Innovation in large corporations: a development of the rudimentary theory of effectuation.

Svensrud, Erik ; Asvoll, Havard

INTRODUCTION

"Prediction is very difficult, especially about the future." These words were made famous by the Danish physicist Niels Bohr (1885 - 1962), but it is not only in physics that prediction has been a subject of interest. For business in general (Davis & Karim, 2008; Jaimovich & Rebelo, 2009), and innovation processes in particular (Christensen, Anthony, & Roth, 2004; Tellis, 2006), being able to predict the future is regarded as an essential capacity. The underlying logic is rather simple; if you know how the future will evolve, you can gain the upper hand over competitors, and as a result, success is a probable outcome (Christensen & Raynor, 2003). Without stating whether prediction is possible in absolute terms, it has been proposed that prediction today is even harder to perform than before (Sarasvathy, 2001). One prominent argument for this is the fact that "business all over the world is becoming more free-market oriented and more entrepreneurial" (Sarasvathy, 2001: 244). Consequent difficulties in prediction have led to the development of a reciprocal theory to the well established strategy of predictive rationality (Kotler, 1991), namely effectuation. The rationale of effectuation is that to the extent to which we can control the future, we don't have to predict it. When following an effectuation process, focus is concentrated on the given set of means, rather than striving to achieve a particular effect. However, this theory has been developed almost entirely from the entrepreneurial perspective and little has been done to develop this theory so that it accommodates innovation in large corporations. Recognizing this point, Dew & Sarasvathy, (2002:20) have argued that: "One of the more fertile areas for research based on the theory of effectuation will involve large corporations and the commercialization of new technologies that they create"

Motivated by the rudimentary theory of effectuation this paper aims to support the evolution of this theory such that it encompasses the perspective of large corporations and their innovations. In particular the paper aims to develop a new model of effectuation theory through examining the question of whether innovation managers in large corporations should use effectuation strategies in their innovation projects, and if so, how they should be used. Further the influence of tacit knowledge and time on innovation projects is also investigated as these are posited as elements influencing effectuation theory.

We believe that this research will contribute to a better theoretical understanding of the effectuation processes in innovation and entrepreneurial management in large corporations. The models presented will help innovation managers to better understand the nature of effectuation, thereby improving their ability to manage in their innovation projects. The outcome of this process is a model for innovation projects which gives the value of effectuation as a function of time. In addition, this function is compared to the contrasting theory of causation, which rests on the logic of prediction. A comparison to the employment of effectuation processes for a standalone entrepreneurial start-up, where the advantages of effectuation processes already has been proposed (Dew & Sarasvathy, 2002; Sarasvathy, 2001), will also be presented. Based on this model it is suggested that effectuation processes are of significant importance for large corporations. However, in large corporations, according to the model, the intermixture of causation processes should be higher, and the point of time where causation processes are more valuable than effectuation processes occurs somewhat earlier in the growth of an opportunity than for an entrepreneurial start-up. Moreover, large corporations should promote and utilize tacit knowledge held by the employees, as a driving force for opportunity creating. In addition, we propose that gut feeling should be internalized and developed when innovation managers in large corporations evaluate opportunities. Finally, in innovation projects, time should be managed in a more subjective manner than when operating production to ensure optimized growth conditions for the opportunities, and the challenges concerning timing can be overcome by launching more opportunities to the market, but in a cost efficient way.

There now follows a presentation of a theoretical framework covering essential topics. Then, a presentation and argumentation of the socio dynamic model chosen is given. Finally, a discussion regarding the fundamentals behind effectuation theory and some subsequent concluding remarks including tentative propositions for further research will be presented.

THEORETICAL MOTIVATION AND REFLECTION

A theoretical foundation is needed to assure a thorough understanding of the concepts and topics presented later in this article. The framework and the topics presented here are a result of theoretical reflection. Moreover, we are trying to support some gaps and links between the literature of strategic management for large corporations and effectuation theories within the field of entrepreneurship which indicate potential for theory development. What we found was that the majority of previous studies and theories concerning effectuation and opportunities were researched from an entrepreneurial perspective. Even though propositions for the role of effectuation processes have been advanced at the level of the firm (Sarasvathy, 2001) and it has been stated that "effectuation is not just for small, start up firms--it can be applied to large firms and economies as well" (Dew & Sarasvathy, 2002: 19), little research has been conducted in relation to determining how effectuation processes effects innovation in large corporations (Dew et al., 2002).

The link between corporate management strategy and effectuation is often not considered, because a key feature in the research emphasizes the advantages of the analytical separation between invention and commercialization (Teece 1988) or between exploration and exploitation (March 1991), even though it is realized that the two functions cannot be empirically separated (Teece 2006: 1137). Empirical studies are rare, but there exists models which theoretically state that entrepreneurial opportunity-seeking is at the same time also strategic behavior with the aim of value creation (Ireland, Hitt, & Simon 2003; Ramachandran, Mukherji, & Sud 2006). Also Meyer & Heppard (2000) remark that the two fields are mutual constitutive and inseparable, since the research results of the one cannot fully be understood without the other (Barney & Arikan, 2001). Hence, entrepreneurially orientation is not just about sporadic periods of action; rather it needs to be a regular and systematic part of a firm's behavior (Smith & Gregorio 2000; Ireland, Covin, & Kuratko, 2009). The underlying logic is that entrepreneurial actions and strategic actions can independently contribute to value creation, and they can contribute even more when they are integrated. In summary, even though there is a general agreement regarding the positive effects entrepreneurship has on firms' efforts for creating wealth (Lyon, Lumpkin & Dess 2000), it seems that the intersection between these two research fields has been largely left uncovered. However, Wiltbank, Dew, Sarasvathy and Read (2009) have formulated some connections on how expert entrepreneurs use effectual logic to conceptualize the creation of new markets, i.e. they do not give the particulars about how managers in larger enterprises might use strategies of effectuation. This research is linked to the Schumpeterian tradition focusing on exploring the relationship between marked structure and innovation, and is not related to internal decisions within strategy management.

In lack of established research, we discuss two areas of the management strategy literature that intersect in a particularly interesting way with the literature on effectuation theory. Integrating the notions of tacit knowledge, gut feeling, dynamic capabilities and time into research on effectuation would add an important dimension to the effectuation theory literature and provide a useful and interesting way of explaining the role of managers involved in effectuation at different levels of analysis. We are not arguing that these are the only, or even the best, connections. Our goal is to show that there are important synergies between the two literatures that can contribute to our understanding of effectuation in strategic organizations. This can strengthen one interesting contribution to the theory of effectuation, i.e. that managers in large firms also use effectual strategies and tacit skills in a context where most managers are familiar with prediction.

We would like to increase the sharpness and the focus with regard to the managers' understanding and their use of the tacit and dynamic nature of gut feeling and time. These are elements which we consider to be important but relatively unexplored and under-communicated in the research on effectuation.

Furthermore, during this reflective work, two additional sub-questions came into being. These are: "how does the aspect of time affect innovation in large corporations?", and "how does the aspect of tacit knowledge affect innovation in large corporations?" These two sub questions give an interesting insight into both the main question and the theory of effectuation as a whole.

Even though it has been stated that tacit knowledge is a very important element of opportunity processes (Nonaka & Takeuchi, 1995), little has been done in order to explore how this knowledge can be utilized for large organizations to improve their innovation processes, and even less has been discussed with regards to intertwining this with theories of effectuation. In conformity with this, literature on how the aspect of time affects opportunity practice in large corporations are scarce, even though the importance of this interlink has been demonstrated in multiple studies (Harryson, 2005; Stalk Jr, 1988).

If the claim that ordinary management effectiveness is not the only source of superior entrepreneurial performance and competitive advantage in large corporations, then it is possible to assume that there is a significant rare, tacit, non-imitable and intangible skill which has the potential to support entrepreneurial management and effectual skills. One important implication from this inference is that the managerial skills of gut feeling and timing are difficult to obtain, imitate and apply, and may be a very important strategic issue. Altogether, this sums up into the four topics of opportunities, effectuation, tacit knowledge, and the aspect of time.

Opportunities

The term opportunity, in the entrepreneurial context, has been objected to a vast number of definitions but there is still little agreement to be found concerning its nature and definition. (Hansen & Shrader, 2007). Since 1990, four articles have worked to find consensus concerning the term (Hansen & Shrader, 2007; Kirzner, 1997; Short, Ketchen Jr, Shook, & Ireland, 2010; Venkataraman, 1997). One of the most dominating definition of opportunity is the one presented by Eckhardt and Shane (2003: 336): "situations in which new goods, services, raw materials, markets and organizing methods can be introduced through the formation of new means, ends, or mean-ends relationship." Similar to how Alvarez and Busenitz (2001) think of entrepreneurship theory, finding a common definition of opportunity is not the end, but rather the means to an end. A large number of definitions say something about the importance of opportunities, or as formulated by Short et al. (2010: 1) "without an opportunity, there is no entrepreneurship."

