Effectuation as an action theory for complex domains

I think, approaching effectuation as a self-organization theory/logic for complex domains is more appropriate than viewing it as the possession of a so-called expert entrepreneur. ( I have tweeted about this topic earlier)

Following are some reasons; 

Firstly, Most of the effectuation principles are universal and have corresponding concepts from complexity science(Click Link). This means it should not be limited to entrepreneurs. Herbert Simon also hinted at this aspect and suggested that there might be a connection between effectuation and Near Decomposibility (Sarasvathy and Simon, 2000). According to him (Saraswathy, 2009), Near Decomposibility is an astonishingly ubiquitous principle in the architecture of rapidly evolving complex systems, and effectuation appears to be a preferred decision model with entrepreneurs who have created high-growth firms, we should be able to link Near Decomposibility to the processes these entrepreneurs use to create and grow enduring firms–whether in an experimental situation or in the real world (Saraswathy, 2009, p.163). The beauty of effectuation is that Saraswathy in her scientific study brilliantly identified and encapsulated all of these complexity principles and made them accessible to potential entrepreneurs with simple everyday language. Thus, I believe, using it as a complexity-based concept may improve the potential and scalability of the concept.

Secondly, many scholars may argue that entrepreneurship is a low validity domain (Kahneman and Klein, 2009). To have genuine expertise to develop, the domains must be of high validity. i.e. “Skilled intuitions will only develop in an environment of sufficient regularity, which provides valid cues to the situation” (Kahneman and Klein, 2009). This was also previously spotted in a review by Shanteau(1992), in which he confirmed the importance of predictable environments and opportunities to learn them, in order to develop real expertise. To Kahneman and Klein(2009) prolonged practice and feedback that is both rapid and unequivocal are necessary conditions for expertise, provided by predictable environments. I argue that, while studying the expertise of experienced entrepreneurs, she inadvertently discovered the universal laws for operating in low validity, complex uncertain domain.

Thirdly, complex domains like entrepreneurship are subjected to various complexity laws like power laws, Mathew effects, reputation effects, ecosystem-embedded-preferential-attachment, etc. This may prevent us from establishing any valid causal relationship between expertise and performance in a domain like entrepreneurship. Thus in complexity, high performance may not guarantee success, in that, the success of an individual does not depend uniquely on the quality of performance(Barabási, 2018). 

Fourthly, deliberate practice may not work in complex domains like entrepreneurship. Saraswathy(2008) defines an expert is as someone who has attained a high level of performance in the domain as a result of years of experience and deliberate practice (Ericsson et al, 1993). But in recent scholarly works, it has been observed that deliberate practice may not guarantee better performance in extremely complex domains. A 2014 meta-analysis (Macnamara et al, 2014) has shown that deliberate practice only explained 26% of the variance in performance for games, 21% for music, 18% for sports, 4% for education, and less than 1% for professions. This further demonstrates a low connection between deliberate practice and performance in complex unstructured domains.

Fifthly, I believe that, like the personality view of entrepreneurial achievement(McClelland,1951, 1961; Llewellyn and Wilson, 2003), the expertise view may also have some unintended counter-productive effects. It can legitimize the hubris among successful entrepreneurs, and at the same time make the aspiring entrepreneur think that he may require deliberate practice to become a successful entrepreneur, while in-fact success could be the result of complexity-effects like power laws, Mathew effects, reputation effects, preferential attachment, etc. In fact, complexity can make Big-head(meme silicon-valley Tv show) the king.

Finally, I believe that effectuation is widely applicable in other domains. It has application in complex domains like education, learning, economics, politics, etc. Framing effectuation as a science of action in social complexity will open up a lot of possibilities. This also will make the theory more robust and useful, building upon theories and methods from the natural sciences and complex systems.

This is part of my ESOLoop Framework For Entrepreneurship self-organization


Sarasvathy, Saras D., and Herbert A. Simon. “Effectuation, near-decomposability, and the
creation and growth of entrepreneurial firms.” In First Annual Research Policy Technology
Entrepreneurship Conference. 2000.

Sarasvathy, Saras D. Effectuation: Elements of entrepreneurial expertise. Edward Elgar 
Publishing, 2009.

Kahneman, Daniel, and Gary Klein. “Conditions for intuitive expertise: a failure to disagree.”
American psychologist 64, no. 6 (2009): 515. 

Shanteau, James. “Competence in experts: The role of task characteristics.” Organizational
behavior and human decision processes 53, no. 2 (1992): 252-266.

Barabási, Albert-László. The Formula: The science behind why people succeed or fail. Macmillan,

Ericsson, K. Anders, Ralf T. Krampe, and Clemens Tesch-Römer. “The role of deliberate
practice in the acquisition of expert performance.” Psychological review 100, no. 3 (1993): 363

Macnamara, Brooke N., David Z. Hambrick, and Frederick L. Oswald. “Deliberate practice
and performance in music, games, sports, education, and professions: A meta-analysis.”
Psychological science 25, no. 8 (2014): 1608-1618.

McClelland, David C. “N achievement and entrepreneurship: A longitudinal study.” Journal of
personality and Social Psychology 1, no. 4 (1965): 389.

Llewellyn, David J., and Kerry M. Wilson. “The controversial role of personality traits in
entrepreneurial psychology.” Education+ Training (2003).

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