Does effectuation make innovative digital multi-sided platform startups? An investigation of entrepreneurial behavior in platform-based open innovation

Purpose This research investigates the nature of regulatory-focused effectuation (as the basis of entrepreneurial behavior) in absorptive capacity development for open innovation implementation, the role of crowds or communities management practices in the effectuation-based open innovation process, and open innovation performance as the output of the open innovation process in digital multi-sided platform (MSP) startups context. Design/methodology/approach In order to verify the hypothesis, the researcher conducts a quantitative study that is based on a self-administered questionnaire and employs the PLS-SEM approach. The sample comprises of 70 Indonesian digital MSP businesses that have been operational for at least three years and have used open innovation approaches with their audiences, communities or complementors. Findings The research findings imply that there is a connection between promotion-focused effectuation and the open innovation process. This connection is particularly strong when it comes to the incorporation of absorptive capacity and crowds or communities management practices. On the other hand, prevention-focused effectuation shows insignificant effect toward open innovation process in digital MSP startups context. Research limitations/implications The research findings imply that with limited resources and experiences, young entrepreneurs can still implement open innovation strategy for their digital MSP platform through effectuation principles that leverage the external resources from digital platform ecosystem members. Practical implications In digital MSP startups context that perform promotion-based effectuation principles, innovation performance can be achieved by analyzing new insight, transforming the existing activities with the new insight, creating new offering afterward, as well as strengthening crowds or communities management practices through co-creation activities with platform ecosystem members that may lead into new business model. Originality/value The originality of this work is to make a contribution to the literature on strategic entrepreneurship by describing the phenomena of the paradox of resource-based theory; adopting open innovation strategy under constrained initial resources and capabilities scenario.