Historically, there have been two dominant views of the opportunity construct: the discovered and the created (Alvarez & Barney, 2007). As proposed by Shane (2000), these two different views are most probably a continuation of the legacy between the two dominant, and distinct, fundamental entrepreneurial theories of the Schumpeterian framework of creative destruction (Schumpeter, 1942) and the Austrian Economics of market disequilibrium (Kirzner, 1973). The core of creative destruction can be described by entrepreneurship as the result of introducing new opportunities to the market, thus bringing the market into disequilibrium. Whereas the Austrian economics, lead by Kirzner (1973), propose that the role of the entrepreneur is finding "holes" in the market equilibrium, hence bringing the market from disequilibrium to equilibrium. Thus, opportunity creation can be seen as a Schumpeterian approach, where the entrepreneur creates opportunities; opportunities which are not already present. On the other hand, opportunity discovery can be understood as opportunities that already exist, and the role of the entrepreneur is finding these. Previous research about the topic has comprised risk and uncertainty into the different views of opportunity. Here, risk refers to a situation where estimates for the probability can be achieved, whereas uncertainty refers to situations where probabilities cannot be found (Knight, 1921). This considered, the different views of opportunities can be defined as: opportunity creation--"where the entrepreneur creates both supply and demand"; and opportunity discovery--"where a known supply services an unknown demand" (Short, et al., 2010: 19). In addition, following this model, a third view of opportunity has also been proposed. This view, which can be seen as a nuance of the view of discovery, is called opportunity recognition--"where known products are matched with existing demand" (Short, et al., 2010: 19). Here, the term "product" is used in a wider context, including elements of products such as goods, services, raw materials, markets and organizing methods. Miller (2007) proposes that for opportunity recognition, risk is bounded to asymmetric information and unpredictability. For opportunity discovery processes, where search is the essential entrepreneurial activity, risk is bounded to unknownability. Whereas for opportunity creation, where the entrepreneur has a causal role in bringing the opportunity into being; the risk is constrained by uncontrollability. The concept of effectuation is located within the perspective of creation.

Effectuation

In a broader sense, effectuation can be seen as a philosophy. It can be described as logic for understanding the future as something unpredictable. However, by enacting on this unpredictable future, control can be obtained. In entrepreneurial literature, effectuation is seen as a useful logic for entrepreneurs with limited resources (Sarasvathy, 2001). By definition "effectuation processes take a set of means as given and focus on selecting between possible effects that can be created with that set of means" (Sarasvathy, 2001: 245). Sarasvathy exemplifies this by using the case of an artist. By following an effectuation process, the artist can paint anything he or she wants (possible effects), given the means of a blank canvas and some paints (set of means). This given, the fundamental of this theory is rudimentary, based on a core of four principles (Sarasvathy, 2001):

1. Affordable loss rather than expected returns: An effectuator's object is to create prospective options rather than maximize returns in the present.

2. Strategic alliances rather than competitive analyses: Effectuators attempt to reduce uncertainty and remove entry barriers by following this principle.

3. Exploitation of contingencies rather than exploitation of preexisting knowledge: Giving an unpredictable future, preexisting knowledge is of less value than what exploitation of contingencies involves.

4. Controlling an unpredictable future rather than predicting an uncertain one: Again, giving an unpredictable future, focusing on the means of controlling the future is a better choice than doing predictions of an unpredictable future.

Effectuation is not in principle meant as a replacement for predictive rationality, but exists in parallel to it. Both rationality and effectuation are necessary for the undertaking of decisions and action (Dew & Sarasvathy, 2002). A constraint with today's rudimentary theory of effectuation is its point of view. The theory has been developed more or less with respect to the entrepreneurial position.

On the contrary, causation is the theory of following predictive rationality. "Causation processes take a particular effect as given and focus on selecting between means to create that effect" (Sarasvathy, 2001: 245). To proceed with the artist example, by following a causation process, the artist has received instruction on what to paint (particular effect) and he or she can then select between different canvases and paint (means to create that effect) to create that painting.

There has been research performed to support the rudimentary theory of effectuation. One of the most supporting studies is a comparison between 27 expert entrepreneurs and 37 MBA students (Dew, Read, Sarasvathy, & Wiltbank, 2009). Here, both groups were asked to think of a given case about building a new venture around an imaginary product. The results showed that the two groups were strongly and starkly opposed to each other considering their reasoning. The expert entrepreneurs followed effectual thinking whereas the MBA students used textbook procedures in causational thinking.

A variety of published articles and books focus on the logic of effectuation in depth. For example Sarasvathy (2001) have laid out fundamental assumptions and important theoretical principles and concepts. Further research has been done with regard to the dynamics and transformative aspects of effectuation (Sarasvathy and Dew 2005; Sarasvathy, Dew, Read and Wiltbank 2010). The logic of effectuation is also elaborated upon and applied to various degrees in such areas as expert entrepreneurs (Read and Sarasvathy, 2005; Sarasvathy 1998; Dew, Read, Sarasvathy and Wiltbank 2009), opportunity creation (Alvarez and Barney 2007; Miller 2007; Sarasvathy, Dew, Velamuri and Venkataraman 2002), entrepreneurial education (Fiet 2000), corporate entrepreneurship and (top)management strategies (Augier and Sarasvathy 2004, Sarasvathy and Kotha 2003); Pacheco, York, Dean, and Sarasvathy, 2010). This is an inconclusive and short overview of the written work of effectuation in order to identify the logic as an emerging, multifaceted and empirical persuasive theme.

Tacit Knowledge

Tacit knowledge is a broad concept of knowledge generally referring to the fact that some knowledge is profoundly actionable and harder to externalize than other. There exists many definitions of tacit knowledge which differ with regard to the degrees of tacitness and capacity to articulate, its embodied or cognitive nature, and its subjective (individual, I) or objective (collective, tradition based) dimensions. The tacit aspects of individual knowledge are not necessarily publicly available except as embodied in people to be hired, and the tacit aspects of collective knowledge are woven into the very fabric of an organization and cannot easily be imitated. This is a valid general statement of tacit knowledge, but there is not enough space to handle the myriad of all of these definitions in greater detail (see Gourlay 2006 for further elaboration). However, it seems relatively clear that tacit knowledge has shown to be of great importance for opportunities and innovation. For example in a research done by Nonaka and Takeuchi (1995), where they looked at why Japanese corporations have a talent for innovation, their conclusion was that Japanese corporations were more inclined to value tacit knowledge compared to their American counterparts. It seems like a supported claim that tacit knowledge is made visible through its application and may then be utilized in the innovation process (Leonhard and Sensiper 1998). Howells (1996) emphasizes that learning is particularly crucial in relation to acquiring tacit knowledge, which may explain why tacit knowledge is often explained as an intangible asset or hard to imitate dynamic capability. Research show that tacit knowledge is gained throughout the innovation and production chain of a company. In fact, several authors assume that tacit knowledge is a unique strategic resource and a source of competitive advantage (Goranzon and Florin, 1990; Goranzon, 1993; Black and Boal, 1994; Nonaka and Takeuchi, 1995; Howells, 1996; Teece, Pisano, and Shuen 1994, 1997; Choo, 1998; Baumard, 1999; Scharmer, 2000; Ambrosini & Bowman, 2001; Johannessen et al., 2001), even though they have different views on how this should be done.

Michael Polanyi is, by a majority of authors, regarded as the founder of tacit knowledge (Ambrosini & Bowman, 2001; Nonaka & Takeuchi 1995). He has described tacit knowledge as a reconsideration of human knowledge by starting from the fact that "we can know more than we can tell" (Polanyi, 1967: 4). On the contrary, explicit knowledge is knowledge that can be externalized in a formal language (Nonaka & Takeuchi, 1995). Due to the dynamic character of tacit knowing (Polanyi 1962), the perspective of tacit knowledge is conceptualized as tacit knowing. The rationale behind this alteration can more precisely be defined by Polanyi (1969: 132) where he states that "knowledge is an activity which would be better described as a process of knowing". One example in explaining the nature of tacit knowledge is the blind man and his rod (Polanyi, 1962). A blind man using a rod is not focused on the stick, but the meaning of what the rod touches. The rod itself is internalized and a part of the action in gaining the explicit knowledge of the physical reality. When the person focuses on his rod, he is no longer using it to get meaning from the physical world. A true understanding of the rod-in-action can only be gained from using it. The proficiency needed here cannot be fully articulated or communicated in a requisite manner, it has to be experienced and executed. The most important aspects of tacit knowing are shown by our skilled performance, it is displayed and manifested in what we do. Hence, tacit knowledge's modus operandi is not always to be ordered, operationalised, converted and externalized (cf. Nonaka & Takeuchi 1995), but to be the other actionable side of theoretical knowledge. Given the actionable and sometimes non explicit nature of tacit knowledge, finding a way to convert this knowledge is important for corporations who want to capitalize on it (Nonaka, Toyama, & Konno, 2000). In brief, the interaction and conversion between explicit knowledge and tacit knowledge can be achieved according to the SECI process. This process proposes that there are four modes of knowledge conversion: socialization; externalization; combination; and internalization. The socialization mode implies that tacit knowledge can be converted to new tacit knowledge through shared experiences and socialization. An externalization process implies articulating tacit knowledge into an explicit form, allowing it to be shared to others. This is a valuable process in terms of laying the foundations for new knowledge, or to cite Nonaka et al. (2000: 9) "when tacit knowledge is made explicit, knowledge is crystallized". The other two modes in the SECI model are about converting explicit knowledge into new explicit knowledge (combination) and embodying explicit knowledge into tacit knowledge (internalization).

