An Effectual Analysis of Markets and States

AbstractEntrepreneurial expertise consists in nonpredictive heuristics grouped under the rubric of effectuation. The principles and process of effectuation specify ways to tackle multiple uncertainties, allowing the cocreation of innovative upsides even without large, upfront investments. In focusing attention on the differences between risk and uncertainty, effectuation compels us to rethink the familiar relationships between risk and reward. Entrepreneurs and their stakeholders self-select into the effectual process not only to build products and ventures but also to reshape their environments, including markets and states. An effectual perspective, therefore, offers new frameworks to analyze the role of markets and states in innovation, especially in shaping and choosing goals worth pursuing in the face of complex interacting uncertainties. Additionally, it suggests that the question, “What are we willing to live with if we get it wrong?” has to become a larger part of the public discourse than it is today.