AoM-Paper_Effectuation R&D-Kuepper-09.

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EFFECTUATION IN THE CONTEXT OF R&D PROJECTS: CHARACTERISTICS AND IMPACT ON PROJECT PERFORMANCE

ABSTRACT Innovative products are widely recognized to be an important source of competitive advantage. Both projects with an exploitative and explorative objective have been shown to be mandatory to ensure the long-term success of technology-based organizations. However, many companies have difficulties in finding efficient and successful approaches to different types of R&D projects and particularly to those that involve a high level of innovativeness. The aim of this study is to adopt a new theoretical concept called effectuation that was originally developed in the entrepreneurship research. This concept brings in a new perspective on the issue of how to accomplish successful R&D projects by focusing on the decision making in uncertain situations. First, characteristics of an effectual approach in the context of R&D projects are developed and clearly delineated from conventional prediction-based control strategies hereinafter called causation. Second, a thorough qualitative and quantitative scale development process is applied. Expert interviews and a pilot study (123 R&D projects) are used to develop a multi-factor measurement model of effectuation and causation respectively. These measures are validated in a follow-up study with a larger sample of 400 projects. Third, the new measures are applied to test two central hypotheses: (a) effectuation is positively related with the success in highly innovative contexts, (b) causation approaches are particularly beneficial in projects with a low level of innovativeness. Structural equation modeling is used to test the hypothesized effects. The results suggest that non-predictive control approaches consistent with effectuation are an important predictor of successful highly innovative R&D projects. At the same time causation proves to significantly enhance performance of projects that involve a low level of innovativeness.

Keywords: Effectuation; R&D projects; Project performance

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AoM-Paper_Effectuation R&D-Kuepper-09.doc To compete successfully, technology based firms need to be innovative. Considerable resources have to be invested in research and development (R&D) to enable the short term oriented exploitation of the existing product base as well as the long term oriented development of new, highly innovative products. To date it is widely accepted that both exploitation and exploration are required to assure the long term success of organizations (e.g., Benner & Tushman, 2003). However, several authors have stressed that companies are comparably successful in exploiting existing product lines, whereas they face significant obstacles in exploring new businesses and technologies (Dougherty, 1992; Salomo, Weise & Gemünden, 2007). This managerial issue is also reflected in the scientific research. Although project characteristics are known to make a difference, only few studies have systematically analyzed the extent to which specific factors are contingent upon the project’s degree of innovativeness. Research is so far dominated by incremental R&D processes. According to the rational plan approach (Brown & Eisenhardt, 1995), studies that analyze incremental R&D projects generally assume stable and predictable environments. Consequently, process management activities with clear project goals, staged task sequencing, pre-defined milestones and formal project reviews are widely considered to be best practices (e.g., Shenhar, Tishler, Dvir, Lipovetsky, & Lechler, 2002). However, it is still not clear if the success factors associated with incremental R&D projects also apply to projects with a high degree of innovativeness. Studies in this field are comparably rare. In addition, the existing studies have not yet converged to generally accepted success factors. For example, the study of Song and Montoya-Weiss (1998) reveals that project planning can be disadvantageous for highly innovative projects. Similarly, Lewis, Welsh, Dehler and Green (2002) observed a negative interaction between a planned style management approach and projects that involve a high degree of technical uncertainty. However, Shenhar et al. (2002)

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AoM-Paper_Effectuation R&D-Kuepper-09.doc found that project planning is particularly important for projects that involve a high complexity and uncertainty. Another example is related to the optimum extent of process formality. Griffin (1997) revealed no significant relationship between process formality and development time whereas Salomo et al. (2007) state that process formality is not possible in highly innovative projects. One reason for the variations in research findings may be a lack of theoretical foundation that can be observed in many contributions to the innovation management research. To date no theoretical framework is available to systematically analyze success factors of projects with different degrees of innovativeness and to make sense of seemingly contradictory findings in the current literature. A reason for not having agreed upon one general framework may be found in the fact that “one size does not fit all projects” (Shenhar, 2001). Project characteristics like the degree of innovativeness are indeed important moderators. Therefore, a universal approach is likely to be inappropriate. With this article we intend to contribute to the theory building in the R&D project management literature in three ways. First, we investigate the effectuation logic as a conceptual basis for R&D projects. We adopt Sarasvathy’s theory of effectuation that was originally developed in the entrepreneurship research (Sarasvathy, 2001) to the context of R&D projects. We describe the characteristics of such a theory along five key principles. These principles are clearly delineated from conventional planning and prediction focused R&D approaches. We show that effectuation can be an important conceptual basis for analyzing R&D projects under uncertainty. Second, we contribute to the extant literature by precisely developing effectuation and causation measures. This is done on the basis of a generally accepted scale development process. The newly developed measures are of utmost importance for further research in the field of effectuation. They can serve as a basis for future empirical studies that are required to advance the

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AoM-Paper_Effectuation R&D-Kuepper-09.doc effectuation research that is so far focused on theory building through experiments and case studies. Third, we study the impact of effectuation on the R&D project performance. Employing a path model, the relationship between effectuation and causation principles respectively and the performance of R&D projects are investigated. We measure the project performance on the basis of process and output criteria. In addition the moderating role of the level of innovativeness is examined in detail. Based on recently suggested measurement scales, we measure the degree of innovativeness as a multi-dimensional concept (Danneels & Kleinschmidt, 2001; Gatignon, Tushman, Smith, & Anderson, 2002; Garcia & Calantone, 2002). We differentiate market and technology innovativeness. In the following section we develop characteristics of effectuation in the context of R&D projects. On this basis we build up our research model and derive research hypotheses by linking effectuation and project success variables. Next, we give a description of the research method and the study context. The development and evaluation of measures is detailed afterwards. We present the results of tests of the measures as well as the whole research model using data from 123 R&D projects in a pre-study and 400 R&D projects in the main study. The article concludes with a discussion of the theoretical contributions and the managerial implications of the study’s findings.

THEORETICAL BACKGROUND AND RESEARCH HYPOTHESES The existing R&D literature mostly assumes that a key task of the R&D manager is to discover opportunities and exploit them. With this concept in mind it is easy to see the importance of clear project targets, pre-defined milestones or formal project reviews and other factors that are often cited in the literature. However, the effectuation research offers new thinking that ap4

it quickly gathered interest in different disciplines including management (Augier & Sarasvathy. Dew & Sarasvathy.AoM-Paper_Effectuation R&D-Kuepper-09. The first principle therefore emphasizes creating a new outcome on the basis of existing means. psychology (Sarasvathy. While the existing R&D literature is mostly focused on the exploitation of existing opportunities. and finance (Wiltbank. However. 2001: 251). Effectuation in turn shall be a “general theory of decision making in uncertain situations” (Sarasvathy. Effectuation prefers control over prediction: “to the extent we can control the future we do not need to predict it” (Sarasvathy. Principles of Effectuation and Delineation from Causation In order to reduce the uncertainty and to increase the controllability of the future. Sarasvathy & Venkataraman. 2001). This is opposed to a causal approach that starts with pre-defined project targets and derives the required means on 5 . 2008). It was induced from an experiment of entrepreneurship as a form of expertise (Sarasvathy. Read.doc proaches the challenge from an alternative view. an effectual R&D approach starts on the basis of given resources and competences. We intend to apply effectuation in the context of R&D project management. Effectuation was first introduced in the entrepreneurial context. 2004). 1986). These are all aspects that make effectuation promising under uncertainty and in the specific context of R&D projects. Effectuation can be summarized in five key principles that we briefly outline and apply in the context of R&D projects in the following. 2003). economics (Dew. The effectuation logic appears to be particularly suitable to form a conceptual basis in the R&D context since the R&D project management can be considered as a specific decision making problem (Dewar & Dutton. 2008: 227) that focuses on the human action as the “predominant factor shaping the future” (Sarasvathy. 2004). This means that opportunities are not waiting to be discovered but emerge through the R&D activity of an organization and its partners. 2008: 87). effectuation assumes that all opportunities need to be actively created.

