Measuring entrepreneurs' use of effectuation as heuristics: Development and validation of a situational judgment test (SJT) for effectuation

Abstract

Effectuation is a key theory of entrepreneurial decision-making. However, measuring effectuation remains challenging. Existing measures use self-report scales that rely on recall and aggregate across diverse past situations. Such measures cannot capture effectuation as a decision-making logic based on heuristics. Leveraging insights from extant work on situational judgment tests (SJT) in applied psychology, we develop and validate an effectuation SJT that captures the implicit nature of entrepreneurs' use of effectuation in specific situations. Across seven studies including a 14-month prospective panel study, we establish the construct, predictive and incremental validity of the new SJT for venture outcomes. Methodologically, this novel SJT of effectuation facilitates new types of research, such as unpacking the cognitive underpinnings of effectuation. Theoretically, our study offers new conceptual clarity about effectual principles and their impacts on venture outcomes by leveraging extant work on heuristics in the cognitive sciences. We also introduce SJTs as a new method of value to specific streams of entrepreneurship research.