ELEMENTS OF EFFECTUATION IN BUSINESS MODEL DEVELOPMENT

Effectuation is defined as a decision-making logic that entrepreneurs employ in situations of uncertainty. It is rooted in entrepreneurs' expertise and implies a set of principles that guide decision-making processes to be control-oriented as opposed to prediction-oriented. The underlying logic of strategic decision-making is influenced by various forms of uncertainty that entrepreneurs operate within in the process of business model development. The assumption is that the decision-making logic changes as the level or form of uncertainty changes. The main objective of this article is to analyze the degree to which entrepreneurs tend to apply each of the effectuation principles in developing a particular component of the business model. The study is qualitative in nature and it focuses on six case studies depicting micro and small companies operating in two creative industries sectors in Croatia. The data collection included semi-structured, in-depth interviews complemented with a survey and general business information about the companies. The empirical analysis juxtaposes business models of six companies in light of different forms of uncertainty each company operates within, idiosyncrasies of each business model and specific elements of effectuation that entrepreneurs/business owners have embodied into segments of the business model. The results pinpoint the components of the business model that are predominantly shaped by effectual logic in each of the case studies. The paper contributes to the advancement of empirical evidence in research studies connecting business model framework and theory of effectuation, and deepens the understanding of business model development of micro businesses operating in creative industries.