Lauri Kaatiala 

SMEs’ decision-making at the pre-
internationalization phase 

The interplay of causation and effectuation 

 

 

 

 

 

 

 
  

Vaasa 2021 

School of Management 
Master’s thesis in Economics 
and Business Administration  

International Business 



2 

UNIVERSITY OF VAASA 
School of Management 
Author:    Lauri Kaatiala 
Title of the Thesis:  SMEs’ decision-making at the pre-internationalization phase: 

The interplay of causation and effectuation 
Degree:    Master of Science in Economics and Business Administration 
Programme:   International Business 
Supervisor:   Tamara Galkina 
Year:    2021  
Number of pages:                   87 
 

ABSTRACT: 
The internationalization of small and medium-sized enterprises (SMEs) has been of increasing 
interest to the research community. This is due to the important role of SMEs in national 
economies as well as in the global marketplace. SMEs are key players in creating jobs, boosting 
digital transformation, and helping societies to achieve Sustainable Development Goals. The 
SME internationalization research has two popular approaches: the traditional stages models 
and new phenomena, such as born globals and international new ventures. The stages models, 
most notably the Uppsala model, involve a pre-internationalization phase. Regardless of some 
models created to illustrate SMEs’ activities during this phase, it remains an understudied top-
ic. Especially the decision-making during the pre-internationalization phase has not been re-
searched enough. This thesis aims to study how SMEs are using the two decision-making logics 
– causation and effectuation - when they prepare to expand operations to foreign markets. 
 
The theoretical framework of this thesis consists of three chapters on major theories of inter-
nationalization, the pre-internationalization phase, and SME decision making. This framework 
provides the theoretical viewpoints for conducting the research and analyzing the findings. 
Specifically, the theoretical part of this thesis introduces three major theories of internationali-
zation concerning SMEs: the Uppsala model, the network theory, and the International new 
ventures theory. Further, it examines the concept of pre-internationalization and what SMEs 
are experiencing before the expansion to foreign markets. Lastly, it discusses SME decision 
making concentrating on the two different but complementary logics: causation and effectua-
tion. The research methodology selected for conducting this study is a qualitative, single-case 
study since it offers the best tool for identifying the logic behind the case firm’s decisions. 
 
This study shows that SMEs use both logics – causation, and effectuation – during the pre-
internationalization phase. However, the dominant logic behind the decisions related to the 
upcoming internationalization is effectuation. This study proposes which of the two logics 
SMEs tend to emphasize in their decisions depending on the field of operations. The author 
identifies four categories: target markets, product and competitors, networks, and resources. 
This study shows that decisions concerning product and competitors, networks, and resources 
follow effectual logic. Decisions concerning target markets follow causal logic. SMEs combine 
the two logics in such a way that they create synergy. The managerial implications of this study 
are aimed especially at the decision-makers in internationalizing SMEs who have no prior ex-
perience of international operations. Besides, the findings of this study are interesting for 
scholars studying internationalization or SME decision-making. 
 

KEYWORDS: international business, SME decision-making logic, effectuation, causation, pre-
internationalization, internationalization 



3 

Contents 

1 Introduction 6 

1.1 Background of the study 6 

1.2 Research gap 7 

1.3 Research question and intended contributions 8 

1.4 Main concepts and definitions 9 

1.5 Structure of the study 10 

2 Theoretical part 12 

2.1 Major theories of internationalization 12 

2.2 Pre-internationalization phase 15 

2.3 SME decision making 23 

2.3.1 Causation and effectuation 27 

2.3.2 Five principles of effectuation 28 

2.3.3 Causal vs. effectual reasoning 30 

3 Methodology 33 

3.1 Research philosophy and approach 33 

3.2 Research strategy and purpose 34 

3.3 Data collection and analysis 36 

3.4 Quality of the study 40 

3.4.1 Reliability and validity 40 

3.4.2 Guba’s four criteria 41 

3.5 Ethics of the study 43 

4 Findings and discussion 45 

4.1 Target markets 45 

4.2 Product and competitors 51 

4.3 Networks 56 

4.4 Resources 59 

5 Conclusion 66 

5.1 Conclusion to the research question 66 



4 

5.2 Theoretical contributions 67 

5.3 Managerial implications 68 

5.4 Limitations of the study 68 

5.5 Suggestions for future research 70 

References 71 

Appendices 84 

Appendix 1. Interview questions in English 84 

Appendix 2. Interview questions in Finnish 86 

  



5 

Figures 
 
Figure 1. Types of International New Ventures (Oviatt & McDougall 1994: 59) 15 

Figure 2. Factors affecting the Pre-Export Activities of the Firm (Wiedersheim-Paul et 

al. 1978: 48) 18 

Figure 3. A Framework for Entrepreneurial decision making (Ogarcă 2010: 9) 24 

Figure 4. Developed model of the decision-making process by SMEs (Gibcus & Van 

Hoesel 2004: 5) 25 

Figure 5. Effectuation in Action (Society for Effectual Action) 30 

Figure 6. Causal vs. Effectual Reasoning (Society for Effectual Action) 32 

 
 

Tables 
 
Table 1. The eight factors of the Export Readiness Index (Tan et al. 2010; 17-18) 22 

Table 2. The background information of interviewees 38 

Table 3. Overview of the interviews 39 

 
 

Abbreviations 
 
BG  Born global 
HR  Human resource 
ICT  Information and communication technology 
INV  International new venture 
MNE  Multinational enterprise 
SME  Small and medium-sized enterprises  



6 

1 Introduction 

 

1.1 Background of the study 

Small and medium-sized enterprises (SMEs) are the engine of the global economy. 

They are the main source of employment, added value, and innovation. SMEs repre-

sent more than 95 % of all firms and create 60-70 % of the jobs. In the EU SMEs repre-

sent 99% of all businesses (OECD 2017). They play a key role in national economies 

around the world from advanced industrialized countries to emergent economies. 

