SME innovativeness in a dynamic environment: is there any value in combining causation and effectuation?

Abstract

It has been suggested that, in dynamic environments, the combination of causation and effectuation will boost an SME’s innovative performance, compared to a sole focus on planning. To statistically test this claim, we develop a contingency model for business planning, which considers effectuation as an internal and environmental dynamism as an external boundary condition. As expected, we find that causation positively relates to an SME’s innovativeness and that this effect is amplified when combined with effectual decision-making logics. Interestingly, it turns out that this leverage effect is only present in stable environments. What is more, in dynamic environments, SMEs relying on pre-committed resources from partners appear to score lower on innovativeness than their counterparts without pre-commitments. With this finding, we provide statistical evidence that combining causal and effectual decision-making logics is beneficial for innovative performance, but that environmental dynamism acts as a barrier to fully take advantage of it.

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