While Nonaka and Takeuchi (1995) seem to propose a main strategy; that tacit knowledge should be made explicit through a different mechanism for exchanging knowledge (by using metaphors, analogies, models etc.), it is important to be aware that not all tacit knowledge can be made explicit and externalized in this manner.

This is an understanding of tacit knowledge which is also shared by Johannessen's (2006; Asvoll and Widding 2011) view of tacit knowing. Tacit knowing can be described by its three aspects: the propositional knowledge; the knowledge of skills; and the knowledge of familiarity (Johannesen 2006). According to Johannessen (2006: 268), characteristics of propositional knowledge are that "our knowledge must be capable of formulation in some language or other", and that "our linguistically articulated knowledge must be supported by experience or be proven by formal means". Thus, this tacit knowledge ought to be articulated in some way. For the second dimension, the knowledge of skills, the actionable aspect of knowledge is taken into account. To exemplify this, Polanyi (1959) points out that an expert within the field of medicine not only needs special connoisseurship for identifying particular specimen, but also need special skills for examining. The aspects of art or craft have also been recognized as part of this knowledge. The last aspect of tacit knowledge is the familiarity based, which is founded on firsthand experience. Finding analogies and likenesses between various settings and situations are qualities that characterize this dimension of tacit knowledge. This perspective (Johannessen 2006; Asvoll and Widding 2011) states that all our knowledge (tacit and explicit) can be exercised in practice, and that there's a lot more to knowledge than fits into propositional or converted knowledge.

Hence, tacit knowledge can also be differentiated by its degree of tacitness (Ambrosini & Bowman, 2001). Here, the scope of tacit skills (Ambrosini (2001) proposes that the expression "tacit knowledge" should be replaced by "tacit skills", hence skills implying doing) is dispersed between two anchor points, from easily communicated to totally unavailable skills in terms of articulation and theorization. In-between these anchors, the tacitness can further be categorized into "tacit skills that can be imperfectly articulated" and "tacit skills that could be articulated" (Ambrosini & Bowman, 2001: 816).

Gut Feeling

A special form of tacit and displayed knowledge, gut feeling, will now be handled in greater detail. Gut feeling is a vague concept, susceptible for explanation. Though vague in definition, it is an important property for entrepreneurial activity (Busenitz & Barney, 1997; Hills & Shrader, 1998). The concept of gut feeling is in a close relation with both intuition (Khatri & Ng, 2000), and biases and heuristics (Maqsood, Finegan, & Walker, 2004). Gut feeling can be seen as a non rational decision process, but as a senior manager of a computer company noted:

Although people think that 'gut feeling' is not a rational decision making method, many people fail to realize that 'gut-feeling' is actually a sub-conscious derivative of the accumulation of years of management experience. (...) It is, therefore, important that decision making be based on a combination of relevant information and 'gut-feeling'. (Khatri & Ng, 2000: 22)

The usage of gut feeling for making decisions is especially of great value in entrepreneurship. This is because entrepreneurs often hold limited information about their business idea (Gartner, Bird, & Starr, 1992) and their decisions can seldom be based on historical trends (Miller & Frierson, 1984). Adding to the fact that they don't have the luxury of becoming expert decision makers within a specific area (Gilmore & Kazanjian, 1989), and the uncertainty and complexity often typical of an entrepreneurial context, simplifying strategies for making decisions are needed. (Busenitz & Barney, 1997). This rationale for making entrepreneurial decisions can be justified by the concept of bounded rationality first introduced by Simon (1957). According to this concept, the human's cognitive abilities are limited by three factors: limited information sensing ability; limited information processing capacity; and limited information storage capacity (Simon, 1957). Thus, making optimal choices by employing a strict, rigid procedure of rationality is somewhat not possible. Hence, other means like heuristics and gut feeling, are ways to overcome these barriers, and still make a satisfactory decision (Krosnick, 1991).

Aspect of Time

"The driving force of our rapid innovation is the conviction that if we lose money we can always recover, but if we lose time we can't." (Harryson, 2005). These words, from the former chairman and founder of Sony Corporation, Akio Morita, point out the importance of the aspect of time in innovation practice. As a strategic weapon, time is as important as money, productivity, quality, and even innovation (Stalk Jr, 1988). Even though it is acknowledged that time is an important factor in innovation and opportunity practice, little literature is found in how this factor should be treated.

Objective time, also referred to as actual time, is the time measured with a standard clock (Hornik, 1984). In terms of strategy, Taylorism is one of the first theories conceptualizing objective time in labor processes (Littler, 1978). Taylor introduced this theory in the USA in the 1880/90s. The goal was to increase the efficiency of production, and he believed in the original stupidity of the worker (Littler, 1978). As a mean to reach this goal, he introduced very strict time frames for each task handled by the employees. In this way, time was then seen upon as something absolute. In contradistinction to this, subjective time is the time perceived by individuals (Hornik, 1984). This given, time can been seen upon as something relative. Eriksen (1999) refers to subjective time as linear in an elastic manner, or something cyclic. A subjective perception of time can be theorized and exemplified by Arthur Schopenhauer's theory that our perception of the time length of a day changes according to our age. For instance, one day for a boy aged ten is perceived twice as long as for one aged twenty (Eriksen, 1999). Some objectives, like achieving trust, cannot be reached within a certain timeframe. In this case, a given timeframe will be irrelevant. In an opportunity context it has been said, in contrast with Taylorism and the objective of speed and efficiency, that:

In today's working life, the speed of production and productivity is less congruent than ever before. In many relations, the inventiveness is far more important for productivity than the speed of production, and inventiveness requires generally another type of time economy than what you will find in time management. (translated) (Eriksen, 1999: 241)

In entrepreneurship theory, the aspect of time is found in close relation with the stages of growth for a new venture, and since 1962, there have been introduced more than 100 different models of business stages (Levie & Lichtenstein, 2009). According to Levie and Lichtenstein (2009), the most cited model is Greiner's (1972). Here, the most essential element in building a model of organization development is the age of the organization. Dependent on the growth rate of the industry an organization operates in, it will develop through five different phases: creativity; direction; delegation; coordination; and collaboration. This given, the model interweave time as a subjective element of the different phases of organizational growth. However, the approach of dividing organizational growth into different stages has been criticized with the argument that since company growth is a continuous process, dividing it into discrete phases is artificial (Baron & Shane, 2007). In opposition with the business stage view, where resources must be allocated, combined, ordered and sold/bought due to a time schedule in order to create a competitive advantage, the dynamic capability framework defines resources/capabilities as built over time and firm-specific.

Dynamic Capability View

Rudimentary efforts are made to identify the aspects of manager-specific dynamic capabilities that can be sources of competitive advantage. Dynamic capabilities are useful in confirming the origin of advantages and in explaining the capabilities and unique abilities of existing enterprises to respond to their rapidly changing environment (Teece et al., 1994, 1997). Even though such concepts are often viewed as outside the traditional boundaries of strategy, we consider that dynamic capabilities can be seen as an emerging and potentially integrative approach to understanding under-researched sources of competitive advantage and effectual strategies. We refer to the 'dynamic capabilities' approach in order to stress the theoretical foundation for how the firm/manager can be seen as utilizing tacit knowing, gut feeling and effectuation in the exploiting and renewing of existing internal and external firm specific capabilities/skills. The dynamic capability view emphasizes that dynamic capabilities of a firm depend on both its ability to identify strategic opportunities and its ability to change the structure of the firm to better exploit those opportunities (Teece et al, 2002: 92). Therefore, dynamic capabilities are the firm's ability in the processes of firm integration, reconfiguration, renewal, learning, and response mechanisms (Teece 2007). Examples of dynamic capabilities are product development, strategic decision making, and alliance management (Eisenhardt and Martin, 2000). This approach emphasizes the development of management capabilities, and difficult-to-imitate skills (for example organizational, functional and technological skills) in order to respond to events and create financial success. A central theoretical concern is that "maintaining dynamic capabilities thus requires entrepreneurial management " (Teece 2007: 1346), which involves understanding the knowledge dynamics that underpin capability development. In this way dynamic capabilities can help with overcoming the limits of modeling strategy, emphasizing the efficiency characterized by a static resource/knowledge based framework.

The effectuation framework does not explain how to sustain competitive advantage in large firms, hence it originally does not reflect upon how the entrepreneur/manager handles structural and organizational issues in order to achieve competitive advantage. The dynamic capability view can be seen to embrace several capacities and distinct skills; (1) to sense and shape opportunities and threats, (2) to seize opportunities, and (3) to maintain competitiveness through enhancing, combining, protecting, and, when necessary, reconfiguring the business enterprise's intangible and tangible assets (Teece 2007). Hence, there are different micro foundations of dynamic capabilities: the processes, procedures, organizational structures, decision rules, and disciplines (Teece 2007), which we cannot address in this paper. We recognize the importance of all these micro foundations and we believe they could fit well into the effectual framework, but due to space limits here we focus just on entrepreneurial management (dynamic) skills to sense and shape opportunities and the importance of strategic alliances.