SMEs are in the spotlight when governments are trying to resolve problems of low 

growth, high inequality, and problems related to sustainable development (Robu 2013; 

OECD 2017). The ongoing COVID-19 pandemic affects SMEs in multiple dimensions 

including reduced sales and lack of cash (World Bank 2020). After that, there are al-

ready new challenges on the horizon. The world’s working-age population will grow up 

to 700 million people between the years 2019 and 2035 (World Bank 2021). New jobs 

are needed to absorb the growing global workforce. Many of them will be employed by 

SMEs. These factors, among others, make SMEs’ development a high priority for gov-

ernments around the globe (World Bank 2021). 

 

One crucial area in the SMEs’ development is the strengthening of international activi-

ties. SMEs’ internationalization opens new markets and raises the competitiveness and 

economic growth of nations substantially. SMEs, in turn, also receive benefits from 

their international activities, such as higher turnover growth, higher employment 

growth, and innovation boosts (European Commission 2014). Due to the economic 

growth effect of their cross-border activities, the internationalization of entrepreneuri-

al SMEs is an important topic (European commission 2007). An important aspect of the 

internationalization of SMEs is the pre-internationalization phase.  Pre-

internationalization as a research area is understudied. Most of the research in this 

field focuses on internationalization which has already happened (Meschi et al. 2021) 

while the phase before remains mostly unexplored. 



7 

 

1.2 Research gap 

The process of internationalization of SMEs has been widely studied from different 

perspectives for several decades. (Ribau et al. 2018). There are three main domains of 

internationalization research: the traditional approach (Welch & Luostarinen 1988; 

Johanson & Vahlne 1977) the international entrepreneurship approach (Cavusgil & 

Knight 1996; 2004; 2005; Oviatt & McDougall 1994), and the network approach (Johan-

son & Mattson 1988). Regardless of the abundance of internationalization research, 

fewer studies have been conducted about the pre-internationalization phase. The liter-

ature has not adequately addressed firms’ situations before expanding their activities 

across domestic markets (Lamb & Liesch 2002; Luostarinen & Welch 1990). Regardless 

of some efforts to shed light on how firms behave before their expansion overseas (Tan 

et al. 2007; 2005; Caughey & Chetty 1994; Wiedersheim-Paul et al. 1978; 1975), the 

pre-internationalization phase remains largely undeveloped. Therefore, what happens 

in firms in terms of their preparations to expand to foreign markets with no prior expe-

rience in doing it and no initial commitment to international operations remains an 

understudied topic. 

 

Concurrently, the literature lacks research on how decisions are made in SMEs at the 

pre-internationalization phase (Chetty et al. 2015; Nummela et al. 2014; Zahra et al. 

2005), even though the decisions have a significant impact on the future of the firm. 

Given the central role of decision-making in internationalization, it is important to un-

derstand better SME decision making (Knight & Liesch 2002) and how SMEs decide to 

engage in international activities (Schweizer 2012). While there is a plethora of differ-

ent theories of decision making, one of the influential approaches to examine the deci-

sion-making of internationalizing SMEs has been effectuation (Sarasvathy 2001). This 

theory distinguishes two different but complementary logics of acting and reasoning. 

Causation is seen as the goal-oriented approach to decision making and the entrepre-

neurial process. In this model, an entrepreneur has a clear vision of where he/she is 

aiming, and all decisions and actions serve the fulfillment of the ultimate pre-set goal. 



8 

Effectuation, instead, is more pragmatic and implies constantly search for opportunities 

to employ limited resources creatively to ultimately create some new product or ser-

vice. The essence of effectuation is the logic of control versus logic of prediction (Kara-

mi et al. 2020). The theory of effectuation has been applied in SME internationalization 

in terms of opportunity discovery and creation. However, the application remains 

fragmented (Karami et al. 2020). Causation and effectuation coexist during new ven-

ture internationalization and firms can even apply the two logics simultaneously 

(Ciszewska-Mlinaric et al. 2016). Still, there is a need to better understand how SMEs 

use causation and effectuation as well as the interplay between the two logics in their 

decisions while preparing for internationalization. 

 

1.3 Research question and intended contributions 

Based on the above-mentioned research gap, the corresponding research question of 

the study is: 

 

“How do causation and effectuation interact in the SME decision making at the pre-

internationalization phase?” 

 

The author intends to answer the above-mentioned question by conducting a study 

with a Finnish firm that is planning to expand its operations outside Finland and, there-

fore, is at the pre-internationalization phase. To answer the research question, the au-

thor sets up supportive objectives which help to find the answer. The first objective is 

to review the existing literature about pre-internationalization and Sarasvathy’s (2001) 

theory of effectuation. The second objective is to research a real-life case firm’s deci-

sion making while it is preparing for internationalization. The third objective is to make 

propositions about which of the two logics is dominant in different fields of the case 

firm’s operations. 

 

This study provides several theoretical contributions. First, it focuses on a largely ne-

glected but important phase of pre-internationalization (Tan et al. 2007; 2005; Wie-



9 

dersheim-Paul et al. 1975; 1978). The findings of the study complement the research 

about pre-internationalization by offering a decision-making perspective as well as of-

fering an up-to-date case study. Second, the findings of the study also contribute to 

effectuation research (Sarasvathy 2001; 2008). The study attempts to combine the the-

ory of effectuation with the decision making of internationalizing SMEs and, therefore, 

provides a new perspective to the research field. This study also provides practical con-

tributions. The findings of this study will help the case firm to identify its decision-

making logic during the pre-internationalization phase. With the help of the increased 

understanding of the logic, the case firm can improve its decision making. 

 

1.4 Main concepts and definitions 

This part provides definitions of the key terms used in this thesis.  

 

Small and medium-sized enterprises (SMEs) are usually defined either by the number of 

employees or the size of revenue. Many organizations have their definitions for SMEs. 

In this study, SMEs are defined according to OECD (2005) as “Small and medium-sized 

enterprises (SMEs) are non-subsidiary, independent firms which employ fewer than a 

given number of employees. This number varies across countries. The most frequent 

upper limit designating an SME is 250 employees, as in the European Union”. To com-

plement the OECD’s definition the World Bank (2021) states that there is no interna-

tional standard firm size for SMEs, but many institutions use the following size catego-

ries: small enterprises have 10-49 employees, and medium-sized enterprises have 50-

249 employees. 

