Do strategy choices matter for nascent firms? A study on effectuation and causation impacts on new ventures outcomes

Principal Topic : Nascent entrepreneurship has drawn the attention of scholars in the last few years (Davidsson, 2006, Wagner, 2004). However, most studies have asked why firms are created focussing on questions such as what are the characteristics (Delmar and Davidsson, 2000) and motivations (Carter, Gartner, Shaver & Reynolds, 2004) of nascent entrepreneurs, or what are the success factors in venture creation (Davidsson & Honig; 2003; Delmar and Shane, 2004). In contrast, the question of how companies emerge is still in its infancy. On a theoretical side, effectuation, developed by Sarasvathy (2001) offers one view of the strategies that may be at work during the venture creation process. Causation, the theorized inverse to effectuation, may be described as a rational reasoning method to create a company. After a comprehensive market analysis to discover opportunities, the entrepreneur will select the alternative with the higher expected return and implement it through the use of a business plan. In contrast, effectuation suggests that the future entrepreneur will develop her new venture in a more iterative way by selecting possibilities through flexibility and interaction with the market, affordability of loss of resources and time invested, development of pre-commitments and alliances from stakeholders. Another contrasting point is that causation is ''goal driven'' while an effectual approach is ''mean driven'' (Sarasvathy, 2001) One of the predictions of effectuation theory is effectuation is more likely to be used by entrepreneurs early in the venture creation process (Sarasvathy, 2001). However, this temporal aspect and the impact of the effectuation strategy on the venture outcomes has so far not been systematically and empirically tested on large samples. The reason behind this research gap is twofold. Firstly, few studies collect longitudinal data on emerging ventures at an early enough stage of development to avoid severe survivor bias. Second, the studies that collect such data have not included validated measures of effectuation. The research we are conducting attempts to partially fill this gap by combining an empirical investigation on a large sample of nascent and young firms with the effectuation/causation continuum as a basis (Sarasvathy, 2001). The objectives are to understand the strategies used by the firms during the creation process and measure their impacts on the firm outcomes. Methodology/Key Propositions : This study draws its data from the first wave of the CAUSEE project where 28,383 Australian households were randomly contacted by phone using a specific methodology to capture emerging firms (Davidsson, Steffens, Gordon, Reynolds, 2008). This screening led to the identification of 594 nascent ventures (i.e., firms that are not operating yet) and 514 young firms (i.e., firms that have started operating from 2004) that were willing to participate in the study. Comprehensive phone interviews were conducted with these 1108 ventures. In a likewise comprehensive follow-up 12 months later, 80% of the eligible cases completed the interview. The questionnaire contains specific sections designed to distinguish effectual and causal processes, innovation, gestation activities, business idea changes and ventures outcomes. The effectuation questions are based on the components of effectuation strategy as described by Sarasvathy (2001) namely: flexibility, affordable loss and pre-commitment from stakeholders. Results from two rounds of pre-testing informed the design of the instrument included in the main survey. The first two waves of data have will be used to test and compare the use of effectuation in the venture creation process. To increase the robustness of the results, temporal use of effectuation will be tested both directly and indirectly. 1. By comparing the use of effectuation in nascent and young firms from wave 1 to 2, we will be able to find out how effectuation is affected by time over a 12-month duration and if the stage of venture development has an impact on its use. 2. By comparing nascent ventures early in the creation process versus nascent ventures late in the creation process. Early versus late can be determined with the help of time-stamped gestation activity questions included in the survey. This will help us to determine the change on a small time scale during the creation phase of the venture. 3. By comparing nascent firms to young (already operational) firms. 4. By comparing young firms becoming operational in 2006 with those first becoming operational in 2004. Results and Implications : Wave 1 and 2 data have been completed and wave 2 is currently being checked and 'cleaned'. Analysis work will commence in September, 2009. This paper is expected to contribute to the body of knowledge on effectuation by measuring quantitatively its use and impact on nascent and young firms activities at different stages of their development. In addition, this study will also increase the understanding of the venture creation process by comparing over time nascent and young firms from a large sample of randomly selected ventures. We acknowledge the results from this study will be preliminary and will have to be interpreted with caution as the changes identified may be due to several factors and may not only be attributed to the use/not use of effectuation. Meanwhile, we believe that this study is important to the field of entrepreneurship as it provides some much needed insights on the processes used by nascent and young firms during their creation and early operating stages.

Foreseeability of pure economic loss and causation

In Bonny Glen Pty Ltd v Country Energy [2009] NSWCA 26 (24 February 2009) the New South Wales Court of Appeal held that the pure economic loss suffered by the appellant was recoverable. However, rather than arguments as to whether the appellant was vulnerable and a member of an ascertainable class, whether the respondent had knowledge of the risk to the appellant and was in a position of control and considerations as to indeterminate liability as in Perre v Apand Pty Ltd (1999) 198 CLR 180, the arguments raised related to the foreseeability of the loss and causation.

