The Role of Effectuation and Causation for SME Survival Amidst Economic Crisis

International Journal of Entrepreneurial Behaviour and Research. 2023. Vol. 29. No. 7. P. 1664–1697.

Osiyevskyy O., Shirokova G., Ehsani M.

Purpose – Economy-wide crises create major challenges for small and medium enterprises (SMEs). Existing studies emphasize the crucial role of contrasting behavioral strategies, effectuation and causation in SMEs’ adaptation to crisis conditions. Yet, prior literature concentrated predominantly on exploring the impact of effectuation and causation on firm performance rather than survival. The authors present and empirically test a theoretical model explaining how behavioral strategies affect SME survival during an economy-wide crisis under different levels of environmental dynamism. Design/methodology/approach – The authors propose a theoretical framework based on the combination of the effectuation literature and the emerging variance-based perspective on entrepreneurial actions. The theoretical model is then tested using a sample of Russian SMEs during a period of economic adversity and recovery (2015–2019). Findings – The empirical results reveal that causation reduces the probability of firm survival in dynamic environments, while effectuation increases the chance of survival irrespective of the state of the environment. In a nutshell, the study provides evidence that the effectuation logic serves a viable way for SMEs to increase the chances of survival through the economic shock and subsequent recovery period. Originality/value – For the first time in the literature, the authors demonstrate the role of behavioral strategy (effectual and causal) as a crucial antecedent of SME survival in the short and medium term, particularly during an economy-wide downturn. Furthermore, the study demonstrates the power of variability-based theorizing for explaining and predicting the survival/failure implications of entrepreneurial actions. Keywords Effectuation, Causation, SME, Survival, Crisis Paper type Research paper

Keywords: SME, Crisis, survival, Effectuation, Causation