4700 Keele Street, Toronto, Ontario, M3J 1P3, Canada 1Wilfrid Laurier University, 75 University

AvenueWest, Waterloo, Ontario, N2L 3C5, Canada

Corresponding author email: jonkerr@yorku.ca

The co-creational processes of effectuation represent an important development in

understanding of entrepreneurial action. Theyalso manifest in networks that are them-

selves important artefactual outcomes of effectual processes. To synthesize research

connecting effectuation to the networks involved, this paper offers a systematic litera-

ture review. Following recent theorizing, the authors organizethe literature around two

general themes: (1) why and how network development occurs; and (2) what network

develops. The resultant thematic model offers a comprehensive perspective on network

development under effectuation logic. The analysis identifies that understanding of ef-

fectual networkingand effectual networks is fragmented, incomplete and constrained by

a lack of construct and contextual clarity. The authorspresent alternative perspectives

on constructs and assumptions surrounding networksin effectuation, integrate network

theory into effectuation, and generate important trajectories for future research.

Introduction

Effectuation is ‘one of the most compelling con-

temporary theories of entrepreneurial behavior’

(McKelvie et al. 2011, p. 286). Induced through

studies of expert entrepreneurs, it provides an ex-

planation for entrepreneurial action under conditions

of uncertainty (Sarasvathy 2008). As an alternative

to predominant explanations, effectuation logic has

become foundational to research and discourse in

entrepreneurship (e.g. Reymen et al. 2015; Welter

and Kim 2018) and is applied across a range of

management-related fields (e.g. Blauth et al. 2014;

Coviello and Joseph 2012). Yet years beyond Saras-

vathy’s (2001) seminal work, debate surrounds the

theory’s state of development (see Arend et al. 2016;

Read et al. 2016; Welter et al. 2016). One concern

is that effectuation research has moved little beyond

the level of the individual to delve into the network

of external parties involved in the co-creation of

opportunities (Arend et al. 2015; Reuber et al. 2016).

Progress also appears hindered by an emphasis

on variance rather than process-based theorizing

(Garud and Gehman 2016; Gupta et al. 2016). We

highlight these concerns because effectuation entails

process-based interactions involving multiple actors:

interactions that manifest in networks.

In effectuation, entrepreneurs do not search for

opportunities in the traditional sense. Instead, they

engage in an iterative process where the transfor-

mational boundaries of any new artefact (e.g. new

product) are refined through interactions with other

actors and commitments they might make towards:

(i) the emerging artefact; and (ii) the ‘effectual net-

work’ (Sarasvathy 2008). Networks then become ob-

jectified as a product of relational interactions and

are themselves artefactual outcomes of effectual pro-

cesses. However, networks that develop under effec-

tuation may exhibit observable differences relative

to more familiar transactional networks (Sarasvathy

and Dew 2003). Recent theorizing also emphasizes

that an understanding of what network develops may

be incomplete without understanding why and how

development occurs (Ahuja et al. 2012; Slotte-Kock

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Constitution of Effectual Networks 371

and Coviello, 2010). This is important to both ef-

fectuation and network theory because predominant

deterministic explanations surrounding network de-

velopment may break down under the conditions of

uncertainty and ambiguity characteristic of the effec-

tual problem space (Engel et al. 2017; Sarasvathy and

Dew 2005). This leads us to question: What networks

develop under effectuation and why and how does

that development occur?

In this study, we identify and synthesize extant re-

search that links effectuation to networks, organizing

the literature around both developmental processes

and outcomes. To inform our work, we also draw

on reviews from entrepreneurship pertinent to net-

works (e.g. Hoang and Antoncic 2003; Slotte-Kock

and Coviello 2010) and the broader,more mature net-

work literature (e.g. Burt 1992; Granovetter 1973).

Our synthesis is integral to theorizing (Weick 1995)

and we contribute in several ways. First, we unpack

micro-level processes of network development and

construct a thematic model that organizes the litera-

ture, offers a contextualized perspective on network

development, and provides a foundation for future

research. Second, we challenge constructs, contex-

tual boundaries and assumptions to suggest that, for

example, ideas and process goals are important con-

siderations in effectual networking. Finally, our study

identifies and assesses what is (not) known about the

resultant networks and integrates network theory into

effectuation to understand the effectual character of

networks. We begin, however, by considering effec-

tuation, networks and context. We then attend to our

method,findings, reflections on the literature, and new

avenues for study.

On effectuation, networks and context

Effectuation is a decision-making logic focusing

on the effects that can be created from a given

set of means (Sarasvathy 2001). In explaining

entrepreneurial action, it lies juxtaposed to the ends-

driven logic (i.e. ‘causation’) that has dominated

theorizing in entrepreneurship (Sarasvathy 2008).

Sarasvathy (2001, p. 245) uses a simple illustrative

analogy: in causation, a chef identifies a menu

and shops for the needed ingredients to create the

desired effect; in effectuation, the chef searches the

cupboards and prepares dinner based on the means

available. Although effectuation and causation are

both integral parts of human reasoning and can

occur ‘simultaneously, overlapping and intertwining’

(Sarasvathy 2001, p. 245), each is linked in theory

to more contextualized views of entrepreneurship in

line with, for example, Welter(2011) and Zahra et al.

(2014). In particular, effectuation logic guides action

in contexts of uncertainty where ‘predictability,

pre-existing goals and an independent environment

are not available to the decision maker’ (Steyaert

2007, p. 466). This is important because uncertainty

is central to most theories of entrepreneurial action

(McMullen and Shepherd 2006). In contrast, pre-

dominant explanations tend to convey sufficiently

stable environments where goals for realizing

exogenous opportunities can be well ordered and risk

approached through predictive and planned strategies

(Alvarez and Barney 2007; Welter et al. 2016).

When futures are unpredictable, effectuation logic

represents an intendedly rational, rule-directed wayof

proceeding (Lerner et al. 2018). Its principles convey

that effectual processes are: (i) driven by the means

available to an entrepreneur (who she is, what she

knows, who she knows) rather than predictable ends;

(ii) built on a philosophy of partnership and precom-

mitments; (iii) focused on human agency co-creating

opportunities; (iv) characterized by experimentation

within the constraints of what one can afford to lose;

and (v) flexible enough to embrace contingencies.

While these principles represent an internally con-

sistent set of heuristics (Sarasvathy 2008), they also

reflect unique sub-dimensions that may not always

be highly correlated (Chandler et al. 2011; DeTienne

and Chandler 2010). There is also some question as

to whether these heuristics are necessary boundary

conditions for effectuation (Welter et al. 2016). Our

analysis of past research (e.g. Reymen et al. 2015)

suggests that, while individual decisions are deemed

‘effectual’ without adherence to all effectual prin-

ciples, evidence of each principle tends to exist in

longitudinal studies of effectual processes.

Central to effectuation – and our interest with this

paper – is the philosophy of partnership and precom-

mitments. This ‘crazy quilt’ principle calls for stitch-

ing together a network of self-selecting stakeholders

as a way to reduce uncertainty (Sarasvathy 2001). As

such, effectual processes are embedded not only in a

network but also, followingfrom Aldrich and Zimmer

(1986), an evolving social context. While not unique

to effectuation, the development and nature of net-

works under effectuation maydiffer from networks in

entrepreneurship more generally (Engel et al.

2017; Sarasvathy and Dew 2005). This leads us

to suggest that the robust literature on networks

in entrepreneurship provides a useful backdrop

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