The dynamic capability view focuses on the relation between competitive advantages and how the firms'/manager's idiosyncratic and difficult-to-trade capabilities are renewed and generated (Teece et.al 1997). For example, the manager can be more or less skilled to perform opportunity detection, creation and strategic alliances. In the dynamic capability literature there is substantial research on these issues; i.e. the decisions of strategic alternatives (Teece et.al. 1997), evaluations of ideas (Zollo &Winter 2002), the top management strategic decision making (Eisenhardt & Martin 2000), alliances with R & D institutions, external co-operation (Teece et.al. 1997) and learning network capabilities (Borch & Madsen 2007). A minor issue has been the nature or aspects of knowledge, even though Teece et al. (1994) were one of the first to raise the question about the potential benefits of tacit knowledge.

It is stated that often it is not possible to convert tacit knowledge to codified knowledge especially with regard to original skilled performance (Teece 1976,; Teece et.al. 1997), which may be executed by the managers gut feeling. Gut feeling can be considered as a tacit know-how capability which can mainly be displayed by skilled performance without in -situ being captured or translated into theoretical knowledge and knowledge bases.

Integrating effectuation, gut feeling, tacit knowing and dynamic capabilities may shed light on important common denominators. Four characteristics which denote the common denominators between these theoretical concepts may be that these are skills which rests on the subject/entrepreneurial manager, it's difficult to imitate, timing and actionable nature.

To stress the value that can arise from effectual innovation both gut-feeling, tacit know-how and dynamic capabilities share the same qualities, i.e. that there are some aspects with effectual decisions which are idiosyncratic, personal, difficult to trade, hard to imitate and intangible. Hence, these rare aspects carried by the entrepreneurial manager are of strategic importance, because any capability or skill which, due to its homogenous nature, can be replicated or bought and sold may not be strategic (cf. Barney, 1986). Also Porter (1996) claims that operational effectiveness (capabilities) is not essential to strategy.

Indeed, if tacit aspects such as gut feeling, dynamic capabilities and timing are interconnected with the execution of effectual skills, it follows that effectual strategies become profound strategic issues at the level of the firm/ entrepreneurial manager. Here, it's possible to clarify some of the distinctions between the firm and entrepreneurial manager. Teece (2007) states that dynamic capabilities reside in large measure with the enterprise's top management team, but maintaining dynamic capabilities thus requires entrepreneurial management. It may be that the entrepreneurial manager is deprived of the innovative opportunity unless the project has been initiated by the top management. It is also a potential problem that ambitious innovation champions do not possess networks and lacks the power to persuade organizational members to join the innovative project. Therefore it seems important to achieve a shared understanding and 'strategic fit' between top management and entrepreneurial management, if the effectual skills should result in competitive advantage.

This study's contribution is found in filling the theoretical gaps here stated, by building a theoretical model that can be conducive to enhance the understanding of opportunity practice, both at the level of research and at the level of the firm. The "building blocks" for the forthcoming discussion and model consist of this theoretical reflection, which contributes in terms of foundation and focus. These "building blocks" have been presented in previous sections, and they will henceforth be used to ensure more persuasive arguments and to eventually build a more robust theoretical model. A model founded on elements of socio dynamics, a procedure to be elaborated in the following section.

ELEMENTS OF SOCIO DYNAMICS

Before proceeding to the discussion, some explanatory descriptions of sociodynamics will be given. This said, "sociodynamics aims at providing a frame of theoretical concepts for designing mathematical models for a broad class of dynamical phenomena within human society" (Weidlich, 2005: 45). Modeling complex, non-linear social systems implies both challenges and rather large simplifications. Whilst keeping these limitations in mind, we will hereby take an experimental approach in describing some social dynamics pseudo mathematically. The rationale behind doing this is the fact that this will contribute in building a depiction of how the pillars of effectutation theory evolve over time. The principal result of this discussion will be found in the shape of a model, not in the underlying mathematical expressions. Further rationalization for this approach is the fact that "we need new insights into the factual microeconomic behavior of economic agents by methods of humanities, cognitive and social sciences, which are sometimes called 'experimental economics'" (Mainzer, 2009: 219). Furthermore, giving that the forerunner of modern socio dynamics, the Austrian economist Joseph F. Schumpeter (Mainzer, 2009), used this approach for modern entrepreneurship theories has shown the relevance of intertwining these elements.

As introduced, the biggest concern about using this procedure is the rough simplification involved here. The use of only two dependent variables, as to be explained, is a simplification of the reality. One of the major pros however, is found in how the arguments are structured and built. By using this kind of model building, this will be a rational exercise examining all the contributions and testing each one of them, both for improvement and validation. Hereby, we propose that as a starting-point for developing an existing theory into new areas, this method is purposive.

DISCUSSION

For the forthcoming discussion, two different dimensions will be employed. Hence value of opportunity/innovation practice (v) in a large corporation (vertical axes), and subjective time (t) of internal venture growth (horizontal axis). These dimensions are made mathematical dimensionless where t spans from 0 (where an opportunity comes into being) to 1 (a fully integrated and exploited opportunity), and v spans from 0 (no value for the opportunity practice) to 1 (maximum value for the opportunity practice).

Affordable Loss

The principle of affordable loss is to choose prospective options rather than maximize returns in the present. The essential here is then to make choices that you can afford to lose, and that will create more options for the future. In innovation processes, some costs will always be present when doing choices. These costs however, will be quite small in the beginning of a new venture compared with costs related to choice making in later stages. This can be showed by the resource commitment versus time graph which says that the resource commitment, here referred to as cost (c), increase proportional with the time spent for a venture (Tidd & Bessant, 2009). As a consequence, it is reasonable to assume that the value, following the affordable loss principle, will decrease proportionally, from maximum value at t = 0, to the time spent for a venture, due to the growth of costs. In mathematical terms, this can be converted to the following formula: c(t) = t, and v1(t) = 1-t, which denotes the opposite of the growth of the resource commitment. Although the principle of affordable loss in creating more options for the future, models like the innovation funnel (Tidd & Bessant, 2009) propose that in an innovation process the result of making a choice is a decrease in the scope of choices.

According to the funnel analogy, maximum choices can be made at t = 0, and when the opportunity is fully integrated and exploited, the relative number of choices can be approximated to zero. This effect has also been referred to as path dependency (Alvarez & Busenitz, 2001). The value of following the principle of affordable losses is directly related to this. The reason for this is that it will be less valuable looking for new choices when the absolute number of choices you can choose from decreases for each choice completed. In mathematical terms this is equal to: v2(t) = 1-t. The theoretical reflections in this study may evince support for the affordable loss principle. When the firm can afford to lose and end innovation project before they get too expensive, then they may be more able to preserve and develop unique tacit firm-specific skills which are a main source of competitive advantage in accordance with the tacit knowing view (Asvoll & Widding 2011) and the dynamic capability view (Teece et.al 1997).

Summing up the contributions from v1(t) and v2(t) gives the following expression, v(t) = v1(t)+v2(t) = 2-2t, as here shown graphically:

[FIGURE 1 OMITTED]

Strategic Alliances

It has been stated that there are two mechanisms for how you can extract value from a strategic alliance: by bargaining over economic benefits from successful execution of joint tasks; and by internalizing skills from partners (Hamel, 1991). In this respect, a following in how these mechanisms evolve; from an initial opportunity to a fully integrated competitive advantage, will here be conducted. To evaluate the first mechanism, bargaining over economic benefits, we will look into how bargain power between two strategic alliance actors develops dynamically. In brief, "bargaining power at any point in time with an alliance is, cetrisparibus, a function of who needs whom the most" (Hamel, 1991: 100). The rationale behind this statement is; if you have little to offer, you will be less attractive, thus being an object for lower bargain power, than if you have much to offer. Transferring this to the development of a new opportunity in a large corporation, the internal venture will most probably have more to offer, and as a result of this, obtain more bargain power in the latter phases than in the early stages. This can be supported by entrepreneurial research that has shown how relatively small firms have a much larger interest in creating strategic alliances than relatively larger firms have (Gomes-Casseres, 1997). One particular reason for this is that small firms can then build public confidence and a good reputation just by being in alliance with a large established actor (Stuart, 2000). However, by being an internal corporate venture, you will profit from the already established reputation of the corporate, and if the corporation is large enough, it is reasonable to approximate this reputation to be constant, regardless of the internal corporate venture's actions. Mathematically, this can be denoted, given an average reputation of the firm, by the following: v1(t) = 0.5. The evolvement of the second mechanism is more dynamic in nature. Here, the value extracted is found in internalizing the skills from the partners. Given skills as the practical aspect of knowledge (Polanyi 1969; Asvoll & Widding 2011), the extraction will then be in attracting and internalizing unknown valuable knowledge from the alliance. As this internal venture grows, more knowledge, both tacit and explicit, will be gained, hence building the internal knowledge reservoir and achieving competitive advantage (Widding, 2005). Based on this increase of knowledge reservoirs, it is reasonable to believe that the value of strategic alliances for the internal venture will decrease proportionately with the growth. Mathematically, this can be described by the following: v2(t) = 1-t. To summarize, the value of a strategic alliance of an internal venture in a large corporation is the sum of bargaining over economic benefits, as proposed to be constant over the growth, and internalizing the skills from the partners, as proposed negatively proportional with the growth. Mathematically, this can be described by the following: v(t) = v1(t)+v2(t) = 1.5-t, as here depicted:

[FIGURE 2 OMITTED]

One way of validating this is by looking into previous research. This has shown that there have been alliances formed at higher rates in emergent-stage markets than in mature-stage markets (Eisenhardt & Bird Schoonhoven, 1996), and that "young and small firms benefit more from large and innovative strategic alliance partners than do old and large organizations" (Stuart, 2000: 791).