 

Decision making has been studied in several fields of science and it has different defini-

tions depending on the context. In this study, decision making is defined according to 

Jarzabkowski (2005) as a contextually embedded activity that leads to a course of ac-

tion. This study is also aligned with the idea of decision making as an act of processing 

information. It means the transformation of knowledge and information into manage-

rial actions (Galbraith 1974; March 1991; Weick 1979). 



10 

 

Causation is a decision-making logic, which is defined in this study according to Saras-

vathy (2001: 245), as processes which “take a particular effect as given and focus on 

selecting between means to create that effect”. 

 

Effectuation is a decision-making logic, which is defined according to Sarasvathy (2001: 

245), as processes which “take a set of means as given and focus on selecting between 

possible effects that can be created with that set of means”. 

 

Internationalization is an ambiguous concept that has been defined in different ways. 

There is not only one, but several definitions for internationalization. It can be defined 

according to European Comission (2014) as to “all activities that put SMEs into a mean-

ingful business relationship with a foreign partner”. Dutot et al. (2014: 674) define in-

ternationalization in their own words: “the internationalization of a firm is the outward 

movement of its operations and the process of mobilization, accumulation, and devel-

opment of a specific set of resources to achieve greater performance”. The above-

mentioned definitions are aligned with the author’s understanding of the concept. 

However, to complement the two definitions Welch & Luostarinen (1988: 36) state that 

internationalization is simply a “process of increasing involvement in international op-

erations”. 

 

1.5 Structure of the study 

The structure of the study follows systematically the basic structure of a scientific re-

port. It is divided into five main chapters. The first chapter is the introduction which 

discusses the background of the study, research gap, research question and intended 

contributions, main concepts, and definitions, and concludes with the structure of the 

study. The second chapter is the theoretical part which is divided into three sub-

chapters. The first sub-chapter introduces three main theories of internationalization. 

The second sub-chapter discusses the research about the pre-internationalization 

phase. The third sub-chapter introduces the theory of effectuation, and it is divided 



11 

into three sections: causation and effectuation, five principles of effectuation, and 

causal vs. effectual reasoning. The third chapter of the study discusses the methodolo-

gy. This chapter is divided into five sub-chapters: research philosophy and approach, 

research strategy and purpose, data collection and analysis, quality of the study, and 

ethics of the study. The fourth sub-chapter of the methodology section is divided into 

two parts: reliability and validity, and Guba’s four criteria. The fourth chapter is called 

findings and discussion. It is divided into four sub-chapters: target markets, product 

and competitors, networks, and resources. The fifth chapter is called conclusions and it 

is the last main chapter of the study. This chapter is divided into five sub-chapters: con-

clusions to the research question, theoretical implications, managerial implications, 

limitations of the study, and suggestions for future research. After the last chapter fol-

low references and appendices of the study. 

 

 



12 

2 Theoretical part 

This section aims to systematically present the relevant theories of the chosen topic. 

This theoretical part consists of an overview of the three most important theories of a 

firm’s internationalization followed by the pre-internationalization phase. The second 

part consists of the decision making of SMEs; it concentrates on causal and effectual 

reasoning and their characteristics. 

 

2.1 Major theories of internationalization 

Academics have presented several approaches and models which attempt to explain 

how and why the internationalization process of firms occurs. The Uppsala model 

(sometimes called the stage model) is perhaps the most traditional theory to describe 

the step-by-step internationalization process in which individual firms gradually in-

crease their operations in foreign markets by acquiring, integrating, and using interna-

tional market knowledge. It was introduced in 1977 by Johanson and Vahlne and the 

model is based on a study of the internationalization processes of four Swedish firms 

with operations in 20 different countries. 

 

The Uppsala model highlights the gradual and incremental character of internationali-

zation. It argues that market uncertainty in international operations is usually related 

to limited knowledge about the foreign market, therefore firms tend to follow an in-

cremental internationalization path and manage better the limited knowledge of the 

foreign market (Johanson & Vahlne 1977). Firms expand to foreign markets through 

learning and gaining experience. Learning is understood as a dynamic process of accu-

mulating knowledge through accessing market information or collecting business expe-

rience. Firms seek experiential knowledge about the clients and the market. When a 

sufficient amount of knowledge is gained, the firm can proceed to the next stage or 

phase of international expansion and commit more resources to the target market. 

There are four major steps presented in the Uppsala model. These steps are no regular 

export activities, export activities via independent representatives or agents, the estab-



13 

lishment of a foreign subsidiary, and foreign manufacturing units. Rather than expand-

ing simultaneously to several countries, the model concentrates on the extension of 

involvement in individual markets (Johanson & Vahlne 1977; 1990). 

 

Network theory was introduced by Johanson and Mattson (1988) and it defines the 

process of a firm’s internationalization as the establishment, maintenance, and devel-

opment with participants of a network in foreign markets. The network theory high-

lights the importance of developing long-term interactions with those participants of 

foreign market networks. The degree of internationalization is seen as the extent to 

which the firm occupies certain positions within international networks as well as the 

degree of importance and integration of the positions (Johanson & Mattsson 1988: 

297). 

 

Networks tend to offer information that lowers the risk and uncertainty inherent in 

international operations (Liesch et al. 2002). Building and maintaining crucial networks 

are an essential part of the internationalization process as input as well as output of 

the process. International networks are important for the firm’s str planning, but they 

are too difficult to be incorporated into the strategic process. The networks are difficult 

to control and predict. They tend to develop to directions that are unplanned or un-

seen (Liesch et al. 2002; Welch & Welch 1996). The network theory also includes the 

concept of market internationalization, in other words, network internationalization. 

Depending on the current network position of the firm there are three ways to im-

prove. The firm can conduct international extension, international penetration, or in-

ternational integration. The overall degree of a firm’s internationalization, as well as 

the level of market internationalization, affects the internationalization process (Johan-

son & Mattsson 1988). 

 

International new ventures (INV) theory was first introduced in the early 1990s by Ovi-

att and McDougall (1994). The authors defined an INV as “a business organization that, 

from inception, seeks to derive significant competitive advantage from the use of re-



14 

sources and the sale of outputs in multiple countries” (Oviatt and McDougall 1994: 49). 

