Together or separately? Direct and synergistic effects of Effectuation and Causation on innovation in technology-based SMEs

Technology-based SMEs develop their activity in changing environments with strong competitive pressures. These conditions make them much more likely to innovate but also make the innovative process more challenging due to greater complexity of decisions about resources and establishment of actions to achieve favorable innovation results. Although prior studies have analyzed diverse factors that impact the innovative dynamics of this type of firm, little advance has been made in exploring the problem from the perspective of decision-making. This study seeks to close this research gap using Effectuation Theory, one of the most-cited theories emerging in the field of entrepreneurship. More specifically, we analyze the use of causal and effectual decision-making logics to evaluate their direct and ambidextrous effects on innovation in technology-based SMEs. Our results provide evidence that not just one path, but rather a pool of alternatives, supports product and process innovation development. More specifically, when technology SMEs pursue product innovation, both effectuation and causation can be used as predominant mechanisms to achieve positive innovation results. If firms also seek to develop process innovations, however, they may obtain better results with an ambidextrous approach.