Exploitation of Contingencies

As stated in the theory section, exploitation of contingencies should be considered rather than exploitation of preexisting knowledge when the future is unpredictable. To evaluate if, and when, this priority is valuable for a large corporation, finding the underlying elements for this statement has to be done. We propose that the two characteristics which constitute this statement are the aspect of knowledge and the aspect of flexibility. Preexisting knowledge is important as the counterpart of exploiting contingencies, and will hereby be evaluated with respect to internal opportunity growth. As mentioned as one of the rationales behind evaluating the value of strategic alliances, we will here consider the growth of the knowledge reservoir (Widding, 2005). But instead of acknowledging the knowledge reservoir as a proportional growth from something next to nothing at the origin of an opportunity, the argument here is that the growth of an opportunity in a large corporation already has a head start compared to their entrepreneurial counterparts. The reason for this is that a large corporation will most probably pursue opportunities that are found within their already present activity or strategy, or at most daring, at the rim of this. This supports the argument that if a large corporation chooses to pursue an opportunity, some knowledge and core competencies (Prahalad & Hamel, 1990) concerning the opportunity would most probably already be present in the corporation. This head start is here expressed by a mathematical factor of 0.5 into the mathematical knowledge function: v1(t) = 0.50.5t. This shows that the value of exploiting contingencies due to the elements of knowledge and competencies is initially quite high, before, as a consequence of building these reservoirs and capabilities, the value will decrease. The second characteristic, the aspect of flexibility, is concerning the ability to exploit contingencies. In juxtaposition to the rationale behind evaluating affordable loss in large corporations, the path dependency resulting from pursuing an opportunity (Alvarez & Busenitz, 2001) will decrease flexibility over time. Thus, this leads to that the maximum flexibility of an internal opportunity pursuit is found initially. But, in contrast to an entrepreneurial start-up, this flexibility is rather dampened due to the corporate strategy, which puts restrictions on the extension of the flexibility. This dampening is here denoted mathematically with the starting point of 0.5 (and not 1, as the case of no restrictions to the initial flexibility). Hence, giving the flexibility function of: v2(t) = 0.5-0.5t. Combined, this gives the function: v(t) = v1(t)+v2(t) = 1-t.

[FIGURE 3 OMITTED]

The hazard of focusing on preexisting knowledge in an opportunity setting also concerns about bringing in an expert too early when pursuing an opportunity. The reason for this is the expert's natural stance of defending his/her reputation and preexisting knowledge.

Control of an Unpredictable Future

Sarasvathy's logic for controlling an unpredictable future rather than trying to predict the future is: "to the extent that we can control the future, we do not need to predict it" (2001: 252). In our perspective, the aspect of controlling the future and predicting the future are not contradictory, they are on equal footing. The difference here is the kind of opportunities they are approaching: the created; or the discovered (Shane, 2000). The discovered approach is related to the Austrian Economic School of finding "holes" in the market equilibrium (Kirzner, 1973). Prediction, we propose, is a pro active way of finding these future "holes", thus an activity only accountable for the opportunities to be discovered.

Controlling the future however, is about making (and taking) a position before it is possible to predict and thereby creating an opportunity which in the next turn contributes to disturbances in the market equilibrium. This said the approach of controlling the future is only accountable for the opportunities to be created. If making an assumption that the created opportunities are of equal importance as the discovered, we can hereby propose that the value of controlling an unpredictable future, confined to the opportunity aspect, accounts for half of the total value of opportunities regardless of time. In mathematical terms this gives the function: v1(t) = 0.5. In addition, we will here suggest a dynamic contribution to this forth element of the rudimentary theory of effectuation, which we have chosen to call the 500 pound effect.

So by growing bigger in a certain market you will gain more power, which in next turn will contribute to an increased ability to control this market in the future. However, by already being present in a large corporation, you will have a head start. This head start will here be presented as a factor of 0.5, and the value of control will grow with the opportunity, thus giving the following equation: v2(t) = 0.5+0.5t. Together, v1(t) and v2(t) account for the value of controlling the future: v(t) = 1+0.5t, as here depicted:

[FIGURE 4 OMITTED]

Note the upward trend of the value of controlling an unpredictable future due to the opportunity growth. This is an opposite trend compared to the three other figures earlier presented, and contributes to the rationale of employing effectuation processes in larger corporations, which weakens Sarasvathy's (2001) link between the effectuation's given set of means and the underlying logic of control. The underlying assumption for the value of controlling was the simplification in the valuation of the discovered and created view of opportunities. Whereas the present theories (Christensen, et al., 2004) are backing prediction and the value of discovered opportunities, we will hereby propose that the value gained from created opportunities can be even more valuable. The rationale behind this proposal starts with Knight's definition of risk and uncertainty (1921). The role of the entrepreneur is to change situations from uncertainty to risk. By doing this, an entrepreneur can capitalize on taking decisions based on quantifiable probabilities rather than non-quantifiable probabilities (Miller, 2007). According to Short (2010), for created opportunities, both supply and demand is unknown, whereas for discovered opportunities, only the demand is unknown. Thus, the value added from entrepreneurial activities will then be higher for opportunity creation than for opportunity discovery. Moreover, earlier research has shown that exploitation of enacted opportunities is more likely to be a source of sustained competitive advantage than exploration of those formed by imperfections to pre-existing industries or markets (Barney, 1986). This given, the line concerning the aspect of opportunity could be raised due to the sometimes higher valuation of created opportunities. However, as a result of absent evidence and the simplicity of the model, this has not been conducted in this study.

Building a Model

The four principles which constitute the rudimentary theory of effectuation have now been evaluated. The result of this will now be combined into one model which will depict the value of using effectuation processes when pursuing an opportunity within a large corporation. Before presenting this model, the underlying assumptions will here be summarized. Because, as stated earlier in the discussion, this is a rather simplified model, so knowing the assumptions is crucial to be able to evaluate its constraints.

1. All four principles which constitute the effectuation theory are weighted equally.

2. The underlying evaluations of these principles are treated as either nonexistent, constant, or as a 1st order function of the opportunity growth.

3. The underlying evaluations of these principles are treated only between the two conditions of: the point in time where an opportunity comes into being; and at the point in time where the opportunity is fully integrated and exploited by a large corporation.

4. Effectuation processes and causation processes have been juxtaposed as a dichotomy to enable clearer theoretical exposition (Sarasvathy, 2001).

The forthcoming model is a sum of the four principles evaluated by value between 0 (no value) and 1 (maximum value), and according to opportunity growth from 0 (where an opportunity comes into being) and 1 (a fully integrated and exploited opportunity):

[FIGURE 5 OMITTED]

Here, the result is depicted showing value of both effectuation and causation processes. According to assumption IV, the value of causation follows is calculated: [v.sub.c](t) = 1-[v.sub.e](t), where the subscript c and e denotes causation and effectuation respectively. An interpretation of this figure shows that the value of following effectuation processes is greatest at the initiation of the opportunity. During the growth of the opportunity, the value of these processes will decrease, and as a consequence of this, following causation processes seems more adequate. At the intersection between these lines, which occurs almost halfway through the lifespan of an internal opportunity, there is a shift where the management of the opportunity should change strategy, from explorative effectual activities to more predictive causation based activities. This shift can also be interpreted such that it points out where the corporation should change the manager for the opportunity, from an effectual entrepreneurial type to a causational predictive controller type. Even though some persons hold both these characteristics, it might be useful for a corporation to at least evaluate such a shift of the opportunity manager at this point. To give further insight of this model, a comparison of how this model would be without the influences a large corporation have on an opportunity will here be given. In order to show this, modification concerning the effects of: the established reputation; the present knowledge and competencies; the dampening of flexibility; and the 500 pound effect, within a large corporation have to be adjusted to an entrepreneurial context as here depicted:

[FIGURE 6 OMITTED]

A comparison between these two figures shows two distinct differences, hence the higher initial value of effectuation and the later intersection point. This gives that it is more valuable for an opportunity in a start-up company to utilize effectuation processes in the early stages than the case of an opportunity in a large corporation. In addition, a start-up company should employ effectuation processes (as the main focus) for a longer period of time than for an opportunity in a large corporation. In spite of this, the differences are just slight, which means that the opportunity strategy for a large corporation should not differ too much from the strategy of a start-up, and vice versa. An interesting remark is that the 500 pound effect actually makes the two models, the start-up's perspective and the large corporation's perspective, more equal.