The term INV can be understood as a firm that internationalizes early in its life cycle, so 

the focus of the INV concept is on the age when examining the firm’s ability to interna-

tionalize. The international expansion of INVs can occur simultaneously with the do-

mestic phase or soon after the domestic phase at an accelerated speed. This is the 

main factor that differentiates INVs from the traditional models of internationalization.  

 

Oviatt and McDougal (1994) name four types of INVs which are based on the number 

of countries they operate in as well as the coordination of the firm’s value chain activi-

ties: Export Start-up, Multinational Trader, Geographically Focused Start-up, and Global 

Start-up. Perhaps the most radical form of INV is called a born global (BG) which was 

defined as “small, technology-oriented companies that operate in international mar-

kets from the earliest days of their establishment” by Knight & Cavusgil (1996). BGs can 

also be defined as “a new venture with a global niche market focus from day one” 

(Moen et al. 2008). In contrast to the limited resources that usually restrict new busi-

nesses, BGs conduct international sales from the early stage after the inception (Ca-

vusgil & Knight 2009). They grow in numbers and challenge the traditional views on 

internationalization which was long dominated by MNEs (Knight & Cavusgil 2004). Ovi-

att & McDougall (1994) argue that INVs which internationalize fast have existed for 

years, but researchers have overlooked them as an important group in the global mar-

ketplace. The INVs have distinguishable characteristics compared to the traditional in-

ternational firms. The emphasis of the INV concept lies within entrepreneurial behavior 

and its implications to global startup creation. This behavior is one of the key elements 

in explaining the birth of INVs (Oviatt & McDougall 1994). 

 

 



15 

 

Figure 1. Types of International New Ventures (Oviatt & McDougall 1994: 59) 

 

2.2 Pre-internationalization phase 

The pre-internationalization phase is a rarely studied topic in the internationalization 

literature. Wiedersheim-Paul et al. (1975; 1978) consider it in their pre-export model. 

The model stresses the pre-export activities of the firm as an important explanation for 

the start of exporting and internationalization process. The authors highlight the im-

portance of organizational learning of the firm which happens in the phase before ex-

porting and include factors, such as, characteristics of the decision-maker, enterprise 

environment, extra-regional expansion of the firm, and information. In the pre-

internationalization phase, experience is accumulated through constant interaction 

between the firm and its environment. Wiedersheim-Paul et al. (1978) focused on do-

mestically owned manufacturing firms that start as non-exporters selling only to local 

markets before export start. The proposed model can be treated as a basic model upon 

which the later models are built. 

 

The first aspect of the model is the characteristics of the decision-maker that have an 

impact on the firm’s behavior in the pre-export phase. These characteristics operate at 



16 

two levels in the pre-export model: in influencing factors and in influencing their per-

ception. For example, exposure to attention-evoking factors and perceiving them can 

be higher with a person who has gained experience from earlier involvement in inter-

national operations. A decision maker’s former experience combined with his/her val-

ue system creates a value profile that is complex to measure. However, Wiedersheim-

Paul et al. (1978) state that the most important aspect of the value profile is the deci-

sion maker’s international outlook. A person with a high degree of international orien-

tation is likely to be exposed to attention-evoking factors as well as perceiving them 

which will have an impact on the firm’s behavior in the pre-export phase. 

 

The second explanatory factor of the model is the domestic environment and location 

of the firm, especially from the information flow -perspective (Wiedersheim-Paul et al. 

1978). The authors state that urban areas are favorable places for firms due to the en-

terprise environment. These areas tend to create information centers that can benefit 

export-seeking firms in many ways. By operating in an information center firms’ per-

sonnel are exposed to an environment that contains exporting firms and can therefore 

create positive attitudes towards exporting and international activities. According to 

the authors, information centers create face-to-face situations which tend to change 

attitudes. On the other hand, domestic locations away from information centers can be 

a disadvantage due to lack of exposure to information flows and cause firms to suffer 

from spatial bias. (Wiedersheim-Paul 1978). However, it needs to be taken into account 

that the model is more than 40 years old and the environment in which many SMEs 

operate is nowadays different. The recent development of information technology has 

changed the operating environment and the importance of physical location might not 

be as important as it used to be. 

 

The authors have selected four characteristics of the firm which are of special im-

portance in the pre-export phase (Wiedersheim-Paul et al. 1978). These characteristics 

are goals of the firm, product line, history of the firm, and extra-regional expansion. 

The authors state that the desire for sales stability with growth was the most frequent-



17 

ly mentioned reason for firms’ to consider expanding operations to foreign markets. 

Export operations can offer other sources of sales and growth which makes the firms 

less vulnerable to possible fluctuations in their domestic markets.  Products can be 

described in different dimensions. The degree of standardization and degree of com-

plexity are stated in the model. However, the authors argue that the most important 

factor of the product line is the software/hardware relationship in the total amount of 

sales. According to Wiedersheim-Paul et al. (1978) products with less software are eas-

ier to sell since there is less information flow between seller and customer. Products 

with higher software content require more information flow and closer contacts which 

decreases the possibility of outside firms getting new orders. This might have been the 

case in the late 1970s, but it is certainly not the case anymore. Internet and IT are eve-

rywhere, and a significant number of new firms concentrate on creating software. 

 

The history of the firm is an important factor in the pre-internationalization phase. Past 

behavior and actions may constraint the firm’s ability to respond to new situations and 

adapt to new strategies. History does not determine the future, but it has an impact on 

the expected future operations. Extra-regional expansion is also mentioned in the 

model, and it means that firms move to less familiar territories within the country of 

origin and might face different barriers due to different operational environments. 

Some of the barriers which the firm encounters during its extra-regional expansion are 

similar to those of foreign market expansion. In both situations, barriers are overcome 

and the firm develops skills to solve problems the relat foreignness of the distant mar-

ket is reduced. (Wiedersheim-Paul et al. 1978). However, the differences between dif-

ferent regions within several countries as well as the differences between countries 

around the globe have generally reduced due to the hive level of IT. They still do exist, 

but might not be as strong as they used to be in the late 1970s. 

