Title page for ETD etd-07012012-113721

Document Type Master's Dissertation
Author Hechter, Philip Charel
URN etd-07012012-113721
Document Title Effects of risk tolerance in the effectuation and causation process on growth of entrepreneurial firms
Degree MBA
Department Gordon Institute of Business Science
Advisor Name Title
Ms E Swanepoel Supervisor
  • effectuation
  • causation
  • decision-making process
  • risk tolerance
  • financial growth
Date 2012-03-08
Availability unrestricted
There is a critical need for entrepreneurial action to stimulate the economy, this study aimed to investigate how entrepreneurs make decisions, how they perceive financial risk and how their decision-making linked to their risk profile translates into their firmsí financial growth. To do this study had to firstly, understand how entrepreneurs make decisions. Sarasvathy's (2001) seminal work in this field distinguished between entrepreneurs who follow an effectuation or a causation decision making process. Causation is compared to puzzle building where all the pieces are there, but needs to be assembled. Whereas effectuation is compared to patchwork quilting where the entrepreneur need to develop the opportunity while constantly changing direction as new information becomes available. The findings showed that causation logic is more common in terms of decision making with entrepreneurs, which is contrary to findings of Sarasvathy (2001). Secondly, this study set out to understand how entrepreneurs perceive financial risk by measuring their financial risk tolerance levels. This was measured independently for entrepreneurs following the effectuation as well as a causation approach. The results indicated that the majority of entrepreneurs were ranked in the moderate risk taking category according to the FinaMetrica model. Entrepreneurs who follow causation logic had a greater aptitude for risk than their counterparts who followed an effectuation approach. Thirdly, this study determined whether a statistically significant correlation existed between the decision-making approach, risk tolerance levels and the financial growth achieved by the entrepreneurial firm. This study did not find a statistically significant relationship between these constructs.

© 2011, University of Pretoria. All rights reserved. The copyright in this work vests in the University of Pretoria. No part of this work may be reproduced or transmitted in any form or by any means, without the prior written permission of the University of Pretoria.

Please cite as follows:

Hechter, PC 2011, Effects of risk tolerance in the effectuation and causation process on growth of entrepreneurial firms, PhD thesis, University of Pretoria, Pretoria, viewed yymmdd < http://upetd.up.ac.za/thesis/available/etd-07012012-113721/ >


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