doc that basis. On the one hand these commitments are related to the organization itself. suppliers or external groups of researchers. The fourth principle deals with unexpected surprises during 6 . 2001) incorporates the potential risk or downside of an R&D project. In-depth business case modeling is often applied as means to support decision making in those cases.AoM-Paper_Effectuation R&D-Kuepper-09. The decision maker needs to define how much he is willing to lose in a worst case scenario by making in-advance commitments of how many resources he is willing to put at risk. This effectual approach can be clearly delineated from causation that is characterized by a thorough quantification of expected project returns as basis for decision making. The first three principles can be regarded as the decision preparation process.g. Again the reduction of risks and an increase of the controllability of an uncertain future are in the focus of an effectual approach. e. the following two principles are related to the implementation of an R&D project. It has to be decided whether or not to implement the R&D project and which option to pursue. Such a pre-commitment can for example imply agreements with a customer to take specified quantities of the developed R&D output in the future or to support the R&D project with specified financial resources or competences. causation focuses on the identification and the avoidance of uncertainty. The third principle of effectuation involves forming partnerships and getting commitments from potential customers. by elaborate market and competitor analyses. The second principle that is often referred to as “affordable loss” principle (Sarasvathy. On the other hand commitments of other stakeholders are required to further reduce the risks and increase the controllability of an uncertain future. commitments are required to decide about the implementation of an R&D project. Whereas such an approach actively seeks to reduce uncertainty. Seen from that perspective. In addition to the competences that are already linked to a specific organization or project team..

Contingencies are acknowledged and appropriated “by leveraging surprises rather than trying to avoid them. The sum of the existing means and committed resources are the basis for the decision making 7 ..g.AoM-Paper_Effectuation R&D-Kuepper-09. Generally. 2008: 22) in the context of R&D project management. Effectuation considers such surprises to be a vital source of opportunities. Thus. The five principles together are called effectuation. it implies that an organization is more entrepreneurial in terms of initiating new trends rather than relying on analyses about potential developments of the exogenous environment. Effectuation can be regarded as “the inverse of causation” (Sarasvathy. A causal approach that currently dominates the R&D literature strictly follows a linear process that seeks to reach the given project target as efficient as possible and within the given timeframe. Human agency is considered to be the prime driver of future developments. 2008: 21). E.doc the project implementation. overcome them. ---------------------------------Insert Table 1 about here ---------------------------------We already hinted at the fact that effectuation is not a static model but a dynamic nonlinear approach. Given means are considered to be the starting point of an effectual R&D approach. or adapt to them” (Sarasvathy. This has significant implications on the overall organization of the R&D process. Commitments concerning the maximum affordable loss as well as commitments from stakeholders on the one hand enlarge the decision scope and on the other hand form a framework that leads to a converging process. The five principles all represent aspects of such a dynamic model. these trends cannot be influenced but can be exploited by thorough forecasts and early assimilation. a conventional causal approach is characterized by the assumption that future developments and existing trends are exogenously given. Table 1 summarizes the five principles with its effectuation and causation characteristics respectively. The fifth principle of effectuation concerns the whole R&D process.

Differently. We define uncertainty to be the difference between the information possessed by an organization and the information required to perform particular tasks (Galbraith. The dynamic process of an effectual decision making is summarized below in Figure 1. ---------------------------------Insert Figure 1 about here ---------------------------------Moderating Effects of Technology and Market Innovativeness After we have delineated effectuation and causation in the precedent section.doc and for refining project goals. 1977). Under real uncertainty that is also called Knightian uncertainty. the principles 4 and 5 guide an iterative implementation process. probabilities for future consequences cannot be calculated. 8 . Under these circumstances. Neither effectuation nor causation is hypothesized to be generally preferable. After having decided about the project option that shall be pursued. This means that a prediction-based causal approach might be misleading under high uncertainty whereas a control-based effectual approach might be beneficial. Then future developments are relatively stable and predictable and thus can be best exploited through adaptation. The conceptual work of Sarasvathy (2001) clearly describes an effectual problem space. future developments cannot be controlled by forecasting and exploiting trends but rather by actively participating in building the future. in a low-uncertainty context. we still need to clarify the boundary conditions of each concept. causation should have advantages. Market analyses and business cases can be used effectively to decide about investing in a specific R&D project.AoM-Paper_Effectuation R&D-Kuepper-09. Central to it is the notion of uncertainty. New insights and surprises can lead to an integration of new stakeholders that again bring in new ideas together with new commitments.

AoM-Paper_Effectuation R&D-Kuepper-09.. 2001. 1995). 2002. Garcia & Calantone. Shenhar et al. by definition. The degree of innovativeness is defined as the difference between the status quo and the aspired R&D outcome. 1992a). It is particularly high if the considered organization does not have any experiences with the technical principle (Green et al. it is particularly important “to consider both a marketing and technological perspective” (Garcia & Calantone.. Wheelwright & Clark. 2004. 2001). Different dimensions need to be considered to cover the notion of innovativeness. The outcomes of highly innovative R&D projects are. Ex ante. The market-related innovativeness reflects the novelty from the perspective of the marketing department. Salomo et al.doc In the context of R&D projects. The technological innovativeness is related to the novelty of the required technical expertise within the organization (Henderson & Clark. 2002. the customer loyalty towards an R&D outcome is unknown and customer requirements as well as their willingness to pay are unclear. It prescribes the amount of new market requirements and new customer groups that need to be addressed. Other dimensions beyond the technological and marketing innovativeness like 9 . 2007). The level of uncertainty increases with the degree of technological innovativeness since the innovativeness reflects the amount of new design work that needs to be undertaken in a project. The marketing innovativeness increases with a decreasing market familiarity and experience of an organization (Danneels & Kleinschmidt.. MacCormack & Verganti. 1990. the uncertainty increases with an increasing marketing innovativeness. Again. Although previous research offers a wide range of definitions and perspectives (Danneels & Kleinschmidt. 2002). the level of uncertainty is closely linked to the degree of innovativeness. In the case of high technological innovativeness it is not clear from the beginning whether a technical realization is feasible within a reasonable cost and timeframe. difficult to predict and therefore uncertain. Projects that involve a high degree of innovativeness also imply a high level of uncertainty and vice versa.

Eisenhardt and Tabrizi (1995) developed two different strategies that should be followed depending on the specific context.. 2002. 2002. Lewis et al. Utterback et al. Song & Montoya-Weiss. only recently studies have systematically considered the degree of innovativeness as an important moderator in search of project success factors (e. Marquis. 2001). Moorman & Miner. 1974. Similar to our dichotomous discussion. 1976). This assumption is not new to the project management research (e. the technological and marketing degree of innovativeness can be assumed to have a significant impact on the relevance of each concept... 2001.doc an organizational or process innovativeness are not considered here since the focus of this study is on product innovations. Process innovations are explicitly excluded from the analyses due to the fact that success determinants can significantly vary between different types of innovations (Wolfe. Tatikonda & Montoya-Weiss. Myers & Marquis. 1995: 91). Under these circumstances projects can be planned and executed in pre-defined steps. 1979). 1967. The impact of the degree of innovativeness that is involved in a project is increasingly acknowledged in the researcher community. 1994). Rothwell et al. However. The management of and coping with uncertainty is known for a long time to be “the central problem of administration” (Gifford et al. 1969. The first one is called “compression strategy” and is related to projects that involve a low degree of uncertainty.. Eisenhardt & Tabrizi.g. “Such a process can then be compressed by shortening the time of each step” (Eisenhardt & Tabrizi.. It is called “experiential strategy” and is characterized by an iterative process to account for “foggy and shifting markets and technologies” (Eisenhardt & Tabrizi. 1998.g. The second strategy is related to circumstances with a higher degree of uncertainty.. the moderating role is complex since it can differ between different analyzed variables.. On the basis of the discussion of effectuation and causation.AoM-Paper_Effectuation R&D-Kuepper-09. However. simple di- 10 . 1995. 1995: 88). Shenhar et al.