 

The last aspect of the pre-export model is the attention-evoking factors. These are fac-

tors or influences which cause a firm to consider export activities as a possible strategy. 

Sometimes attention evoking factors can be latent but only in their active form they 



18 

are included in the pre-export model. They can be divided into two categories which 

are internal attention-evokers and external attention-evokers. Internal attention-

evokers are unique competence which refers to a situation in which the firm has al-

ready developed a unique competence that can be spread further to international 

markets and the opportunity cost of the asset is very low or even zero. Another inter-

nal attention-evoker concerns the excess capacity of resources. 

 

 

Figure 2. Factors affecting the Pre-Export Activities of the Firm (Wiedersheim-Paul et al. 

1978: 48) 

According to Tan et al. (2005), the pre-export model has some similarities with Uppsala 

Model from Johanson & Vahlne (1977) since both define internationalization as phases 

or stages which create a path. Once a firm has accumulated enough knowledge and 

experience it can proceed to the next stage and continue learning. However, the Upp-

sala model starts from the commencement of internationalization while the pre-export 

model highlights the phase before the expansion into foreign markets. The pre-export 

model was later also tested through a multiple-case study (Caughney & Chetty 1994). 



19 

After the research, there has not been a significant scholarly interest in the pre-

internationalization stage. It seems that focusing on new domains of internationaliza-

tion, such as born globals, and the network perspective has shifted researchers’ inter-

est away from questions of the origin of internationalization and the pre-

internationalization period. 

 

The interest of the research community to study further the pre-internationalization 

remained at a low level until 2005 when Tan et al. published their study of firms’ activi-

ties and development before the export start. The authors use the term export start as 

a synonym for what is understood as the start of internationalization in this study. Tan 

et al. (2005) point out that the inadequate knowledge of the pre-internationalization 

phase is a research gap in theories that are based around the Uppsala model. They 

argue that while the Uppsala Model explores the incremental process of acquiring 

knowledge and increasing the foreign market commitment there is a pre-

internationalization phase occurring before the foreign market commitment described 

in the Uppsala model (Tan et al. 2005). In other words, the authors introduced an idea 

that there would be a stage before the start of international operations and the inter-

nationalization does not appear, all of a sudden, from nowhere. As an attempt to es-

tablish a connection from the pre-internationalization phase to an international firm, 

Tan et al. (2008) propose an Internationalization Readiness Index (IRI) which was pub-

lished in 2008. The authors created the IRI as a diagnostic tool that could be used to 

assess a firm’s receptivity to commence its international activities. The IRI is based on a 

survey of 274 Australian exporting and non-exporting firms which were selected ran-

domly from all industries (Tan et al. 2008). The authors identified four fundamental 

concepts which are proposed as a basis for the construction of the IRI. These four con-

cepts are internal and external stimuli, firm resources, attitudinal/psychological com-

mitment, and lateral rigidity. 

 

The first concept of the IRI is the internal and external stimuli. Both impact on firms’ 

initial international involvement as well as their following development (Bilkey 1978; 



20 

Leonidou 1995). There are several important internal stimuli for export. For example, 

the nature of the product in terms of its innovation, nature of input and degree of 

standardization (Vernon 1966), characteristics of the firm and its management (Wie-

dersheim-Paul et al. 1975; Oviatt & McDougall 1994), knowledge and experience of 

network relationships (Hakansson 1982). The second concept is the firm’s tangible and 

intangible resources are an important factor for firms’ long-term sustainable long-term 

competitive advantage especially in the resource-based view (Wernfelt 1984). Tangible 

resources include financial or human-related attributes, product attributes, investment 

in research and development. (Tan et al. 2005; 2008). 

 

The third concept of the IRI is attitudinal/psychological commitment. It tends to take 

place at the pre-internationalization stage when a decision-maker is exposed to a stim-

ulus or a triggering factor. Decision-maker starts to seek information and to evaluate 

different possible strategies regarding the future of the firm. This happens due to psy-

chological and attitudinal commitment to the idea of internationalization. This impulse 

might not lead to the expansion of the firm’s operations to foreign markets. However, 

firthe m may continue to explore the opportunities of internationalization which can 

lead to the involvement of resources in internationalization. Resource commitment 

happens only after the decision-maker decides to engage in the internationalization 

process. (Tan et al. 2005; 2008). 

 

The fourth concept is lateral rigidity which is a behavioral characteristic. It causes re-

sistance in decision making and acts as a moderating effect in the process (Luostarinen 

1979). Lateral rigidity refers to a restricted perception of stimuli factors and the inabil-

ity of the firm to react due to different reasons. According to Luostarinen (1979), the 

reasons are resources constraint, a biased search that results in limited information, or 

confinement of choices because of risk avoidance and uncertainty. Lateral rigidity helps 

to understand the unpredictable actions firms take in their internationalization deci-

sions. When lateral rigidity is included in the index it provides a more complete expla-

nation as to why firms might not proceed internationalization process regardless of the 



21 

sufficient information and exposure to stimuli. Due to this factor, the firm might not 

engage in international operations but remains in the pre-internationalization phase 

(Tan et al. 2005; 2008). 

 

After the publication of the IRI, the authors continued their research and introduced a 

multiple-item index which is called the Export Readiness Index (ERI) (Tan et al. 2010). It 

was created through a survey of 290 Australian SMEs and, as a result, they introduced 

an 8-factor model which serves as a practical tool for both exporting and non-exporting 

SMEs. For a non-exporter, the ERI offers an opportunity to better understand what is 

needed for exporting, and for exporting firms it offers a better understanding of their 

strengths and weaknesses. The ERI consists of 8 factors which are presented in table 1. 

All other factors are drivers for export readiness except factors 5 and 6 which act as 

inhibitors. The factors are presented in the table below with explanations. 

  



22 

1. Market similarities and 

advantages 

Perception by the decision-maker that a potential export 

market shares similarities with the domestic market in 

terms of culture and language, and as a stable currency 

exchange rate. 

2. Growth and profits  

potential 

Perception by the decision-maker that there are addi-

tional profits and growth prospects for the firm through 

engaging in export operations. 

