Examining Effectuation Theory: Lessons for Entrepreneurial Activity in Developing Countries

Abstract

Business development and utilization of indigenous resources is directly linked with the level of economic growth of any society. Globalization and innovation have made it challenging for developing countries to keep pace of business development to attain sustainable levels of economic growth. Developing counties are faced with the problems of non-conducive external business environment, complex business registration and taxation systems, scarcity of finance, technological support and logistics, and lack of managerial skills and financial advice. Enhancing entrepreneurial effectuation can enable the entrepreneurs of developing countries to successfully create such businesses that are not only efficient in resources utilization but also have a competitive outlook. Effectuation theory is best suited to the environment of developing countries as it enables the entrepreneurs to undertake affordable losses and in the face of uncertainty, create strategic partnerships and use the contingencies to their benefit. In order to achieve this end, the governments in developing countries can play a role of insurer and confidence booster for those entrepreneurs that can create value to the indigenous resources and create employment and competitiveness.