Proof of causation in informed consent cases : establishing what the plaintiff would have done

A degree of judicial caution in accepting the assertion of a plaintiff as to what he or she would have done, if fully informed of risks, is clearly evident upon a review of decisions applying the common law. Civil liability legislation in some jurisdictions now precludes assertion evidence by a plaintiff. Although this legislative change was seen as creating a significant challenge for plaintiffs seeking to discharge the onus of proof of establishing causation in such cases, recent decisions suggest a more limited practical effect. While a plaintiff’s ex post facto assertions as to what he or she would have done if fully informed of risks may now be inadmissible, objective and subjective evidence as to the surrounding facts and circumstances, in particular the plaintiff’s prior attitudes and conduct, and the assertion evidence of others remains admissible. Given the court’s reliance on both objective and subjective evidence, statistical evidence may be of increasing importance.

Ending the life of the act/omission dispute: Causation in withholding and withdrawing life-sustaining measures

My aim in this paper is to challenge the increasingly common view in the literature that the law on end of life decision making is in disarray and is in need of urgent reform. My argument is that this assessment of the law is based on assumptions about the relationship between the identity of the defendant and their conduct, and about the nature of causation, which, on examination, prove to be indefensible. I then provide a clarification of the relationship between causation and omissions which proves that the current legal position does not need modification, at least on the grounds that are commonly advanced for the converse view. This enables me, in conclusion, to clarify important conceptual and moral differences between withholding, refusing and withdrawing life-sustaining measures on the one hand, and assisted suicide and euthanasia, on the other.

Omissions, causation and responsibility

In this paper I discuss a recent exchange of articles between Hugh McLachlan and John Coggon on the relationship between omissions, causation and moral responsibility. My aim is to contribute to their debate by isolating a presupposition I believe they both share, and by questioning that presupposition. The presupposition is that, at any given moment, there are countless things that I am omitting to do. This leads them both to give a distorted account of the relationship between causation and moral or (as the case may be) legal responsibility, and, in the case of Coggon, to claim that the law’s conception of causation is a fiction based on policy. Once it is seen that this presupposition is faulty, we can attain a more accurate view of the logical relationship between causation and moral responsibility in the case of omissions. This is important because it will enable us, in turn, to understand why the law continues to regard omissions as different, both logically and morally, from acts, and why the law seeks to track that logical and moral difference in the legal distinction it draws between withholding life-sustaining measures and euthanasia.

Long term exposure to asbestos satisfies test for causation

Background In Booth v Amaca Pty Ltd and Amaba Pty Ltd,1 the New South Wales Dust Diseases Tribunal awarded a retired motor mechanic $326 640 in damages for his malignant pleural mesothelioma allegedly caused by exposure to asbestos through working with the brake linings manufactured by the defendants. The evidence before the Tribunal was that the plaintiff had been exposed to asbestos prior to working as a mechanic from home renovations when he was a child and loading a truck as a youth. However, as a mechanic he had been exposed to asbestos in brake linings on which he worked from 1953 to 1983. Curtis DCJ held at [172] that the asbestos from the brake linings ‘materially contributed to [the plaintiff’s] contraction of mesothelioma’. This decision was based upon acceptance that the effect of exposure to asbestos on the development of mesothelioma was cumulative and rejection of theory that a single fibre of asbestos can cause the disease...

The difficulty of establishing causation in medical negligence cases : two recent Australian decisions

This editorial on health and guardianship law provides an overview of the causation issues that precluded the recovery of two medical negligence claims in the cases of Wallace v Kam [2013] HCA 19 and Waller v James [2013] NSWSC 497.

Calligraphy and causation : two obstetric management cases - Hirst v Sydney South West Area Health and King v Western Sydney local health network

Two recent decisions of the Supreme Court of New South Wales in the context of obstetric management have highlighted firstly, the importance of keeping legible, accurate and detailed medical records; and secondly, the challenges faced by those seeking to establish causation, particularly where epidemiological evidence is relied upon...