Shenhar et al. 2001).. two research hypotheses are derived for each 11 . 2002). 2002).g.. It enables a comparison of the results with former as well as with the ongoing research. The first success dimension.g. radical are considered inadequate (Song & Montoya-Weiss. It includes two subdimensions. Shenhar et al. This dimension was fully or partly applied in different studies before (e. Effectuation. In the following.AoM-Paper_Effectuation R&D-Kuepper-09.. The first step in doing so is to establish what success means. namely one construct that measures the benefits to the organization in terms of newly acquired experiences and competences and a second construct that measures the perceived value and future potentials of the R&D output. It assesses success in meeting schedule and budget goals as well as the operational and technical performance of the R&D process. 2007).. many authors claim that it is still not sufficiently understood and “remains a question for empirical analysis” (Salomo et al. 1994. A precise definition of the project performance is therefore particularly important..and output-related success criteria is particularly important in this study as some of the five effectuation and causation principles are more process and others more output related. The second success dimension refers to the project’s output and has also been applied in the literature (e. Different and partly weak measures in many contributions are one major reason for inconclusive findings in the project management literature (Shenhar et al. Montoya-Weiss & Calantone. 1992. 2002).doc chotomies like incremental vs. denoted as process efficiency. The differentiation between process. We differentiate two dimensions of R&D project success. Therefore. refers to the performance of the project implementation. Causation and R&D Performance: Model Overview and Research Hypotheses The assumed impact of effectuation and causation on the R&D project performance is detailed in this section.. Dvir & Shenhar.

12 . Recently. Figure 2 summarizes the research model. The emphasis of effectuation here is on “creating something new with existing means” rather than “discovering new ways to achieve given goals” (Sarasvathy. In the case of an effectual approach of a R&D project such resources are used as an initial basis.doc principle. on the basis of the effectuation logic it can be assumed that a means driven approach should have a positive impact on the R&D project output particularly in projects with a high degree of innovativeness. Project targets are fuzzy at the beginning. This means that the often encountered assumption that project targets need to be clearly specified right from the beginning does not hold true in all cases. In projects with a high degree of innovativeness. relevant resources can be existing competencies and project experiences (“Who I am”). Causation assumes detailed project targets to derive required resources on that basis. R&D networks) (“Whom I know”).g. targets cannot be detailed initially.. different authors have stated that formal processes are “limited or inappropriate” (Seidel. 2008: 21). However. They rather have to be elaborated during the R&D project implementation. “Goals can be unclear and changing. 2007: 522) in uncertain project environments. like radical innovation projects. According to the original wording of Sarasvathy and a transformation to the context of R&D projects. One hypothesis is related to projects that involve a low degree of innovativeness and one to projects with a high level of innovativeness. goal orientation is not yet described in the literature. […] the objective may not only be ambiguous to begin with but also may change over time” (Seidel.AoM-Paper_Effectuation R&D-Kuepper-09. financial means and tangible assets like R&D equipment (“What I have”). A direct comparison of a means vs. skilled employees and experts in the considered field of R&D (“What I know”). ---------------------------------Insert Figure 2 about here ---------------------------------Principle 1: Means versus goal driven initiation of R&D projects. This is different when using a causal approach. relations to partners (e. 2007: 522).

Both effects should level out in a way that no clear advantage of an effectual or causal approach on the project efficiency is expected. Different authors have found that building up new competencies needs to be grounded on existing expertise (Atuahene-Gima. 2002). In this case clear project targets can support the team in guiding towards the aspired R&D output. That means that “a firm must exploit some level of its current competencies to leverage its new competencies to develop radical innovations” (Atuahene-Gima. This can avoid loosing time with minor important tasks that can slow down the process. 2005: 79). This altogether leads to hypothesis 1a. The effectuation characteristic of principle 1 has a positive impact on the R&D output in the context of high market and technological innovativeness. The causation characteristic of principle 1 has a positive impact on the R&D output in the context of low market and technological innovativeness. Due to the specific output orientation of principle 1.AoM-Paper_Effectuation R&D-Kuepper-09. interfaces between different sub-systems can then be planed and developed early in the process guaranteeing a superior quality and a consideration of specific customer requirements. Hypothesis 1a. 2005. For instance. whenever the project’s degree of innovativeness is comparably low a clear project target should positively impact upon the project output. 13 . Principle 2: Consideration of affordable loss versus calculation of expected returns. neither an advantage of effectuation nor causation is expected concerning the process efficiency. On the other hand. On the one hand a focus on existing means like experiences and competencies should accelerate the R&D process.doc In addition it can be argued that basing an R&D project on the current competencies and resources can have a direct advantage particularly when the future is not clear to the organization. However. Hypothesis 1b. Danneels. clear project targets can be beneficial to prioritize activities.

A direct positive effect of effectuation on the R&D output however should be difficult to analyze with a project based perspective that we have chosen in this study. 14 .AoM-Paper_Effectuation R&D-Kuepper-09. Such an effectual approach should therefore have a direct positive impact on the project efficiency under high uncertainty. In contrast. 2008: 21). this might be beneficial because it avoids spending too much money on the wrong projects. Reliable returns cannot be calculated. Via this relation. Precommitments with regard to the project budget and the project schedule help to avoid permanent overspendings that can often be observed in the managerial practice. The precise knowledge about future developments and trends can help to efficiently manage the project within the given budget and schedule. This principle is particularly related to the process efficiency. Hypothesis 2a. Due to this methodological aspect we limit hypothesis 2a to the positive impact of effectuation on the R&D efficiency. Projects that are terminated on the basis of a strict criterion generally have a low project output. in the sum of different projects within an organization. In a project that involves a high level of uncertainty. A limitation of what one is willing to put at risk ensures that the maximum potential loss is in a reasonable relation with the existing risk. However. the effectuation characteristic of this principle is also expected to have an indirect positive effect on the R&D output. Future opportunities and returns can then be analyzed. a consideration of risks should be particularly suitable. The effectuation characteristic of principle 2 has a positive impact on the R&D efficiency in the context of high market and technological innovativeness. in low uncertainty environments a causal approach should be beneficial. estimated and used as a solid basis for the decision of implementing a specific R&D project.doc The effectuation characteristic of this principle “prescribes committing in advance to what one is willing to lose rather than investing in calculations about expected returns to the project” (Sarasvathy.

2002: 309). An effectual approach actively reduces the risk that is inherent in a R&D project with a high degree of innovativeness. Rogers. Principle 3: Reduction versus identification of uncertainty. without worrying about opportunity costs. 1996. or carrying out elaborate competitive analyses” (Sarasvathy. Miller. 2003). Tipping. Different studies in the R&D and innovation management literature have shown the “importance of recognising and working with stakeholders” (Elias. “This principle involves negotiating with any and all stakeholders who are willing to make actual commitments to the project. It has been shown that external relations and commitments have a positive impact on the performance of a project or the organization (e. it can be concluded that stakeholder commitments and external ties are particularly beneficial under high uncertainty. external relations and co-operations are often not aspired in the case of low uncertainty due to the fact that the expected (and probable) benefits would then need to be divided among the partners. Therefore. 1995.doc Hypothesis 2b. According to these studies. Coombs. Beyond it. 1996. & Pybus. Zeffren. In addition external relations can increase the quality of decision making concerning the implementation of a project and therefore indirectly impact upon the performance (Robins & Atuahene-Gima. This can be achieved through direct commitments of stakeholders like potential customers or R&D partners. external ties reduce the project risk as well as they are a vital source of new competencies that support the innovation activity of an organization. 1995). & Fusfeld. The causation characteristic of principle 2 has a positive impact on the R&D efficiency in the context of low market and technological innovativeness. & Jackson. Although these studies have not analyzed the moderating effect of the degree of innovativeness. Eckert.AoM-Paper_Effectuation R&D-Kuepper-09.g. An active reduction of uncertainty is simply not required when the uncertainty is already low. projects that involve a low degree 15 . McMeekin. 2008: 21).. Cavana. 1998.