Aspect of Tacit Knowledge

The difficulties of being big and innovative at the same time have both been indicated by earlier research, "it [sustained product innovation in large, mature organizations] occurred in spite of the system, not because of it" (Dougherty & Hardy, 1996: 1121). To overcome these difficulties, we believe large corporations should better preserve the tacit knowledge, or better be aware of the actionable aspect of tacit knowing (Polanyi 1969; Asvoll & Widding 2011), held by their employees. By identifying those who have the best qualities of tacit knowing, especially regarding the dimension of skills, and giving these individuals the chance (or even incentives) to pursue opportunities, innovation can then happen because of the system, not in spite of it. The theoretical reflection stresses the importance of competent entrepreneurial managers, having the 'right' gut feeling. Experts however, could be seen as too defensive, not willing to broaden their scope for new inputs. In addition, tacit knowing in wielding both chaos and control were seen as a valuable skill. It is reasonable to presume that the recognition of these modes of tacit knowing are associated with the opportunity desired. If you hold the right gut feeling and a willingness to operate in chaos, we assume you will be more likely to create opportunities, rather than discovering them. The underlying argument for this is the Weickian-Marchian-Knightian problem, stated by Sarasvathy and Simon (2000) as:

   Where do we find rationality when the environment does not
   independently influence outcomes or even rules of the game (Weick,
   1979), the future is truly unpredictable (Knight, 1921), and the
   decision maker is unsure of his/her own references (March, 1982)?

By using the rationale of tacit knowing obtained by the employees, a large corporation can then be able to overcome this problem, thus take a position in the "suicide quadrant". This denotes the space where both the market and product are completely new (Sarasvathy, 2003), and as a consequence of taking this rather unique position; achieve value and competitive advantage.

The "suicide quadrant" is also the suitable position for effectuation processes (Sarasvathy, 2003). We believe this, to a certain extent, is concerned with rationality and uncertainty. The larger amount of uncertainty, typical for the "suicide quadrant", the less will the value of common rationality and knowledge be. If this is true, how can you then perform rational actions? It has been claimed that effectuation is not based on irrationality (Dew & Sarasvathy, 2002), however little has been said about knowledge in this context. We assume that an underlying reason for the rationality is the aspect of tacit knowing. Moreover, when dealing with uncertainty, explicit knowledge is absent, and rationality is therefore tied to heuristics and comparative cognitive analysis. In these situations, gut feeling can be interpreted as the result of tacit knowing, and consequently, this can be of use when making decisions. According to this, we propose that gut feeling should be used and developed when entrepreneurial managers in large corporations evaluate opportunities.

Aspect of Time

If entrepreneurial managers don't talk much about time in terms of months and years, maybe this indicates their subjective perception of innovation projects. This may coincide with present theories of opportunity and the concept of time. The perception of objective time, as pushed to the extremes by Taylorism, is suitable for maximizing the efficiency of production (Littler, 1978). We suggest that this is bounded to uncertainty. Given a production line, the uncertainty of the process can be approximated as nonexistent. For an opportunity process however, uncertainty will be present. Since objective time is not optimized in handling uncertainty, time should rather be perceived in a subjective manner. In terms of organizational structure, there is a conflict in the aspect of time. A large corporation, which often has a rigid organization structure, wants to operate objective time, whereas the innovation department will utilize time as subjective (Ulvenes, 1997). Based on this underlying conflict, we propose that the innovation department in large corporations should be partially separated from the corporate strategy. In this way, the entities can apprehend the aspect of time in the most beneficial manner and maximize the processes of both productivity and opportunities.

Regarding the model of effectuation processes, time should be comprehended as subjective. It is reasonable to believe that for opportunity practices, it is more advantageous to look at time as a various factor, extending from initially explosive (Ulvenes, 1997), to objective when fully exploited and integrated. As a consequence, it is not the function of the model in figure 5 which is important, it is the shape. This shape can be contracted or extended depending on how time is perceived during the opportunity growth. Finally, theoretical reflections have shown that timing is a difficult part of innovation in large firms. But, by being partially separated from corporate strategy, we claim that the innovation department should increase their portfolio of potential opportunities, do an early phase development without high investments, and withdraw those not encountering positive feedback. In this way, the absolute number of successes will be higher, and the downside of those not succeeding will not be too costly.

CONCLUDING REMARKS

We will now come with some concluding remarks regarding this study in general; and for the discussion in particular. The purpose of this study is to answer the theoretical based questions stated introductorily. Based on the discussion, six propositions have been made, together constituting the main findings. The first two propositions are given at the level of research, better defined in the development of the theory of effectuation. The four succeeding propositions are given at the level of the firm, mainly addressed to innovation managers in large corporations. These propositions are not fixed, but are purposive as contributions to the mentioned levels. Having this said, the following propositions are offered at the level of research.

Proposition 1: Effectuation processes are almost as important for opportunity practice in large corporations as for start-ups.

The fact that many large corporations gain competitive advantage through a better connection and balance between invention/exploration and innovation/exploitation (cf. March 1991; Teece et.al. 1997), indicate the value of effectuation processes in large companies.

Proposition 2: The value of effectuation processes in large corporations is decreasing with the growth of an opportunity; from initially highly valuable, to a shift halfway through the growth where causation- and effectuation processes are of equality, before ending up as less valuable when the opportunity is fully integrated and exploited.

If this effectuation and causation dichotomy is true or taken for granted by researchers conducting research within each of these separated views (i.e. strategic management vs. entrepreneurship), then maybe it is harder to reconceptualise more holistically that over a period of time large companies can accomplish feats involving both processes of opportunity practice. The next four propositions are offered at the level of the firm.

Proposition 3: The qualities of the entrepreneurial manager of an opportunity in a large corporation should be evaluated during the growth of the opportunity. Since effectuation qualities are of most value initially, whereas causation qualities are most valuable at the latter phases, a shift in the management modus operandi could be expedient.

The underlying reasoning we advance is the claim that effectuation and predictive rationality are two distinct forms of rational action. Hence, rationality depends on the context and if the entrepreneurial/innovation manager is using effectual skills and logic it means that it should be the rational way to proceed. And if the entrepreneurial manager is using prediction it also must be considered the rational mode of action. But if effectuation is used when prediction is efficient and vice versa, there is a lack of logic.

Proposition 4: To overcome the difficulties of being big and innovative at same time, large corporations should identify those employees having extensive tacit knowledge, especially regarding the dimension of skills and attitude, and let these pave the way in identifying, discovering, creating, and exploiting opportunities.

Tacit knowing which is unique and rare cannot be easily imitated. Hence, tacit knowledge can represent a competitive advantage (Alvarez & Busenitz 2001; Ambrosini & Bowman 2001). Because tacit knowledge may be critical in the exploration of effectual opportunities, firms should aim at finding who is capable of entrepreneurial management decision for forming efficient effectuation.

Proposition 5: Gut feeling should be developed, and evaluated to the same extent as other selection criteria, when entrepreneurial managers in large corporations evaluate opportunities; especially those holding a large amount of uncertainty.

This proposition rests on the theoretical insight that tacit knowledge is also a form of 'here and now' actionable knowing (gut feeling) which can, if taken seriously, be of strategic value highly relevant for the success of innovation projects (Johannessen 2006; Teece et.al 1997; Asvoll & Widding 2011).

Proposition 6: Large corporations should be more experimental in their opportunity practice to assure a higher number of successes, and especially to overcome the difficulties of timing. Instead of providing for a few expensive bets, they should arrange for more cost effective ones.

In theory, we have suggested that a given objective timeframe often set by business and stage gate approaches will be irrelevant if not subjective perceived tacit or dynamic skills are developed and used in order to gain competitive advantage. To ensure that a sustainable amount of innovation successes can be achieved and timed in a proper way, costs should not be put solely onto few expensive projects led by top management, but rather rest on the subjective perception and judgment of the entrepreneurial manager involved in several cost effective effectual based projects. This means that time also should be considered in a subjective, cyclic and experience based manner (Eriksen 1999), especially with regard to innovation projects.

Finally, we would comment how this study has influenced the rudimentary theory of effectuation. Based on a socio dynamic model and supporting theories, this study has broadened the scope of effectuation by including its applicability to large corporations as well as to the entrepreneur. In addition, the resulting model indicates that for an opportunity process, there is not an all or nothing situation. Both effectuation- and causation processes are interweaving; and it is the relative relationship between these two evaluated against the opportunity growth which is of interest. In addition, this study demonstrates that tacit knowledge and the aspect of time are elements that should be considered and included when dealing with effectuation processes.

FURTHER RESEARCH

Most importantly, further research should be engaged in testing the validity of the model presented in this study. This said, there is especially the internal and construct validity that should be of uttermost focus. Has this study measured what it was intended to do? Moreover, a larger survey would give more generalized results than here achieved. This also accounts for further development of the theory of effectuation, which in our perspective lacks a more robust empirical foundation.

