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Elements of Entrepreneurial Expertise

Saras D. Sarasvathy

To effectuate is to engage in a specific type of entrepreneurial action. It has special importance for situations where the future is truly unknowable or human agency is of primary importance. In Effectuation, Saras Sarasvathy explores the theory and techniques of non-predictive control for creating new firms, markets and economic opportunities.
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Chapter 5: Understanding Effectuation: Dynamics of the Effectual Process

Saras D. Sarasvathy


5. Understanding effectuation: dynamics of the effectual process The dynamic process of effectuation I illustrate in this chapter has been induced from Nicholas Dew’s empirical investigations into the birth of the Radio Frequency Identity (RFID) industry. In his research, Dew interviewed everyone involved in bringing together the four streams of innovations (going back to 1945) that constituted the technological architecture of RFID tags and the institutional structures of the seemingly unending new markets for them. He also collected a variety of published materials and participated in the conference that officially launched the industry in September 2003. A large part of what I am about to present is directly attributable to to our collaborations (Sarasvathy and Dew, 2005b).1 5.1 WHAT IS A MARKET? Before we define the problem of how new markets come to be, we need to define the term ‘market’. Like fundamental terms in any major line of inquiry – for example, ‘mass’ in physics, or ‘life’ in biology – markets are easier to argue about than to define. Ronald Coase once commented that markets – one of the two central institutions of capitalist societies (the other is firms) – had a ‘shadowy’ existence in the economic literature (Coase, 1988). Part of this shadowy existence is due to the fact that the word ‘market’ is used in a large variety of ways (Menard, 1995). The various descriptions could be divided into three distinct categories: demand, supply and institutions. When we talk about the market for...

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