Principle 4: Acknowledge versus overcome the unexpected. emergent styles (discretion) on the other hand. Formality can be related to a causal approach. and procedures govern the R&D project (Tatikonda & Montoya-Weiss. The effectuation characteristic of principle 3 has a positive impact on the R&D output in the context of high market and technological innovativeness.AoM-Paper_Effectuation R&D-Kuepper-09. utilizing uncertainty and contingent information as resources for their goals rather than relying on goals as determining factors of resource acquisition and choice” (Sarasvathy. Discretion refers to the ability to 16 . contingencies and uncertainty. Effectuation fundamentally rearranges the relationship between planning. “The effectuator leverages uncertainty by treating unexpected events as an opportunity” (Sarasvathy. it is not assumed that an active reduction or an identification of uncertainties has advantages in meeting the defined project budget and schedule. 2008: 85). “Because effectuators often begin with only a very loose notion of their goals. The causation characteristic of principle 3 has a positive impact on the R&D output in the context of low market and technological innovativeness. 2008: 85). Hypothesis 3a. Effectuation is about exploiting contingencies and surprises. The ideas expressed in this principle can be best compared to the formal or planned management styles (formality) on the one hand and the more flexible. they can make up their plans in an incremental fashion. Hypothesis 3b. that are discussed in the literature. The term formality in R&D projects denotes the degree to which rules. policies. 2001).doc of innovativeness are expected to rather profit from detailed market and competitor analyses and a corresponding assimilation of their own activities than from stakeholder commitments. Similarly to principle 1. Principle 3 has a rather low impact on the project efficiency. This leads to the following two hypotheses.

2000). 1986. 2007. 1990). However. an impact of the degree of innovativeness could again be expected. Decision making discretion can have a positive impact on the project performance since it “may foster spontaneity. encouraging members to improvise and explore market opportunities as they arise” (Lewis et al. fluid style of management (Dougherty. Beyond it.. Apart from this aspect that differentiates effectuation and discretion. it has to be kept in mind that effectuation rather suggests actively shaping a new opportunity than adapting to a changing environment which is part of the discretion construct. 1990. 1992b. Naveh (2007) as well as Tatikonda and MontoyaWeiss (2001) did not found a moderating effect of the uncertainty involved in a project. 2002). 1995. Case studies have shown that the balance and the “interplay of emergent and planned styles” (Lewis et al. Zirger & Maidique.doc break formal rules and to react to the emergence of unanticipated ideas.. Tatikonda & Rosenthal. 1997.AoM-Paper_Effectuation R&D-Kuepper-09. 1997). which are conceived. 2002. Montoya-Weiss & Calantone. Naveh 17 . However. and transformed in the process of implementation (Naveh. 1998). At the same time a close managerial supervision and a formalized approach were found to improve the process efficiency (Lewis et al. Discretion therefore can at least partly be compared to the fourth principle of effectuation. reduce errors (Cooper & Kleinschmidt. 2002: 562).. there are researchers who try to integrate both perspectives (Eisenhardt & Tabrizi. 2002: 547) is decisive (Jelinek & Schoonhoven. Laufer. 1992. Song & Parry. shaped. 1994) and increase the financial performance (Ittner & Larcker. Lewis et al. the discussions in the literature shall be briefly considered here to support the development of research hypotheses.. 2007). The empirical studies in this field show mixed results. Naveh. On the other hand a planned style of management in the context of R&D projects is described as a means to accelerate projects (Wheelwright & Clark. Following the argumentation for the first three principles. 1997). On the one hand researchers prefer an emergent. Moorman & Miner.

(2002) hint at the fact that a distinction between the process efficiency and the project output is required. On the one hand the interplay of both approaches may be important. Furthermore. such an approach is in line with what is increasingly acknowledged in the literature namely that a “focus only on front-end concept generation practices may not be sufficient. a planned style of managerial activities or the causal characteristics of principle 4 should be positively related with the project efficiency.g. In such an approach managers can make sure that the R&D teams are always focused on the project target. This is an important result that is not in line with what is mostly expected in the literature (e. 2007: 531). We therefore assume that they do not have a positive effect on the project output. Formal processes have clear restrictions concerning the generation of new experiences and competencies (Sethi & Iqbal. Hypothesis 4a. The effectuation characteristic of principle 4 has a positive impact on the R&D output irrespectively of market and technological innovativeness.AoM-Paper_Effectuation R&D-Kuepper-09.. Tatikonda & Montoya-Weiss. 2007: 123). Lewis et al. It can be concluded that the degree of innovativeness should not have a significant moderating impact. An emergent style of management is positively related to the project output since it builds technical knowledge by exploring novel scientific concepts and experimenting with alternative product designs. This would mean that the impact of uncertainty could be eliminated “by managing formality and discretion” (Naveh. 2001) and has to be considered in the development of research hypotheses for principle 4.doc (2007) assumes “that discretion’s main effect and its interaction with formality may mitigate the effect of uncertainty in R&D projects” (Naveh. 2008). On the other hand it has to be differentiated between the different performance dimensions. The literature results suggest at the same time that effectuation as well as causation have a positive effect on the project performance. 2007: 123). Mile- 18 . Later changes to the concept are not only likely but are also likely to be important” (Seidel. However.

Human action is seen as the decisive factor that shapes the future. 2008: 22). In contrast. An impact of this principle can be particularly expected with regard to the process efficiency. More and more authors conclude that strategies that are based on a prediction of an uncertain environment are not likely to 19 . Instead of having a moderating effect it can still be assumed that both hypothesized relations are stronger in projects that involve a high degree of innovativeness.e.. The effectuation characteristic of this “principle urges relying on and working with human agency as the prime driver of opportunity” (Sarasvathy. Principle 5: Create versus exploit opportunities. Effectuation should be beneficial in projects with a high level of uncertainty. Consequently. In such projects “our knowledge about the future is not a deficiency that can be remedied by sufficient study but in fact derives from the originating. i.AoM-Paper_Effectuation R&D-Kuepper-09. The causation characteristic of principle 4 has a positive impact on the R&D efficiency irrespectively of market and technological innovativeness. 2007: 269f. causation assumes that opportunities are exogenously given. Hypothesis 4b. to be successful in terms of the R&D output requires the integration of new experiences particularly in the case of a high degree of innovativeness “especially as such projects can face considerable ambiguity and unforeseen challenges” (Seidel.doc stones concerning the project schedule and budget visualize the limited resources and lead to an efficient use of those (Wheelwright & Clark. creative force of human choice – that such uncertainties are even in principle imponderable” (Dew & Sarasvathy.). 2007: 524). Trends then cannot be influenced by a single organization but can be exploited by most adequately adapting to it. 1992b). an approach should have advantages that relies to a less extent on forecasts of an uncertain future but rather relies on means to actively control the future by shaping it.

