It is an innovation problem solving framework that is better suited to to entrepreneurship, especially when starting a business. The Principles of Effectuation and Innovation. The effectuation theory explains the nature of the decision- making process in an entrepreneurial firm versus that in an established firm. Effectuation theory offers a cognitive sci-ence-based approach to understanding how entrepreneurs start businesses under conditions of uncertainty (Sarasvathy, 2001a, 2008).1 In a series of publications, the founder of the approach, Methodology - Using a single case in-depth study, followed closely by the theory of effectuation in comparison with causation, to determine the behaviors of the observed. Sarasvathy bases the theory of effectuation on the Knightian theory of uncertainty and she explains that as in the business world we face uncertain situations more often than a … As a contribution, this study presents a temporal vision about the development of the effectuation theory and the identification of its main authors also provides a list of theme focus concepts that can be used for both theoretical and empirical future research. Limitation - The analysis provides detailed insight into these perspectives and suggestions for future research. First, while causal theories of entrepreneurial behavior traditionally assume a Dr. Saras Sarasvathy is an Indian business school professor researching strategy, entrepreneurship and business ethics, currently at the University of Virginia.. Sarasvathy proposed the theory of effectuation in the early 2000s after studying a sample of expert entrepreneurs with diverse backgrounds. Effectuation theory of entrepreneurship is a relatively new thinking developed by Professor Sarasvathy, a cognitive scientist at University of Virginia. Effectuation theory, developed by Professor Saras Sarasvathy, attempts to explain “what makes entrepreneurs entrepreneurial.” In order to answer this question, Dr. Sarasvathy interviewed 27 company founders across multiple industries and asked each to solve a set of ten decision problems. Finally, the theory should be parsimonious—a tall order. Effectuation theory rests on two fundamental premises that contrast it with the causal theories. This theory must also account for population and idiosyncratic emergence, which means that it must be capable of accounting for the simultaneous existence of established and entrepreneurial firms facing the same economic and sociological conditions in the population. PDF | Studies the theory of effectual reasoning with focus on the creation of firms in nonexistent or not-yet-existent markets. What is the effectuation theory of entrepreneurship? Based on PDF | Effectuation theory has been increasingly applied in research examining the internationalisation of small- and medium-sized enterprises (SMEs).... | … principal concepts introduced by effectuation theory. author was not extended and/or modified in order to transform the effectuation theory. Effectuation theory, originally developed by Dr. Saras Sarasvathy in a seminal 2001 article, is an attempt to describe entrepreneurial behavior.