3. Limited growth and  

profits 

Perception by the decision-maker that the firm’s domes-

tic market has limited scope for expansion and that  

profits derived through local sales could be declining. 

4. Market evaluation and 

assessment 

Decision-makers’ response to export stimuli through an 

internal and external assessment for export feasibility. 

5. Satisfaction,  

complacency, and  

aversion to changes 

Decision-makers’ unwillingness to respond to export 

stimuli due to satisfaction with the firm’s current state of 

operations. 

6. Limited knowledge and 

experience 

Decision-makers’ unwillingness to respond to export 

stimuli due to lack of knowledge and experience in ex-

port operations and requirements. 

7. Managerial competence Decision-makers’ perception is that the firm has resource 

strength in the form of competent managers who are 

driven by the benefits of exporting. 

8. Network membership  

and ties 

Decision-makers’ perception that the firm has resource 

strength in the form of network membership and busi-

ness ties with other firms. 

 

Table 1. The eight factors of the Export Readiness Index (Tan et al. 2010; 17-18) 

 



23 

2.3 SME decision making 

Decision making is a crucial function of every organization regardless of its size. Accord-

ing to Rogers & Blenko (2006) “every success, every mishap, every opportunity seized 

or missed is the result of a decision that someone made or failed to make”. Fast im-

plementation of good decisions, eventually, determines the performance of an organi-

zation (Rogers & Blenko 2006). The interest towards the decision-making process of 

SMEs’ and the decision making concerning the internationalization of SMEs is evident. 

The success of SMEs’ is largely dependent on their strategic decision making (Robinson 

& Pearce 1983). Regardless of the interest towards SMEs and entrepreneurial firms, the 

decision-making process in these firms is still largely unexplored (Ogarcă 2010). SMEs 

play a key role in the modern market economy which means that the strategic deci-

sion-making of SMEs’ can be considered essential for the whole of economic develop-

ment. 

 

SMEs’ decision making differs from that of large firms (Wilson & Nutt 2010). Many de-

cision-making theories are developed for multinational enterprises (MNEs) and, are 

then extrapolated to SMEs (Aharoni et al. 2011; Hauser et al. 2019). This does not work 

since SMEs are structurally different and behave differently (Knight & Liesch 2016). 

There are several reasons why SMEs’ decision making differs from that of MNEs. SMEs 

are usually led by one or a few individuals which leads them to follow individualized 

leadership (Oviatt & McDougall 1994; Vershinina et al. 2017). Individualized leadership 

means that managers’ and leaders’ characteristics, actions, and interpretations are 

likely to affect strategic decisions including internationalization decisions (Hsu et al. 

2013; Nielsen & Nielsen 2011; Nordman & Melén 2008). SMEs also tend to face greater 

information scarcity during their internationalization (Buckley 1989) and are likely to 

rely significantly on information from network partners and connections (Vershinina et 

al. 2017). The scarcity of information, as well as other resources, combined with deci-

sions taken by few individuals, may lead to situations in which resource scarcity has a 

greater impact on decisions than “rational pursuit” of clear strategic goals (Evers & 

O’Gorman 2011). 



24 

 

Ogarcă (2010), states that organizational decision making identifies three important 

components which are in constant interaction with each other. These components are 

the environment, the decision-maker (in SMEs it is usually the owner-manager), and 

the strategic process itself. Traditionally, most theories about decision-making highlight 

three main components: the environment, the specific characteristics of the decision 

to be taken, and the entrepreneur. In the context of SMEs, the three most common 

determinants are the top management team, environment, and firm resources (Mitch-

ell et al. 2011). According to Busenitz & Barney (1997), entrepreneurs are more suscep-

tible to heuristics and decision-making biases than decision makers in large organiza-

tions. The framework for entrepreneurial decision making is presented in figure 3. 

 

 

 

Figure 3. A Framework for Entrepreneurial decision making (Ogarcă 2010: 9) 

Several models illustrate the decision-making process. They aim to provide a compre-

hensive interpretation of the decision-making process as possible. However, all firms 

are different and have their own characteristics in their decision-making process. There 

are, still, some basic elements that are present in most SMEs and the model from Og-

arcă (2010: 13) can be used as an illustration of an average SME decision-making pro-



25 

cess. It is somewhat an average illustration of the main stages and moments of an SME 

decision-making process. The process is presented in figure 4. 

 

 

 

Figure 4. Developed model of the decision-making process by SMEs (Gibcus & Van 

Hoesel 2004: 5) 

The first step of the decision-making process is the generation of an idea which is typi-

cally a result of an incubation process. According to Gibcus & Van Hoesel (2004), it is 

usually the first idea that develops into a decision with only a small amount of adjust-

ments. The authors argue that it is an indication of the predominance of emotional 

elements. Regardless of the absence of pressure in the decision-making process, the 

entrepreneurs tend not to develop alternative solutions for the original idea at the ear-

ly stage. Before proceeding to the next stage, a trigger and an informal decision are 

needed. At this point, there is always a possibility to make the no-go decision which 



26 

moves the process back to the first stage of generating the idea. The trigger acts as a 

stimulus that determines the decision maker or the entrepreneur to clarify the idea. 

When the informal decision is taken it is not written. It embodies as an intention in the 

entrepreneur’s mind and can be observed, for example, as a verbal agreement be-

tween the associates. After the informal decision, the whole process continues to the 

second stage that is called the elaboration of the idea. (Gibcus & Van Hoesel, 2004). 

 

At the second stage, different alternatives are evaluated and analyzed. However, the 

authors argue that the alternatives are usually not real alternatives but some shadings 

around the original idea. The alternatives might not challenge the basic idea and they 

are evaluated practically only from the economical perspective which means compar-

ing costs and benefits. Usually, the original idea stays unaffected. In this stage, third 

parties, such as bankers, advisers, employees are also consulted. All the possible risks 

and obstacles concerning the idea are diagnosed. Regardless of the correct evaluation 

of risks and obstacles, the entrepreneur tends to overtop the problems. After the sec-

ond stage, there is a crucial moment of the process – the formal decision which leads 

to the third and final stage of the decision-making process. The third stage is the im-

plementation of the idea. The main problems associated with this stage are the finan-

cial ones. The possible difficulties which are encountered in this stage do not discour-

age the entrepreneur nor force them to revise their decisions. If the idea has reached 

the point of implementation, it is rarely canceled even if there was a good reason to 

stop the implementation. (Gibcus & Van Hoesel 2004). The decision-making process 

model of Gibcus & Van Hoesel (2004) is only one way of approaching the decision mak-

ing of SMEs. However, there are other approaches to the decision-making logic. The 

theory of causation and effectuation concentrates more on entrepreneurial SMEs and 

the reasoning behind the decision-making logic. 