then the future cannot be known now” (Wiseman. A direct advantage of an effectual approach versus a causal approach however might be difficult to analyze with regard to the output. On the one hand effectuation should be preferable due to the fact that an organization that actively creates the future might be able to establish standards and profit from first mover advantages. Therefore a causal approach that spends time and budget on analyses that have a negligible value in the end is assumed to have a negative impact on the process efficiency which comprises meeting time and budget targets.doc be well informed. it has to be questioned whether forecasts and trend analyses can have a positive impact due to the fact that under real uncertainty little reliable information is available. Forbes found that comprehensiveness only has a positive effect on the decision quality if enough information is available and if this information is clear in its meaning. Comprehensiveness denotes a “concept that captures the extensiveness with which an organization’s top executives systematically gather and process information from the external environment in making strategic decisions” (Forbes. are continuously creating the emerging future. “Since men can (must) choose how to act.AoM-Paper_Effectuation R&D-Kuepper-09. However. A similar aspect has been analyzed in the comprehensiveness research. 1989: 268). their chosen acts. Following the results of Forbes. On the other hand an approach that uses causal characteristics of this principle like prediction and forecasting techniques is not necessarily less successful regarding the project output. together with the evolution of the physical world. an effectual approach that actively shapes the future and thus tries to control the future should have a direct positive impact on the project efficiency under high uncertainty. Via this relation the effectuation characteristic of this principle is also expected to have an indirect positive effect on the R&D output. If this is so (as it must be). 2007: 362). This means that under real uncertainty or in the case of a high degree of innovativeness trends cannot be reliably identified ex ante. This is simply because the project team is not bounded to 20 .

In addition it provided an enlarged data basis for testing the research hypotheses. The effectuation characteristic of principle 5 has a positive impact on the R&D efficiency in the context of high market and technological innovativeness. Hypothesis 5a. To build the sample we asked known senior R&D managers to provide contact information of other experienced German R&D managers from their personal network. In other words the causal activities do not have a negative impact on the project output. METHODS Study Context and Samples We used two samples in this study. Sample 1 We drew the first sample from our personal networks and their contacts. Both samples were collected in a cross-sectional survey methodology. In projects with a low degree of innovativeness a causal approach should be beneficial. With the second sample we intended to cross-validate the findings from the first sample.AoM-Paper_Effectuation R&D-Kuepper-09. Hypothesis 5b. The causation characteristic of principle 5 has a positive impact on the R&D efficiency in the context of low market and technological innovativeness.doc the forecasts. Under these circumstances a detailed process planning and forecasting is possible. The only negative impact can be measured with regard to the project efficiency: Additional costs and time efforts that are required for a prediction based approach are disadvantageous. All in all contact information of 900 R&D 21 . The process can be accelerated by analyzing and following technological trends. We applied the first sample for the scale development process that is described below.

7% using a very moderate approach with only one reminder. We furthermore eliminated firms with wrong or incomplete company information which led to a final database of 3. country and a company size above 50 employees. A total of 123 responses led to a response rate of 13. This response rate can be considered satisfactory since only R&D managers with managerial responsibility and experience were asked to participate.doc managers were available for the first study. We formulated clear criteria for participation in order to ensure that the respondent had a broad view of the project and could provide the detailed management and technical information required. After we eliminated companies that did not match specified requirements including industry sector (only R&D intensive sectors considered).138 organizations. a total of 5.288 German companies remained.9%. 606 individuals could not be reached (421) or refused to participate (185) resulting in an effective base of 2. Service firms as well as overseas companies that only have a European sales representation have not been considered. In addition. accounting for a response rate of 10. A total of 277 responses were obtained. We asked each informant to complete a self-administered online questionnaire. Former studies have already shown that survey- 22 . A suitable key informant within each company was either selected from the information given in the Bureau van Dijk database. From this set. we checked the contact information via internet and used phone calls to ensure that the companies are carrying out own R&D projects.532 project managers.AoM-Paper_Effectuation R&D-Kuepper-09. a telephone call to identify the right contact partner or an internet search using social networks like XING. In addition. Sample 2 The sampling frame for this group was the Bureau van Dijk database of European companies. we highlighted the importance of having an experienced project manager as key informant in the invitation mail.

Scales for the causation and effectuation constructs are not available. The objective was to improve or eliminate inappropriate items. Churchill. Instrument Development and Refinement We used existing scales and items to measure the degree of market and technological innovativeness and the different success dimensions.doc ing top managers can reduce the expectable response rate by 50% (Bartholomew & Smith.AoM-Paper_Effectuation R&D-Kuepper-09. similarly items were explicitly allowed since “removing all redundancy from an item pool or a final scale would be a grave error because redundancy is an integral aspect of internal consistency” (DeVellis. a first quantitative and a second quantitative analysis. Therefore. 1999). All in all. the first step entailed the development of new measures. Baruch. We largely used qualitative techniques like literature research. 2003: 87). we generated a full list of 74 items during this process. Following the recommendations of DeVellis. Next. 1979). On the one hand we asked project managers to assess the items for clarity and appropriateness along a 5-point scale ranging from 23 . We contrasted each effectuation item with a causation indicator. we carried out a rough conceptualization and a qualitative pre-test. 2006. To finalize the scale development we used a second quantitative analysis to cross-validate the findings of the preceding tests. This involved developing a pool of items to start with for each of the five effectuation and causation principles. The objective of the qualitative part was to develop preliminary measures that could be applied in a first quantitative test. Within the first phase. we developed a basic understanding of effectuation including a delineation from causation. First. we carried out a qualitative pre-test to test all items concerning their content validity and comprehensibility. expert discussions and interviews to identify items from different perspectives. The scale development process consisted of a qualitative. We adopted the following three-step approach for this purpose (cmp.

This approach was iterative meaning that the next respondent had to assess the improved items. 15 probands were asked to complete a questionnaire that included the items and indicate any ambiguity or other difficulty in responding. We applied sample 1 for that purpose. the objective was to eliminate items in the case that pre-defined cut-off criteria were not met (indicator loadings ≥ . Yi & Phillips. On the other hand we asked effectuation researchers to assess the content validity and the delineation of effectuation and causation. It was demanded that each hypothesized factor explains at least 50% of the variance of the related items (VAR).4.doc very low to very high. This test led to a consistent picture.5). At this stage. Hereafter. In the second step of the scale development approach we used a self-administered survey to make a first quantitative test of the new measures. we assessed discriminant validity demanding that each indicator is clearly associated with the hypothesized factor. In addition the resulting constructs were discussed with academics and scale development experts and finally with yet another set of R&D managers. Again. In addition we conducted a confirmatory factor analysis (CFA). we assessed the reliability by calculating Cronbach’s alpha and item-to-total correlations. The researchers had to assign each item to one of the three categories “Clearly effectuation”. we applied an exploratory factor analysis to ensure convergent validity. very few concerns were raised and only minor refinements were required. Additionally we verified discriminant va- 24 . and nomological validity (Peter & Churchill. Next.6 and average variance extracted (AVE) ≥ . A set of commonly used analyses was carried out to test the new scales for reliability and convergent validity (Bagozzi & Phillips. 1991). First. Three effectuation and causation items had to be eliminated due to an insufficient demarcation. as well as offering suggestions for improvement.AoM-Paper_Effectuation R&D-Kuepper-09. factor reliability (FR) ≥ . 1986). “Clearly causation” and “Could be both”. We asked them to complete a full questionnaire during a phone interview. 1982). discriminant validity (Bagozzi.

