Decision making for business model development: a process study of effectuation and causation in new technology-based ventures

This study investigates the decision-making logics used by new ventures to develop their business models. In particular, we focus on the logics of effectuation and causation and how their dynamics shape the development of business models over time. We find that effectual decision-making logic is used dominantly to generate a viable value proposition for a specific customer segment. Causal logic is then used dominantly to define the other business model components in relation to the value proposition and customer segment. When a shortage of resources emerges, causal logic is replaced by an increase in effectual decision-making again. We conclude that before investing significant resources in a business model it is crucial for firms to reduce, as far as possible, technological and market uncertainty through effectual strategies to avoid high re-configuration costs later.