In this study, the evaluation of effectuation, and consequently causation, has been measured by the parameter "value". This is a rather broad concept, and the strength of this variable is questionable. Finding a more concise and strong variable, or several ones, is interesting for further research. As a last element of further interest, the underlying rationale behind the fourth principle of effectuation, namely "control of an unpredictable future, rather than prediction of an uncertain one" (Sarasvathy, 2001: 259), has been of question in this study. A thorough evaluation, both empirical and theoretically, should give answers to this, thus contributing in strengthening the theory of effectuation, and as a result, making it more logically consistent and empirical robust.

REFERENCES

Alvarez, S., & Barney, J. B. (2008). Toward a creation theory of entrepreneurial opportunity formation. Retrieved October 8, 2010 from http://www.runonthebank.net/drotb.php?f=Creation%20Theory.doc

Alvarez, S. A., & Barney, J. B. (2007). Discovery and creation: Alternative theories of entrepreneurial action. Strategic Entrepreneurship Journal, 1(1-2), 33-48.

Alvarez, S. A., & Busenitz, L. W. (2001). The entrepreneurship of resource-based theory. Journal of Management, 27(6), 755-775.

Ambrosini, V., & Bowman, C. (2001). Tacit knowledge: Some suggestions for operationalization. The Journal of Management Studies, 38(6), 811-829.

Augier, M. Sarasvathy, S. D. (2004). Integrating evolution, cognition, and design: Extending 'Simonian' perspectives to strategic organization. Strategic Organization, 2(2), 169-204.

Barney, J. B. (1986). Strategic factor markets: Expectations, luck, and business strategy. Management Science, 32(10), 1231-1241.

Barney, J. B., & Arikan, A. M. (2001). The resource-based view: Origins and implications. In M. A. Hitt, R. F. Freeman,&J. S. Harrison (Eds.), Handbook of strategic management: (pp.124-188) Oxford: Blackwell Publishers.

Baron, R. A., & Shane, S. (2007). Entrepreneurship: A process perspective. Mason, OH: South-Western. Baumard, P. (1999). Tacit knowledge in organization, London & Thousand Oaks: Sage

Black, J.A. og K.B. Boal (1994). Strategic Resources: Traits, configurations and paths to sustainable competitive advantage. Strategic Management Journal, 15, 131-148.

Borch, O.J. & Madsen, E.L. (2007). Dynamic capabilities facilitating innovative strategies in SMEs. International Journal of Technoentrepreneurship, 1(1), 109-125.

Busenitz, L. W., & Barney, J. B. (1997). Differences between entrepreneurs and managers in large organizations: Biases and heuristics in strategic decision-making. Journal of Business Venturing, 12(1), 9-30.

Choo, C.W. (1998) The knowing organization: how organizations use information to construct meaning. New York, Oxford: Oxford University Press.

Christensen, C. M., Anthony, S. D., & Roth, E. A. (2004). Seeing what's next: Using theories of innovation to predict industry change. Boston: Harvard Business School Press.

Christensen, C. M., & Raynor, M. (2003). The innovator's solution: Creating and sustaining successful growth. Boston: Harvard Business School Press.

Davis, E. P., & Karim, D. (2008). Comparing early warning systems for banking crises. Journal of Financial Stability, 4(2), 89-120.

Dew, N., & Sarasvathy, S. (2002). What effectuation is not: Further development of an alternative to rational choice. Presented at the 2002 Academy of Management Conference.

Dew, N., Read, S., Sarasvathy, S., & Wiltbank, R. (2009). Effectual versus predictive logics in entrepreneurial decision-making: Differences between experts and novices. Journal of Business Venturing, 24(4), 287-309.

Dougherty, D., & Hardy, C. (1996). Sustained product innovation in large, mature organizations: Overcoming innovation-to-organization problems. The Academy of Management Journal, 39(5), 1120-1153.

Eckhardt, J. T., & Shane, S. A. (2003). Opportunities and entrepreneurship. Journal of Management, 29(3), 333-349.

Eisenhardt, K. M., & Bird Schoonhoven, C. (1996). Resource-based view of strategic alliance formation: Strategic and social effects in entrepreneurial firms. Organization Science, 7(2), 136-150.

Eisenhardt, K, Martin J. (2000). Dynamic capabilities: what are they? Strategic Management Journal, October-November Special Issue 21: 1105-1121.

Eriksen, T. B. (1999). Tidens historie. Oslo, Norway: J. M. Stenersen Forlag AS.

Fiet, J.O. (2000). The Theoretical Side of Teaching Entrepreneurship. Journal of Business Venturing, 16, 1-24.

Gartner, W. B., Bird, B. J., & Starr, J. A. (1992). Acting as if: Differentiating entrepreneurial from organizational behavior. Entrepreneurship Theory and Practice, 16(3), 13-31.

Gilmore, T. N., & Kazanjian, R. K. (1989). Clarifying decision making in high-growth ventures: The use of responsibility charting. Journal of Business Venturing, 4(1), 69-83.

Gomes-Casseres, B. (1997). Alliance strategies of small firms. Small Business Economics, 9(1), 33-44.

Goranzon B. (1993) The practical intellect: computers and skills. London: Springer.

Gourlay, S. N. (2006). Towards conceptual clarity concerning 'tacit knowledge': a review of empirical studies, Knowledge Management Research and Practice, 4(1), 60-69.

Greiner, L. E. (1972). Evolution and revolution as organizations grow. Harvard Business Review, 50, 37-46. (Goranzon & Florin 1990). Artificial Intelligence, Culture and Language: On Education and Work (Eds.). B. Goranzon & M. Florin. London: Springer.

Hamel, G. (1991). Competition for competence and inter-partner learning within international strategic alliances. Strategic Management Journal, 12, 83-103.

Hansen, D. J., & Shrader, R. (2007). Opportunity: An 11-letter word (summary) Frontiers of Entrepreneurship Research, 27(17), 1.

Harryson, S. (2005). The Japanese know-who based model of innovation management-Reducing risk at high speed. In C. Herstatt, H. Tschirky, A. Nagahira & C. Stockstrom (Eds.), Management of Technology and Innovation in Japan . Wiesbaden, Germany: Springer Publishers.

Hart, D. N., & Gregor, S. (2005). Information systems foundations: Constructing and criticising. Canberra, Australia: Australian National University.

Hills, G. E., & Shrader, R. C. (1998). Successful entrepreneurs' insights into opportunity recognition. In P.D. Reynolds et al. (Eds.), Frontiers of entrepreneurship research (pp.30-43). Wellsley, MA: Babson College.

Hornik, J. (1984). Subjective vs. objective time measures: A note on the perception of time in consumer behavior. The Journal of Consumer Research, 11 (1), 615-618.

Howells, J. (1996). Tacit Knowledge, Innovation and Technology Transfer. Technology Analysis & Strategic Management, 8(2), 91-106.

Ireland, R., Covin, J., & Kuratko, D. (2009). Conceptualizing corporate entrepreneurship strategy. Entrepreneurship: Theory and Practice, 33, 19-46.

Ireland, R. D., Hitt, M. A., & Sirmon, D. G. (2003). A model of strategic entrepreneurship: The construct and its dimensions. Journal of Management, 29: 1-26.

Jaimovich, N., & Rebelo, S. (2009). Can news about the future drive the business cycle? The American Economic Review, 99(4), 1097-1118.

Johannessen, K. S. (1988). The concept of practice in Wittgenstein's later philosophy. Inquiry, 31(3), 357-369.

Johannessen, K. S. (2006). Rule-following, intransitive understanding and tacit knowledge: An investigation of the Wittgensteinian concept of practice as regards tacit knowing. West Sussex, UK: John Wiley and Sons.

Johannessen, J. A., Olaisen, J. and Olsen, B. (2001) Mismanagement of tacit knowledge: the importance of tacit knowledge, the danger of information technology, and what to do about it. International Journal of Information Management, 21 , 3-20.

Khatri, N., & Ng, H. A. (2000). The role of intuition in strategic decision making. Human Relations, 53(1), 57-86.

Kirzner, I. M. (1973). Competition and entrepreneurship. Chicago: University of Chicago Press.

Kirzner, I. M. (1997). Entrepreneurial discovery and the competitive market process: An Austrian approach. Journal of Economic Literature, 35(1), 60-85.

Knight, F. H. (1921). Risk, uncertainty and profit. Chicago: University of Chicago Press.

Kotler, P. (1991). Marketing management; analysis, planning, implemention and control. New Jersey: Prentice-Hall.

Krosnick, J. A. (1991). Response strategies for coping with the cognitive demands of attitude measures in surveys. Applied cognitive psychology, 5(3), 213-236.

Leonard, D. & Sensiper, S. (1998). The role of tacit knowledge in group innovation. California Management Review, 40(3), 112-132.