FR = . All results that we show in the following section could be confirmed with this enlarged set of additional empirical data. overcome the unexpected) that includes six items (α = . An additional elimination of items was therefore not necessary.58). VAR = 64.86. Principle 3 that basically denotes reducing versus identifying uncertainty. FR = . VAR = 59. Nomological validity requires that the single factors are “confirmed within the context of a larger theory” (Bagozzi. 1981). In total.5%. contains seven items (α = . we analyzed the overall fit of the model within a full structural equation model using AMOS. The third and final step of the scale development process contained the same analyses as completed in step 2. AVE = . Therefore.60).86.83. VAR = 64.90. It uses five items in its final version.doc lidity on factor level using AVE demanding that it be greater than the squared interscale correlations of each pair of factors (Fornell & Larcker. VAR = 63.82.1%. Good reliability and validity characteristics also shows the fourth principle (acknowledge vs.50). AVE = .56). However. This enabled a cross-validation of the results of the earlier analyses. FR = . The final scales are provided in the Appendix.87. the sample size was enlarged by using sample 2.8%. 1979: 14). Evaluation of Measurement Models Principle 1 that prescribes a means versus goal driven initiation of R&D projects. we eliminated eight effectuation and causation items during this process. The scale of principle 2 describing a consideration of the affordable loss versus a quantification of expected returns also shows a high reliability and validity (α = . As for the other principles. AVE = . AVE = .AoM-Paper_Effectuation R&D-Kuepper-09. FR = .9%. The measure for principle 5 25 . In addition we completed an analysis to identify potential misspecifications along the residuals of the covariance matrix and the modification indices.91. is measured on the basis of four items (α = .86. we contrasted effectuation with causation items and used a six-point scale to measure whether the rater rather used an effectual or causal approach.

.9%.. It consists of four items (α = . Dess & Robinson. Discriminant validity was confirmed by the fact that.AoM-Paper_Effectuation R&D-Kuepper-09. We took a broader approach by additionally considering two success dimensions that are related to the project output.. 1987).2%. VAR = 62. Many studies only focus on project efficiency to assess the project performance (e. FR = . AVE = .76. & Robinson. for each pair of factors.58). FR = . Bonner. We asked the informants to evaluate project performance relative to the expectations.85. 1984.doc tests whether the project rather created a new opportunity or if it exploited an existing trend.56).54). Although such an approach may be prone to bias. All items of the two innovativeness dimensions have been applied and 26 ..72.80. 1990) initially consisted of four items and had to be reduced to three key indicators (α = . Shenhar et al. FR = . The moderating variables market and technological innovativeness followed prior conceptual and empirical work. 2002) leading to acceptable reliability and validity values (α = . VAR = 67. ---------------------------------Insert Table 2 about here ---------------------------------Strong support for a nomological validity could be achieved through the structural equation modeling that is represented in the results section. & Walker. Pinto & Mantel. AVE = . VAR = 76. Ruekert.g. AVE = .82.g.78.9%. Self-assessment measures were applied.7%.72. 2002).61). it is the most commonly used way to measure the project performance and it has been shown to be sufficiently reliable (Dawes. The process efficiency scale consisted of three items (e. 1999.g. Pearce. VAR = 77. the AVE was greater than the squared interscale correlations (see table 2). AVE = . FR = . The first sub-dimension of the output-related performance construct applied three items to measure the experiences and competencies gathered throughout the project (α = . The second sub-dimension that measures the perceived value and future potential of the R&D output (e.82. Robbins.

2000 for details and formula). The results suggest that the structural model fits the data very 27 . Hauschildt & Schlaak. We additionally confirmed the results with commonly used χ²-difference tests. ---------------------------------Insert Figure 3 about here ---------------------------------This classification scheme led to 136 projects in the high and 136 projects in the low innovativeness sub-group respectively. We further considered the two extreme cases. RESULTS Table 3 reports the parameter estimates and significance levels for each path in the twogroup structural equation model. Following the procedure of Keil et al. 2001. and on the other hand projects that involved a high market and technological innovativeness. We used a two-group AMOS model to examine the structural relationships separately and to test for significant differences between the two groups (Bollen. 2001). 2001). we split the sample into two groups based on the composite score of the technological and market innovativeness scale (Song & Montoya-Weiss.. 2001). 1989. (2000) significance levels were evaluated based on t-tests (compare Keil et al. Salomo et al. 2001. namely on the one hand projects that involved a low market and technological innovativeness. 2007).. Hypotheses Testing: Structural Model In order to test the hypothesized contingency model. Song & Montoya-Weiss.doc validated in previous research (Danneels & Kleinschmidt. We measured the technological innovativeness on the basis of four items and the market innovativeness based on five items respectively (see Appendix).AoM-Paper_Effectuation R&D-Kuepper-09. Using the mean score of these two constructs enabled us to differentiate four categories. We conducted an overall model assessment for both groups simultaneously (Song & Montoya-Weiss.

0).05). n. Analogical to the discussion of hypothesis 1a.09. p < . p < .02.23. using the effectual characteristics of principle 3 has a positive impact on the R&D output.01) is also directly supported whereas the results for 4b are mixed (Low innovativeness: SC = .05. The negative path coefficient for the subgroup of highly innovative projects indicates at also supporting hypothesis 1a.24.04 (pCLOSE = 1. p < . However.09) and 2b (SC = . This can also – at least partly – be concluded when analyzing hypotheses 3a and 3b.001. Hypothesis 4a (Low innovativeness: SC = -.01) meaning that a causal approach concerning the characteristics of principle 1 has significant advantages in projects that involve a low degree of innovativeness.AoM-Paper_Effectuation R&D-Kuepper-09. ---------------------------------Insert Table 3 about here ---------------------------------Specifically.. p < . As additionally hypothesized.doc well (χ²/df = 1. The data directly supports 3a (SC = -. All paths that we hypothesized to be significant differentiators between effectuation and causation show moderated effects (bold cells in Table 3).25.90). The effectuation characteristics of 28 . the group comparison shows significant differences in the most successful approaches under low and high innovativeness which in total can be interpreted at least as a weak support of hypothesis 1a. GFI = . The effectuation characteristic of principle 2 is preferable in highly innovative projects whereas causation shows significant advantages under low innovativeness.14. On the other hand.. hypothesis 1b is supported (standardized coefficient (SC) .95. TLI = . this path coefficient is not significant.09) can be both supported at significant levels. Hypotheses 2a (SC = -.01). i. p < . hypothesis 3b can be weakly supported since our group comparison shows that best-practice approaches in the context of low and high innovativeness are significantly different.59. Hypotheses 5a and 5b are again both supported.11.96.e.25. CFI = . in both cases the relations are stronger in projects that involve a high degree of innovativeness. p < . SRMR = . RMSEA = . p < . p < . High innovativeness: SC = . High innovativeness: SC = -.s.28.

Finally. we developed measurement instruments to analyze the new effectuation and causation concepts in a large scale empirical study. We went forward in three steps: First. 2b. p = . As described above.05) and the causal approach shows clear advantages in low innovative projects (SC = . Second. 3b and 5b.doc principle 5 have a significant positive effect on the process efficiency in highly innovative projects (SC = -.15). The results also have some managerial implications as they bring in a new perspective that is at least partly contrary to what is mostly believed to be best practice. Seen from a more abstract level we hypothesized that (a) effectuation is positively related with the success in highly innovative projects and (b) causation is particularly beneficial in projects with a low level of innovativeness. Furthermore. p < . we applied the new scales to investigate the performance impact of each concept. This result is additionally supported by the group comparison.AoM-Paper_Effectuation R&D-Kuepper-09. we defined and delineated characteristics of an effectual approach in the context of R&D projects. DISCUSSION The primary aim of this study was to analyze the effects of effectuation and causation processes on the R&D project performance.22. (a) is supported or partly supported by the research hypotheses 1a. 29 . 3a and 5a. 2a. it directly shows that effectuation and causation respectively are important theoretical concepts that can be valuable frameworks for researchers when analyzing decision making related R&D project management topics. This study’s results therefore provide support for the assumption that the degree of innovativeness is an important moderator that needs to be included when analyzing project success factors. The results also support (b) that was tested through the hypotheses 1b.19.