  



27 

2.3.1 Causation and effectuation 

Sarasvathy introduced the theory of effectuation at the beginning of the 2000s (2001; 

2008) as an approach to understand the creation of new ventures under conditions of 

uncertainty using the concept of decision-making logic. She proposed the theory after 

studying how expert entrepreneurs think about problems and different ways of solving 

them. Effectuation means that the decision-maker has a set of means or resources, and 

he/she makes the most of it. Effectuation explains how entrepreneurs can make deci-

sions based on resources they already possess rather than making decisions based on 

pre-selected goals. When following the effectual logic, the entrepreneur starts by 

building on the existing resources with the help of his/her knowledge and contacts 

aiming towards new effects and unanticipated ends rather than pre-selected goals. 

Effectuation is based on resources that the firm or entrepreneur already possesses ra-

ther than defining clear goals. (Sarasvathy 2001; 2008). 

 

Effectuation works by identifying the further step by assessing the resources available 

to achieve goals, while continuously balancing these goals with available resources. It 

has special importance in situations where the future is unknowable or human agency 

is of primary importance. In her theory, Sarasvathy (2001; 2008) explores techniques of 

non-predictive control for creating new firms, markets, and economic opportunities. 

Effectuation can be defined as the logic of thinking which can be utilized by entrepre-

neurs to start businesses and take actions. It provides a tool to control the unpredicta-

ble future. Effectuation helps entrepreneurs to operate in situations in which the future 

is not only unknown but unknowable. By following the effectual logic entrepreneurs 

can shape the future and minimize the need to predict it. The effectuation approach 

contrasts with the causation approach in which a particular effect is taken as given and 

the entrepreneur focuses on selecting the means to create that effect. (Sarasvathy 

2001; 2008). 

 

Causation is a decision-making logic, which aims to reach goals that have been set in 

advance by following causal paths and minimization of unexpected outcomes. To reach 



28 

the goals decision-maker chooses the best means available to reach the pre-selected 

goals. Causation is traditionally used in management and economics as an approach to 

explain the operations of a new business venture (Mäkimurto-Koivumaa & Puhakka 

2013). It is described as a planned and rational approach to decision-making. Causal 

reasoning works so that first the goal is set and then the necessary means are chosen 

to reach the goal. Causation first targets a return, and then works to minimize associat-

ed risk. It tries to minimize the probability of unexpected outcomes and to reach the 

goal effectively. The reached outcome can be compared to the original goal and the 

performance can be evaluated. 

 

According to Sarasvathy (2001), the most common process to create a new business 

following the causation approach includes defining the total market (segmentation), 

choosing the target market (targeting), and choosing the position in the target market 

(positioning). The whole process is based on the prediction about the estimated size of 

the target market and the expected market share. The risk is minimized by gathering as 

much information to support the decision process as possible. Information is collected 

from several sources (statistics, market analysis) which require time and resources. By 

using the causation approach the entrepreneur goes through several steps, including 

defining the goal or decision to be made, deciding the set of alternative means, con-

sidering possible constraints and specifying the criteria for selecting between the 

means (Sarasvathy 2001). Entrepreneurship and entrepreneurial opportunities are of-

ten thought to be born following the causal logic. However, this is a mistake concerning 

entrepreneurship (Mäkimurto-Koivumaa & Puhakka 2013; Sarasvathy 2004). Genuine 

entrepreneurship is a creation of different entrepreneurial opportunities in which the 

initial situation as well as the end situation, are largely unknown (Sarasvathy et al. 

2003). 

 

2.3.2 Five principles of effectuation 

There are five principles in effectual logic. The first principle is the “Bird-in-hand princi-

ple” which focuses on starting with available means. The entrepreneur asks questions, 



29 

such as, who I am, what I know, and whom I know. The idea is to perform actions based 

on the means available and create opportunities that originate from resources availa-

ble for entrepreneurs. (Sarasvathy 2001; 2008). 

 

The second principle is called the “Affordable-loss principle” which focuses on limiting 

the risk by investing only the amount of resources that the entrepreneur is willing to 

lose. He/she understands what can be lost at each step of the process. The next step is 

taken within the constraints of the accepted risk level. By doing this the entrepreneur 

ensures that not all is lost if the downside ends up happening. The venture does not 

end if something unexpected happens since only the predefined amount of resources 

is lost. (Sarasvathy 2001; 2008). 

 

The third principle is the “Lemonade principle” which means identifying difficulties as 

possibilities. Mistakes and adversities are inevitable, and they are a part of entrepre-

neurial activities as well as part of every new venture. Instead of letting “bad news” to 

end projects, the entrepreneur interprets them as opportunities for development and 

learning. These surprises are seen as drivers for the firm to find new solutions and to 

create new markets. Eventually, these difficulties are the drivers of the firms’ long-term 

success. (Sarasvathy 2001; 2008). 

 

The fourth principle is the “Patchwork-quilt principle” which encourages entrepreneurs 

to form partnerships with people and organizations that are willing to make real com-

mitments and jointly creating the future product, firm, or market with the entrepre-

neur. It is important for entrepreneurs to enter collaborations and partnerships at an 

early stage of the venture to bring new resources into the project The partnerships are 

formed with self-selected stakeholders and provide reduction of uncertainty. The en-

trepreneur is encouraged to find partners who are willing to commit rather than find-

ing partners who might not be available or motivated to participate. (Sarasvathy 2001; 

2008). 

