Abstract
Purpose Knowledge of how entrepreneurial alertness (EA) and effectuation impact small firms' performance in uncertain markets is limited. Suggesting effectuation as a mediation mechanism between EA and small firms' performance, the authors explore how entrepreneurs of small firms apply effectual logic to translate their individual alertness to market opportunities into firms' performance.Design/methodology/approachA set of hypotheses is tested by partial least squares analysis of survey data collected from small firms in New Zealand.FindingsThe results show that effectuation works as a mechanism that mediates a positive association between founders'/managers' alertness to market opportunities and small firms' performance.Originality/valueIntegrating EA with the effectuation theory, the authors contribute to the literature on new market opportunity development and firm performance. The authors argue that entrepreneurs concentrate on action and resources to further develop their marketing intelligence in developing new market opportunities. The authors also enhance the understanding of entrepreneurial marketing decision-making by small firms in a relatively small economy in the Asia–Pacific region.