With this in mind.g. Read. This approach thus provided contributions to both research directions. Our concept extends the linear. 2000). It takes into account that specific circumstances like different degrees of innovativeness require different R&D approaches and thus provides recommendations for both. Dew. the dichotomous concept of effectuation and causation can be regarded as an extension of the existing concepts and also as an independent R&D framework.. Cooper. Early research on R&D management has produced descriptive frameworks and models that consider the R&D process as a sequential. Existing frameworks rather focus either on incremental (linear approaches) or on radical innova30 . It is specifically this integrated view that differentiates our approach from the current R&D literature. Constant. linear system with discrete stages (e. Zaltman. More recently. These frameworks resist reductionism and linear analysis. We tested the dichotomous concept of effectuation and causation as a potential theoretical framework for the second field of research namely the management of R&D projects. & Holbek. Duncan. 1973. 1996. Cheng & Van de Ven.e.doc Theoretical Contributions and Future Research Directions The current study enriches and extends researchers’ understanding in several ways since we achieved the findings by linking two fields of research. recursive and chaotic frameworks have been developed to acknowledge that R&D progresses in a non-linear way with several feedback loops (e. recursive and chaotic frameworks by viewing R&D processes as effectual or causal approaches depending on the specific circumstances. incremental and radical innovation projects. “a statement about the truth or otherwise of a phenomenon in the world” but it is also an “internally consistent set of ideas that forms a clear basis for action upon the world” (Sarasvathy. we want to focus on the contributions to the R&D management literature. i.g.AoM-Paper_Effectuation R&D-Kuepper-09. First.. & Wiltbank.. In addition our framework is not only descriptive. 1990). 2008: 345).

g. Beyond offering specific directions for action as extension of the existing frameworks. Beside the contributions to the R&D management research.g. This acknowledges that control can actively be built up e. we showed that effectuation can be delineated from conventional approaches and that effectuation can be measured. 2008).g. 2008) have been used to analyze effectuation. This study is to our knowledge the first large scale empirical analysis that provides newly developed scales of effectuation. Wiltbank et al. & Smit. To date only experiments (e. the framework presented in this article offers a set of clear recommendations to enhance decision making in certain and uncertain situations. we position the human action and the organization in the center of the process. In addition. the chaotic framework rather describes an R&D approach as a chaotic system that leads to an expanding and diverging process.doc tions (chaotic systems). Song. 1963). We did that by clarifying three critical aspects that can be regarded as important towards building a generally accepted theory (House. Whereas most of the existing frameworks assume that exogenous factors drive the R&D process.. Whereas e. First.. effectuation suggests how to navigate through complex decision trees. Second. by using effectual elements like starting the process on the basis of ones means and competences.. we believe that our approach also directly competes with the others by using different underlying key assumptions. It offers support to make such processes converge. The ability to actively reduce uncertainty as an important characteristic of our approach is not considered. This is clearly in contrast to the existing frameworks like the recursive one that deal with uncertainty by recommending quick adoptions to any unforeseen developments and surprises.. this study helps to develop effectuation towards a general theory of decision making in uncertain situations. 2001) and one meta-analysis (Read.AoM-Paper_Effectuation R&D-Kuepper-09. case studies (Sarasvathy & Kotha. it was important to validate effectuation in terms of its relevance. With this study we revealed the 31 .

. In order to be able to successfully implement effectual cells in plan dominated large organizations. 2003: 239).g. Harry & Schroeder. the analysis of mediating effects appears to be particularly relevant. Managerial Implications and Limitations A strict process management including concepts like Total Quality Management (TQM) or Lean Management dominated the managerial practice during the last two decades. Third. This helps to broaden the scope of effectuation and thus gives it a more general meaning. it might be interesting to identify specific antecedents that support effectuation (e.doc relevance of effectuation with a large scale empirical study and found positive impacts of effectuation on performance. Beyond it. However.g. more and more authors hint at the fact that managers that only seek to achieve productivity gains are not well informed in the long run (e. organizational antecedents). 2000). Proponents of process management concepts have promoted it as being universally beneficial for organizations (Hammer & Stanton. Benner & Tushman. The design of these parallel structures is yet another promising future research topic.. it can be assumed that parallel organizational structures are required.AoM-Paper_Effectuation R&D-Kuepper-09. With this study we intended to cover a broad field of effectuation and causation characteristics in order to get a first empirical foundation of its key constructs. We suggest additional in-depth analyses on each principle as interesting future research opportunities. Without doubting that process management activities in the context of R&D projects have clear advan32 . we transferred effectuation from its original field of research to another discipline. Of course. 1999. researchers have already raised concern about that since the “diffusion of process management techniques favors exploitative innovation at the expense of exploratory innovation” (Benner & Tushman. However. In addition. this approach was carried out at the expense of a more detailed analysis of each effectuation principle. 2003).

effectuation offers ways to better deal with high uncertainty situations.doc tages in exploitative projects.. In fact we have shown that R&D managers need to differentiate between projects with a low and a high degree of innovativeness..AoM-Paper_Effectuation R&D-Kuepper-09. Like any investigation. However. One limitation of this study is the use of retrospective data. due to a lack of possibilities to make concise forecasts of expected returns) Causation Considerations about potential returns were decisive for the selection of the R&D option Project budgets were approved based on calculations of expected returns (e. ROI) The selection of the R&D-option was mostly based on analyses of future returns We mainly considered the potential odds of the project We compared different R&D options on the basis of return and profit forecasts (e.g. APPENDIX: INFORMATION ON CONSTRUCTS AND ITEMS Principle 1: Means vs.86) Effectuation 1) Considerations about potential losses were decisive for the selection of the R&D option 2) Project budgets were approved on the basis of considerations about acceptable losses 3) The selection of the R&D-option was mostly based on a minimization of risks and costs 4) We mainly considered the potential risk of the project *) We compared different R&D options on the basis of an assessment of risks and costs that we were willing to lose (e. we have shown in this study that the benefits have to be questioned in exploratory projects. Whereas a strict planned and predictionbased causal approach is suitable under low uncertainty. ours has some limitations. A valuable approach for future research may be employing a longitudinal methodology to limit the recall time frame and to avoid bias from this source. comparison of expected value of return) 33 .. we believe that our findings are not an artifact of common method bias because our analyses with the one-factor test indicated no serious common method problems. multiple respondents might be used to limit common method bias. goals (α = . expected returns (α = . In addition.g.90) Effectuation 1) Our R&D project was specified on the basis of given means/resources 2) The target of our R&D project was vaguely defined in the beginning 3) Given means/resources have been the starting point for the project 4) The process converged towards a project target on the basis of given means/resources 5) Rather given means than concisely given project targets have been the starting point for our project 6) The project specification was predominantly based on given resources 7) Given means have significantly impacted on the framework of our R&D project Causation Our R&D project was specified on the basis of given project targets The target of our R&D project was clearly defined in the beginning Given project targets have been the starting point Required means/resources have been determined on the basis of given project targets A concisely given project target has been the starting point for our project The project specification was predominantly based on given targets Given project targets have significantly impacted on the framework of our R&D project Principle 2: Affordable loss vs.g.