Levie, J., & Lichtenstein, B. B. (2009). A final assessment of stages theory: Introducing a dynamic states approach to entrepreneurship. Entrepreneurship Theory and Practice, Retrieved November 22, 2010 from http://www.management.umb.edu/faculty/workingpaper/ lichtenstein_ben/DynamicStates_ETP_Jun09.pdf

Littler, C. R. (1978). Understanding Taylorism. The British Journal of Sociology, 29(2), 185-202.

Lyon, D. W., Lumpkin, G. T., & Dess, G. G. (2000). Enhancing entrepreneurial orientation research: Operationalizing and measuring a key strategic decision process. Journal of Management, 26, 1055-1085.

MacMillan, I. C., Siegel, R., & Subba Narasimha, P. N. (1985). Criteria used by venture capitalists to evaluate new venture proposals. Journal of Business Venturing, 1(1), 119-128.

Mainzer, K. (2009). Challenges of complexity in the 21st century. An interdisciplinary introduction. European Review, 17(2), 219-236.

Maqsood, T., Finegan, A., & Walker, D. (2004). Biases and heuristics in judgment and decision making: The dark side of tacit knowledge. Issues in Informing Science and Information Technology, 1, 295-301.

March, J. G. (1982). The technology of foolishness. In J. G. March & J. P. Olsen (Eds.), Ambiguity and choice in organizations. Bergen, Norway: Universitetsforlaget.

March JG. 1991. Exploration and exploitation in organizational learning. Organizational Science, 2(1), 71-87.

Meyer, G.D. & Heppard, K.A. (2000). Entrepreneurship as strategy. Thousand Oaks, CA: Sage Publications.

Miller, D., & Frierson, P. H. (1984). Organizations: A quantum view. New Jersey: Prentice Hall.

Miller, K. D. (2007). Risk and rationality in entrepreneurial processes. Strategic Entrepreneurship Journal, 1(1-2), 57-74.

Nonaka, I., & Takeuchi, H. (1995). The knowledge-creating company: How Japanese companies create the dynamics of innovation. New York: Oxford University Press.

Nonaka, I., Toyama, R., & Konno, N. (2000). SECI, ba and leadership: A unified model of dynamic knowledge creation. Long Range Planning, 33(1), 1-31.

Pacheco, D. F., York, J. G., Dean, T. J. and Sarasvathy, S. D. Forthcoming (2010). The co-evolution of institutional entrepreneurship: A tale of two theories. Journal of Management.

Polanyi, M. (1959). The study of man. Chicago: University of Chicago Press.

Polanyi, M. (1962). Tacit knowing: Its bearing on some problems of philosophy. Reviews of Modern Physics, 34(4), 601-616.

Polanyi, M. (1967). The tacit dimension. London, UK: Routledge & Kegan Paul.

Polanyi, M. (1969). Knowing and being: Essays. Chicago: University of Chicago Press.

Porter M. (1996). What is strategy? Harvard Business Review, 74(6), 61-80.

Prahalad, C. K., & Hamel, G. (1990). The core competence of the corporation. Harvard Business Review, 68(3), 79-91.

Ramachandran, J., Mukherji, S., & Sud, M. (2006). Strategic Entrepreneurship in a Globalising Economy: Evidence from Emerging Economies. IIMB Management Review, 28(3), 291-302.

Sarasvathy, S. D. (2001). Causation and effectuation: Toward a theoretical shift from economic inevitability to entrepreneurial contingency. The Academy of Management Review, 26(2), 243-263.

Sarasvathy, S. D. (2003). Entrepreneurship as a science of the artificial. Journal of Economic Psychology, 24(2), 203-220.

Sarasvathy, S. D., & Dew, N. (2005). New market creation through transformation. Journal of Evolutionary Economics, 15(5), 533-565.

Sarasvathy, S. D., Dew, N., Velamuri, R. & S. Venkataraman (2002). Three Views of Entrepreneurial Opportunity, In (Eds.) Audretsch & Acs, International Handbook of Entrepreneurship (pp. 141-160). Kluwer: Boston.

Sarasvathy, S. D. & Kotha, S. (2001) Dealing with Knightian uncertainty in the new economy: The Real Networks case, In Research on Management and Entrepreneurship (pp. 31-62). John Butler, Series Editor, IAP Inc. Greenwich.

Sarasvathy, S. D., & Read, S. (2005). Knowing what to do and doing what you know: Effectuation as a form of entrepreneurial expertise. Journal of Private Equity 9(1): 45-62.

Sarasvathy, S. D., & Simon, H. A. (2000). Near decomposability, effectuation, and the speed of growth of entrepreneurial firms. Paper presented at the first annual technology entrepreneurship research policy conference.

Sarasvathy, S. D., Dew N., Read, S. and Wiltbank, R. (2010). On the entrepreneurial genesis of new markets: Effectual transformations versus causal search and selection. Journal of Evolutionary Economics. 1-23.

Scharmer, C.O. (2000). Organizing around not-yet-embodied knowledge. In: von Krogh, G., Nonaka, I. and Nichiguchi, T., (Eds.) Knowledge Creation. A source of value (pp. 13-60). Basingstoke and London: Macmillan Press

Schumpeter, J. A. (1942). Capitalism, socialism, and democracy. New York: Harper.

Shane, S. (2000). Prior knowledge and the discovery of entrepreneurial opportunities. Organization Science, 11(4), 448-469.

Short, J. C., Ketchen Jr, D. J., Shook, C. L., & Ireland, R. D. (2010). The concept of "opportunity" in entrepreneurship research: Past accomplishments and future challenges. Journal of Management, 36(1), 40-65.

Simon, H. A. (1957). Models of man: Social and rational. New York: Wiley

Smith, K. G., & De Gregorio, D. (2000). Bisociation, discovery and the role of entrepreneurial action. In Strategic Entrepreneurship: Creating a New Integrated Mindset. Hitt MA, Ireland RD, Camp SM, Sexton DL (Eds.). Blackwell: Oxford

Stalk Jr, G. (1988). Time - The next source of competitive advantage. Harvard Business Review, 66, 41-51.

Stuart, T. E. (2000). Interorganizational alliances and the performance of firms: A study of growth and innovation rates in a high-technology industry. Strategic Management Journal, 21(8), 791-811.

Sudek, R. (2006). Angel investment criteria. Journal of Small Business Strategy, 17(2), 89-103.

Teece DJ. (1976). Vertical Integration and Vertical Divestiture in the U.S. Oil Industry. Stanford University Institute for Energy Studies: Stanford, CA.

Teece, DJ. (1988). Technological change and the nature of the enterprise. In: G. Dosi, C. Freeman, R. Nelson, G. Silverberg and L. Soete, (Eds.), Technical Change and Economic Theory (pp. 256-281). Pinter, London.

Teece DJ, Pisano G. (1994). The dynamic capabilities of firms: An introduction. Industrial and Corporate Change 3(3): 537-556.

Teece DJ, Pisano G, Shuen A. (1997). Dynamic capabilities and strategic management. Strategic Management Journal 18(7): 537-533.

Teece DJ, Pisano G. Boerner C. (2002). Dynamic capabilities, competence, and the behavioral theory of the firm. In Essays in Honor of Richard M. Cyert, Augier M, March JG. (Eds.), The Economics of Choice, Change and Organization. Edward Elgar.

Teece, DJ. (2006) "Reflections on 'Profiting from Innovation'". Research Policy, 35(8), 1131-1146.

Teece, DJ. (2007). Explicating Dynamic Capabilities: The Nature and Microfoundations of (Sustainable) Enterprise Performance. Strategic Management Journal, 28(13), 1319-1350.

Tellis, G. J. (2006). Disruptive technology or visionary leadership? Journal of Product Innovation Management, 23(1), 34-38.

Tidd, J., & Bessant, J. (2009). Managing innovation: integrating technological, market and organizational change. Chichester, UK: Wiley.

Ulvenes, A. (1997). Tid i rigide ogfleksible organisasjoner. Oslo, Norway: Cappelen Akademisk Forlag.

Venkataraman, S. (1997). The distinctive domain of entrepreneurship research. Advances in Entrepreneurship, Firm Emergence and Growth, 3, 119-138.

Warren, C. A. B. (2001). Qualitative Interviewing. In J. F. Gubrium & J. A. Holstein (Eds.), Handbooks of Interview Research: Context and Method. London, UK: Thousand Oaks.

Weick, K. E. (1979). The social psychology of organizing. Reading, MA: Addison-Wesley.

Weidlich, W. (2005). Thirty years of sociodynamics. An integrated strategy of modelling in the social sciences: Applications to migration and urban evolution. Chaos, Solitons, and Fractals, 24(1), 45-56.

Widding, L. O. (2005). Building entrepreneurial knowledge reservoirs. Journal of Small Business and Enterprise Development, 12(4), 595-613.

Zollo, M. & Winter, S.G. (2002). Deliberate learning and the evolution of dynamic capabilities. Organization Science, 13(3), 339-351.

Asvoll, H., & Widding, L. O. (in press 2011). Perspectives of knowledge in innovative management--Some steps toward developing a framework for tacit knowing. Accepted for publication in International Journal of Management Concept and Philosophy (2).

Erik Svensrud, Norwegian University of Science and Technology

Havard Asvoll, Norwegian University of Science and Technology