Seminar I
Management of Innovation and Entrepreneurship
First essay: Saras Sarasvathy (2001) Causation and Effectuation
Second essay: Van de Ven et al. (Chapter 7, 1999) The Innovation Journey
Third essay: Kline & Rosenberg (1986) An Overview of Innovation
Fourth essay: Tidd & Bessant (Chapter 1, 2020) Managing Innovation
Group CDLN
2023/11/06
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Saras Sarasvathy (2001) Causation and Effectuation
For all of you that are not familiar with Causation and Effectuation here is the definition due to
Saras Sarasvathy. “Causation processes take a particular effect as given and focus on selecting
between means to create that effect. Effectuation processes take a set of means as given and
focus on selecting between possible effects that can be created with that set of means,”
(Sarasvathy, 2001).
The main contributions of this article are in my opinion the four principles that form the core of a
rudimentary theory of effectuation. The four principles are the following:
Affordable loss rather than expected returns.
This point is very interesting because the Effectuation process looks at how many loss, they can
make without getting problems and focuses on trying out different strategies and creating
multiple options to gain money in the future. Sara Sarasvathy said: “The effectuator prefers
options that create more options in the future over those that maximize returns in the present.” In
Comparison the Causation process tries to maximize the profit in the present.
Strategic alliances rather than competitive analyses.
The different Causation models include in depth competitive analyses. The Effectuation wants to
build alliances to reduce the Uncertainty in the market. This can have advantages but also
disadvantages. An advantage is an easier market entry, shared skills, shared expertise, less
competitors, reducing costs and risks and more. But there are also disadvantages like difficulties
in coordination and different business interests.
Exploitation of contingencies rather than exploitation of preexisting knowledge.
The Causation strategy is better for exploiting preexisting knowledge. But the effectuation
strategy is better for exploiting contingencies which they found during time.Interesting is that it
is a new approach because in my opinion most companies would just ignore contingencies.
Controlling an unpredictable future rather than predicting an uncertain one.
This is also an interesting point because it is about the view of the future. The Causation focuses
on the predictable aspects of the uncertain future. While the Effectuation is focusing on the
controllable aspects of an unpredictable future. The logic behind these views is on the one side:
“to the extent we can predict the future we can control it”. And on the other side: “to the extent
we can control the future we do not need to predict it”. The question is what the effectuation
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model would do if they cannot control the future anymore? And what would the Causation
model do if they cannot predict the future anymore?
Regarding these four points I think that the Effectuation model is more suitable for tech-,
start-ups, and smaller Companies. The reason for that is that the effectuation model is kind of
trying out new things and riskier than the Causation model. And I think the Causation model is
better for existing big companies with an established market position which are not able to risk
anything.
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Van de Ven et al. (Chapter 7, 1999) The Innovation Journey
The excerpt of Chapter 7 had two main ideas it focused on. The first one was on the
observations made by the Minnesota Innovation Research Program (MIRP) on the twelve
commonly observed elements during the innovation journey. It was fascinating to me how the
innovation process was first described as something that “should be” a certain way and then
clarified that concept more with the MIRP’s research (Van de Ven, 1999). From personal
experience, creative processes do not have a method of how they should come to be but more
like common factors that lead to them, just like “a nonlinear cycle of divergent and convergent
activities that may repeat over time and at different organizational levels if resources are
obtained to renew the cycle” (Van de Ven, 1999). However, there is a point that I, as a Business
Administration student, would like to explore a bit more. In the twelve observations presented by
the MIRP, we can see that they talk about innovation in organizations due to the language they
use when talking about venture capital, however, it does spark curiosity as to whether first-time
entrepreneurships have the same elements in common or if they skip or add some more elements.
The second main element in this chapter is the cyclical process of innovation that Dooley
and Van de Ven propose. This model is separated into divergent and convergent behavior (Van de
Ven, 1999). An observation I had, not reading too much into the paper, is that to the authors and
the MIRP, the innovation process in organizations is not something that can be linear and “ruled”
(Van de Ven, 1999), but a creative and free experience whose outcome can be adapted and
reshaped by certain constraints like laws and regulations. The divergent elements are the ones
that give the innovation a better body and are almost like the soul of an innovation, the
convergent elements are the ones that give it structure and help it become a reality.
A sub-element of this cyclical process is how managers lead in these convergent and
divergent elements. All three pattern behaviors are very clear and I see how there is once again a
balance between the disruptive nature of an innovation and needing some rules and order to help
it come to life. Managers have to have the capacity to adapt to the constantly changing situations
in leading innovations and have an equilibrium between following the company’s essence and
going for ideas that can disrupt it completely. Finally, in the next sub-elements, there is a point
made about cooperation between organizations and the development of infrastructure in the
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divergent phases of innovations. This can be very important because most of the time,
innovations can be of such magnitude that they can have a great impact on their stakeholders,
however, even in this divergent phase, there is a need to look for the convergent, which brings
organizations to feel the need for an adjustment of rules and regulations from governments and
authorities to help them bring these ideas to life and make an impact. All of this can be much
easier if different organizations come together and put pressure on authorities, and this makes
cooperation and the need for the creation of proper infrastructure very important for innovations.