we received binding promises of our customers.82) Effectuation 1) We tried to reduce risks of the R&D project through internal or external partnerships and agreements *) We did not perform detailed market and competitor analyses to decide about the realization of the project *) We approached potential stakeholders/partners actively to jointly shape the future 2) We jointly decided with our partners/stakeholders on the basis of our competences 3) Our focus was rather on the reduction of risks by approaching potential partners and customers *) Before starting the project.76) 1) Learnings and expertise that can be leveraged in other projects 2) Generation of new ideas as starting point of potential future projects 34 .. we started partnerships and received pre-commitments Causation We tried to identify risks of the R&D project through thorough market and competitor analyses We performed detailed market and competitor analyses to decide about the realization of the project We have analyzed the market and external trends to better assess future developments We have taken our decisions on the basis of systematic market analyses Our focus was rather on the early identification of risks through market analyses in order to be able to adopt our approach Pre-commitments from e. suppliers or other stakeholders like researcher groups have been rarely used In order to identify risks. overcome the unexpected (α = .86) Effectuation Causation *) We always reacted on surprises – if necessary the project target was adjusted 1) We always tried to integrate surprising results and findings during the R&D process – even though this was not necessarily in line with the original project target 2) Our R&D process was flexible enough to be adjusted to new findings 3) New R&D findings influenced the project target 4) The project planning was carried out in small steps during the project implementation 5) Despite of potential delays in project execution we were flexible and took advantage of opportunities as they arose 6) We allowed the project to evolve as opportunities emerged – even though the opportunities have not been in line with the original project target 7) Potential setbacks or external threats were used as advantageous as possible The project target had the highest priority. the evolvement was initiated by our project 4) We did not carry out any analyses on future trends because we could control the development and trends in our concerned field of R&D due to the fact that we and our partners have been the active drivers Causation Before starting the project. we rather decided intuitively 5) Decisions on capital expenditures were primarily based on potential risks of losses We carried out systematic analyses of all external parameters and trends Decisions on capital expenditures were primarily based on potential returns Principle 3: Reduce vs. We tried to avoid potential surprises (e. through upfront market analyses) We only integrated surprising results and findings when the original project target was at risk Our R&D process focused on reaching the project target without any delay New R&D findings did not influence the project target The project planning was basically carried out at the beginning of the project We first of all took care of reaching our initially defined project targets without delays We have always paid attention to reach the initial project target By the use of upfront market analyses we tried to avoid setbacks or external threats Principle 5: Create vs. we could identify trends through concise analyses and forecasts The R&D-project was our answer on existing trends We have rather exploited external trends than we have build up a new market/R&D-segment with our R&D project We recognized the evolvement of our R&D-segment through analyses and used this trend We carried out elaborate analyses on future trends because we felt that a better understanding of future trends would give us more control over such developments Performance: Process efficiency (α = .72) 1) Met project schedule 2) Stayed on budget 3) Met operational and technical performance of the R&D process Performance: Output Experiences and competencies (α = .AoM-Paper_Effectuation R&D-Kuepper-09..g. identify uncertainty (α = .g. customers. exploit opportunities (α = . we did not carry out detailed analyses concerning future trends 2) We have rather started a new trend than exploiting exogenous trends *) We have rather build up a new market/R&D-segment with our R&D project than we have exploited exogenous trends 3) We did not forecast the evolvement of our R&D-segment through market analyses.80) Effectuation 1) Before starting the project.doc *) We did hardly perform systematic analyses of external parameters. suppliers or other stakeholders 4) In order to reduce risks. we focused on market analyses and forecasts Principle 4: Acknowledge vs.

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02/.58 .) Principle 5 (Caus.AoM-Paper_Effectuation R&D-Kuepper-09. (2000).05.04 (pCLOSE = 1.19*** .04 .29 .03 .) Principle 3 (Effec.11 Principle 3 Principle 4 Principle 5 . exploit opportunities Effectuation characteristics R&D approach driven by given means R&D approach guided by in-advance commitments to what one is willing to lose Existing uncertainty reduced through partnerships and pre-commitments of stakeholders Contingencies/surprises seen as source of opportunities Human agency seen as prime driver of future developments Causation characteristics R&D approach driven by given project targets R&D approach guided by expected project returns Existing uncertainty identified and avoided through market and competitor analyses Contingencies/surprises avoided or quickly overcome to reach given project targets Development/trends seen as exogenously given that can be exploited by use of forecasts Table 2: Discriminant validity: Squared interscale correlations are greater than AVE Principle 1 Principle 1 Principle 2 Principle 3 Principle 4 Principle 5 Proc.14 Principle 2 . Overall fit indices: χ²/df = 1.12 . ** p ≤ .59. p < .) Principle 5 (Effec.56 .25** -.02 .56 .) Principle 2 (Caus.24**** -.05 .28**** -.11**/-.60 .03 .96.50 .05.95. efficiency .13 .56 .01 .25** . CFI =.06 -.50 .01. * p ≤ . SRMR =.54 Squared interscale correlations .14*** .15.22* Significance level of differencec *** *** ** (*) ** *** Positive signs (+) correspond to Causation and negative signs (-) to Effectuation. (*) p ≤ .56 Output .90 The significance of differences between the path coefficients in the low and high innovativeness groups have been tested using the formula following Keil et al. Significant levels: **** p ≤ .02 Proc.23**** .03 .) Principle 4 (Effec. identify uncertainty Principle 4: Acknowledge vs. efficiency Output AVE .) Principle 2 (Effec. The results were confirmed with a chi-square difference test (likelihood ratio test). TLI =.doc Table 1: Delineation of effectuation and causation: Key principles Principle Principle 1: Means vs. RMSEA = .64 .24 41 .05 .) Principle 4 (Caus. goals Principle 2: Affordable loss vs.02 .001. overcome the unexpected Principle 5: Create vs.64 .) Principle 3 (Caus. b Hypothesis a) H1 b) a) H2 b) a) H3 b) a) H4 b) a) H5 b) a b c Path From Principle 1 (Effec.08 .23 .14 Table 3: Two-Group Maximum Likelihood Path Coefficient Estimatesa.10. GFI =.) To Output Output Process efficiency Process efficiency Output Output Output Process efficiency Process efficiency Process efficiency Innovativeness High Low High Low High Low Low/high Low/high High Low Standardized Coefficient -.) Principle 1 (Caus. expected returns Principle 3: Reduce vs.0).03 .58 .15 .54 .60 . *** p ≤ .12 .12 .

AoM-Paper_Effectuation R&D-Kuepper-09. 2008: 87) Principle 2: Affordable loss as criterion for decision making Principle 4: Need to change the initial plan New means that can impact on goals Adjustment of initial decision Principle 3: Interact with others and get stakeholder commitments New stakeholder/ means required? Figure 2: Research model Moderator Innovativeness Effectuation/Causation characteristics Principle 1 Principle 2 Principle 3 Principle 4 Principle 5 high H1a H2a H3a low H1b H2b H3b Output R&D project performance Process efficiency H4a.doc Figure 1: Dynamic model of effectuation Decision/project preparation Decision making Decision/project implementation New insights/ surprises? Principle 1: Given means Principle 5: “Human action is the predominant factor shaping the future” (Sarasvathy. H4b H5a H5b Figure 3: Classification of sub-groups for further analysis High II N = 64 Technological innovativeness I Domain of effectuation N = 136 Low III Domain of causation N = 136 IV N = 64 Low High Market innovativeness 42 .

810 .622 .647 .866 .798 .543 .doc Additional Appendix for reviewers (not intended for publication) Statistics for newly developed scales (N = 400) Factor Item Item loadings .675 .9% .706 .558 .800 62.5% .818 .646 .644 .803 .616 .504 .911 AVE Principle 1 Principle 2 Principle 3 Principle 4 Principle 5 1 2 3 4 5 6 7 1 2 3 4 5 1 2 3 4 1 2 3 4 5 6 1 2 3 4 .774 .540 43 .804 .588 .598 .863 .707 .711 Item-tototal correlation .625 .783 .873 .858 .768 .759 .876 .689 .8% .552 .820 .769 .580 .602 .731 .714 .519 .856 63.653 .734 .477 .778 .652 .7% .660 .672 Cronbach’s Alpha .821 .832 .867 .577 .820 64.605 .619 .629 .698 .757 .811 .560 .AoM-Paper_Effectuation R&D-Kuepper-09.628 .903 Variance explained through first factor (exploratory factor analysis) 64.757 .1% Factor reliability .861 59.839 .753 .

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