The nexus between effectual actions and small business performance

Abstract

Purpose: This study interrogates the interrelatedness of effectual actions and small business performance. It provides fresh insights about effectual heuristics and small business performance, as evinced in a study with data drawn from a variety of sectors.

Design/methodology/approach: Based on primary data from 685 small businesses, the study examines hypothesised relationships using the partial least squares structural equation modelling technique.

Findings/results: The findings reveal the varied effects of composite effectuation and its dimensions on small business performance. Composite effectuation, affordable loss and flexibility are positively related to small business performance, whilst experimentation and precommitment have negative relationships with small business performance. The study concludes that the application of effectual actions has diverse implications for small business performance.

Research implications: The generalisation of findings can be limited, given that this is a single country study. Limitations notwithstanding, this article provides new empirical data, knowledge and insight about the relationship between effectual actions and small business performance. This provides a strong base for future multicountry research into effectual actions and small business performance.

Practical implications: The findings of this article have implications for small businesses navigating uncertainties occasioned by resource constraints. Essentially, the findings of this study can enhance the development of a learning curriculum to improve the ability of small businesses to apply effectual heuristics in managing resource challenges.

Originality/value: This article addresses the research gap in the field of entrepreneurship arising from the limited empirical studies on the relationships between effectual actions and small business performance.