G-protein β3 subunit gene (GNB3) variant in causation of essential hypertension

Essential hypertensives display enhanced signal transduction through pertussis toxin-sensitive G proteins. The T allele of a C825T variant in exon 10 of the G protein β3 subunit gene (GNB3) induces formation of a splice variant (Gβ3-s) with enhanced activity. The T allele of GNB3 was shown recently to be associated with hypertension in unselected German patients (frequency=0.31 versus 0.25 in control). To confirm and extend this finding in a different setting, we performed an association study in Australian white hypertensives. This involved an extensively examined cohort of 110 hypertensives, each of whom were the offspring of 2 hypertensive parents, and 189 normotensives whose parents were both normotensive beyond age 50 years. Genotyping was performed by polymerase chain reaction and digestion with BseDI, which either cut (C allele) or did not cut (T allele) the 268-bp polymerase chain reaction product. T allele frequency in the hypertensive group was 0.43 compared with 0.25 in the normotensive group (χ2=22; P=0.00002; odds ratio=2.3; 95% CI=1.7 to 3.3). The T allele tracked with higher pretreatment blood pressure: diastolic=105±7, 109±16, and 128±28 mm Hg (mean±SD) for CC, CT, and 7T, respectively (P=0.001 by 1-way ANOVA). Blood pressures were higher in female hypertensives with a T allele (P=0.006 for systolic and 0.0003 for diastolic by ANOVA) than they were in male hypertensives. In conclusion, the present study of a group with strong family history supports a role for a genetically determined, physiologically active splice variant of the G protein β3 subunit gene in the causation of essential hypertension.

Failure to administer a drug and causation

Case note on King v Western Sydney Local Health Network In King v Western Sydney Local Health Network [2013] NSWCA 162 the appellant sought damages for the severe physical and intellectual disability she suffered as a result of foetal varicella syndrome (FVS) caused by her mother contracting varicella (chickenpox) in the second trimester of her pregnancy. The mother had been exposed to the virus and sought advice from a doctor at Blacktown Hospital as she had not had the virus herself and therefore did not possess immunity. In such circumstances at the time, the standard medical practice was to offer the mother varicellazoster immunoglobulin (VZIG) to boost her defence to the virus. The appellant’s mother however was not offered this treatment and contracted chickenpox resulting the appellant’s condition...

Calligraphy and causation : two obstetric management cases

Child born with gross hydrocephalus - cerebral palsy - questions surrounding obstetrician's notes - ultrasound not ordered - illegible handwriting - importance of legible, accurate and detailed medical records - causation - child born with congenital varicella syndrome (CVS) - chicken pox - forseeability of risk.

Improving the railway’s understanding of accident causation through an integrated approach to human factors analysis and technical safety data recording

This paper describes a safety data recording and analysis system that has been developed to capture safety occurrences including precursors using high-definition forward-facing video from train cabs and data from other train-borne systems. The paper describes the data processing model and how events detected through data analysis are related to an underlying socio-technical model of accident causation. The integrated approach to safety data recording and analysis insures systemic factors that condition, influence or potentially contribute to an occurrence are captured both for safety occurrences and precursor events, providing a rich tapestry of antecedent causal factors that can significantly improve learning around accident causation. This can ultimately provide benefit to railways through the development of targeted and more effective countermeasures, better risk models and more effective use and prioritization of safety funds. Level crossing occurrences are a key focus in this paper with data analysis scenarios describing causal factors around near-miss occurrences. The paper concludes with a discussion on how the system can also be applied to other types of railway safety occurrences.

Medical negligence, causation and liability for non-disclosure of risk : a post-wallace framework and critique

Through an examination of Wallace v Kam, this article considers and evaluates the law of causation in the specific context of a medical practitioner’s duty to provide information to patients concerning material risks of treatment. To supply a contextual background for the analysis which follows, Part II summarises the basic principles of causation law, while Part III provides an overview of the case and the reasoning adopted in the decisions at first instance and on appeal. With particular emphasis upon the reasoning in the courts of appeal, Part IV then examines the implications of the case in the context of other jurisprudence in this field and, in so doing, provides a framework for a structured consideration of causation issues in future non-disclosure cases under the Australian civil liability legislation. As will become clear, Wallace was fundamentally decided on the basis of policy reasoning centred upon the purpose behind the legal duty violated. Although the plurality in Rogers v Whitaker rejected the utility of expressions such as ‘the patient’s right of self-determination’ in this context, some Australian jurisprudence may be thought to frame the practitioner’s duty to warn in terms of promoting a patient’s autonomy, or right to decide whether to submit to treatment proposed. Accordingly, the impact of Wallace upon the protection of this right, and the interrelation between it and the duty to warn’s purpose, is investigated. The analysis in Part IV also evaluates the courts’ reasoning in Wallace by questioning the extent to which Wallace’s approach to liability and causal connection in non-disclosure of risk cases: depends upon the nature and classification of the risk(s) in question; and can be reconciled with the way in which patients make decisions. Finally, Part V adopts a comparative approach by considering whether the same decision might be reached if Wallace was determined according to English law.