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Kline & Rosenberg (1986) An Overview of Innovation
Within the reading we can cover topics such as the different parameters that can be
carried out within innovation, its types and characteristics within it. Focusing more on
commercial innovation we come to evaluate 2 different types of forces which are the "Market
Forces" and the "Technological and scientific frontiers" forces. These two leverage the type of
product innovation and more specifically the innovation of improvement of existing products in
order to develop new and different creations for the market and thus support innovation that is
not only a "Highly uncertain process", but also the technical and market needs to be satisfied by
a successful innovation.
Taking as a starting point the "Chained-liked model" is a model focused on the central
chain of innovation and in relation to the feedback that is generated by the actions and steps of
innovation within the model, it shows the relationship of research with knowledge, this gives rise
to the search within the potential markets to generate or reform innovatively a new analytical
design, make the design and test it, redesign and reproduce it after the feedback and then enter
fully into the designated market. Kline and Rosenberg define an innovation system as consisting
of three components: a "potential market" anticipated by entrepreneurs, a range of specialized
activities carried out in firms or public institutions (such as research, design, production, and
distribution), and a readily available pool of knowledge. Each activity is represented by a box
that can be opened to reveal its specific content. While some boxes represent specialized
activities, the "knowledge" box serves as an integrative element (Kline & Rosenberg, 1986).
Uncertainty in innovation in relation with product or service innovation is a strategic
approach that seeks to develop novel solutions in situations where there is a high degree of
uncertainty about market needs, technology, competition and other key factors. This type of
innovation focuses on an organization's ability to adapt and respond effectively to a highly
variable and unknown environment. Here are some key issues related to innovation in a context
of uncertainty.
Uncertainty-focused innovation involves embracing ambiguity, adaptability, and
experimentation in product or service development. Organizations that navigate uncertain
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environments effectively gain a competitive advantage by being agile and responsive to market
demands.
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Tidd & Bessant (Chapter 1, 2020) Managing Innovation
Being this the first chapter of Tidd and Bessant's "Managing Innovation" (2020), it was
normal for it to be broad since it gave an introduction to a number of concepts that will later be
described thoroughly. This made it difficult to choose two main points, nonetheless I found the
innovation’s foundations in the 4 Dimensions of the Innovation Space, and their practical
application in the Innovation Life Cycle (Tidd et al., 2020, Chapter 1). The strong and logical
link between the two really made me realize this model is applicable and applied in the majority
of companies, especially if innovation-focused.
The 4 dimensions, also known as 4 Ps, provide a structured framework for dissecting the
multifaceted nature of innovation, or so-called Innovation Space (Tidd et al., 2020), and can be
seen as the basic innovation types we can encounter. Product Innovation underscores the
significance of continually evolving products and services to meet ever-changing customer
needs. Process Innovation stresses the importance of optimizing operational efficiencies to
enhance productivity, reduce costs, and adapt to shifting market dynamics more effectively.
These two are divided by a blurry line which actually represents the Services Innovation: here
product and process merge (Tidd et al., 2020). I indeed wouldn’t know whether to call a trip a
product or a service. Position Innovation highlights the critical role of branding and market
positioning in setting an organization apart. Paradigm Innovation encourages organizations to
reframe their way of working, or better, their business model, to welcome change. Of course,
making the new approach work in practice also requires extensive product and/or process
innovation (Tidd et al., 2020). This is in fact very interesting, as paradigm innovation would
mean consequent innovation in other fields of the business. But I noticed this also applies to
position innovation: you change the market, you change the product, however we must
remember that it depends also on the degree of novelty of the innovation: radical change disrupts
with respect to incremental change. So even though product innovation looks like the most
important type, it can actually be just a tool for a bigger change. This implies that organizations
must remain agile and responsive, as innovation in all fields is integral to staying competitive in
the market.
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The Innovation Life Cycle, as represented by Abernathy and Utterback’s graph
(Abernathy & Utterback, 1978), gives a crucial distinction between what happens to the first two
dimensions: the scope for experimentation is huge around new product and service concepts
(product innovation), rather, mature industries tend to focus more around delivering products
cheaply and flexibly and entering new market segments (process, or position innovation).
Therefore, product innovation drastically drops after the fluid phase of exploration, and process
innovation spikes between the transitional phase of dominant design and the specific phase of
customization. As we can see, innovation management depends on many factors involving the
industry and business we’re looking at and the field of innovation the focus is on. These are
defined precisely in the key aspects of innovation (Tidd et al., 2020). This is why it can be
described as multifaceted and why its management is so hard to put into a concise framework.
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References
Abernathy, W., & Utterback, J. (1978). Patterns of Industrial Innovation. Technology Review, 80,
40-47.
Kline, & Rosenberg. (1986). An Overview of Innovation. The Positive Sum Strategy, 275-276,
289-298, 302-304.
Sarasvathy, S. D. (2001). Causation and Effectuation: Toward a Theoretical Shift from Economic
Inevitability to Entrepreneurial Contingency. The Academy of Management review, 26,
243-263.
Tidd, J., Tidd, J., & Bessant, J. R. (2020). Managing Innovation: Integrating Technological,
Market and Organizational Change. Wiley.
Van de Ven. (1999). Chapter 7. In The Innovation Journey. Oxford University Press.
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