 



30 

The fifth principle is the “Pilot-in-the-plane principle” which encourages entrepreneurs 

to control activities within their reach rather than trying to predict the future. By con-

centrating on the activities within control it is probable to reach desired outcomes. By 

creating constantly desired outcomes the entrepreneur is eventually “creating the fu-

ture” through his/her actions. The core idea of the effectual approach or effectual 

worldview is that future is neither found nor predicted but made through following the 

principles of effectuation. Not everything can be shaped, but effectuation encourages 

entrepreneurs to as a “pilot of the new venture” to focus on aspects that are, to a cer-

tain degree, within their control. (Sarasvathy 2001; 2008). 

 

 

 

Figure 5. Effectuation in Action (Society for Effectual Action) 

 

2.3.3 Causal vs. effectual reasoning 

Causation and effectuation are both rational approaches to decision making, and they 

do not contradict each other, but rather complement. Regardless of complementing 



31 

each other, the two approaches have different points of view as to the five essential 

aspects on which the decisions are based. 

 

Effectuation bases on non-predictive control while causation aims for predictive con-

trol. Effectuation theory argues that expert entrepreneurs tend to use the logic of non-

predictive control to transfer the means at hand into new results that they may not 

have initially envisaged (Yates & Tschirhart 2006). Non-predictive control can be de-

fined as abandoning the predictive information in favor of what the decision-maker 

and stakeholders can control (Wiltbank et al. 2006). The non-predictive logic is in which 

the decision-maker chooses between the available means based on calculations or es-

timations about pre-selected goals. The non-predictive approach of effectuation differs 

significantly from causation in which the prediction of future outcomes plays an im-

portant role, and the unexpected outcomes are minimized. 

 

Effectuation concentrates on means-driven action while causation aims at goal-driven 

action. In effectuation the basic starting point is seen as a given set of means and the 

effort is allocated to generating new outcomes by effectively using the given means. 

This can be seen as opposite to causal logic which selects the goal first and after that 

between given means or acquiring means to reach the selected goal. A good example 

of the difference is a chef who prepares a meal with a recipe (causal) versus another 

chef who imagines possible means from ingredients available (effectual). (Sarasvathy 

2001; 2008). 

 

Effectuation concentrates on the affordable loss while causation aims at expected re-

turns. In the effectual approach, calculations do not determine the choice of projects, 

but the choice of projects depends on the decision makers’ assessment about how 

much the firm is willing to lose if things do not work out. In other words, the effectual 

reasoning is based on the principle of affordable loss. Causation takes a different point 

of view and highlights the importance of expected returns. The entrepreneur tries to 

predict the outcome and tries to reach the expected return. (Sarasvathy 2001; 2008). 



32 

 

Effectuation prefers partnerships while causation prefers competitive analysis. Mata-

lamäki (2017) states that when entrepreneurs work with partners who are willing and 

able to help to shape future outcomes, uncertainty is reduced. The effectual approach 

highlights the importance of building partnerships and bringing different stakeholders 

aboard already during the early stages of the new venture regardless of not knowing 

exactly what the end goals for the venture are going to be. (Sarasvathy, 2001; 2008). 

 

Effectuation prefers leveraging while causation aims at avoiding contingencies. The 

effectual approach usually means that the entrepreneur is likely to experience various 

surprises during the venture. In a causal approach, it is important to minimize all the 

risks which may occur during the venture. (Sarasvathy, 2001; 2008). According to Den-

rell & March (2001) in the causal approach, it is important to avoid all types of surpris-

es – negative as well as positive. The entrepreneur who is operating by the effectual 

logic needs to be prepared for whatever problem he/she might encounter during the 

venture and to learn to turn these problems into new opportunities. 

 

Figure 6. Causal vs. Effectual Reasoning (Society for Effectual Action) 



33 

3 Methodology 

3.1 Research philosophy and approach 

According to Collis & Hussey (2014: 43), “a research philosophy is a framework that 

guides how research should be conducted based on ideas about reality and the nature 

of knowledge”. It can also be referred to as “a system of beliefs and assumptions about 

the development of knowledge” (Saunders et al. 2009: 124). There are five major phi-

losophies in business and management: positivism, critical realism, interpretivism, 

postmodernism, and pragmatism (Saunders et al. 2009). The interpretivist philosophy 

is chosen for this thesis since it is in accordance with the author’s beliefs about how 

the research in social sciences should be conducted and it also provides the best tool 

for answering the research question. Interpretivism means that there is not only one 

objective truth but many subjective interpretations of reality. The interpretations are 

dependent on peoples’ personal views, values, and the context of the research. Even-

tually, the goal of interpretivism is to create deeper understandings and richer interpre-

tations of social worlds and contexts (Saunders et al. 2009). In this thesis, the author 

aims at creating a deeper understanding of the decision-making logic within the case 

firm. Consequently, all the interviewees of this research expressed their interpretation 

by answering the author’s open questions. The researcher himself/herself affects the 

studied phenomenon since the only way to conduct the research is by interfering with 

the research target. 

 

According to Collis & Hussey (2014), there are two main research approaches: deduc-

tive and inductive. This study uses the inductive approach. Collis & Hussey (2014:7) 

state that “inductive research is a study in which theory is developed from the observa-

tion of empirical reality; thus, general inferences are induced from particular instanc-

es”. Lodico et al. (2010: 10) point out, that “inductive reasoning is often referred to as a 

“bottom-up” approach to knowing, in which the researcher uses observations to build 

an abstraction or to describe a picture of the phenomenon that is being studied”. In-

ductive research involves moving from individual observations to more general pat-



34 

terns or laws (Collis & Hussey 2014). The inductive research approach was chosen for 

this study since it offers the advantage of not imposing pre-specified conceptual mod-

els to the case firm but rather explores how the effectual approach is interplaying with 

the causal approach in the firm’s decision making. The inductive approach allows the 

author to analyze the data and then propose a model which arises from the study ra-

ther than imposing a pre-constructed theory or model on the case firm 

 

3.2 Research strategy and purpose 

Quantitative and qualitative approaches are the two main methods of making re-

search. This thesis uses the qualitative method which can be defined as “any kind of 

research that produces findings not arrived by means of statistical or other means of 

quantification” (Strauss & Corbin 1990: 17). Qualitative research attempts to under-

stand different phenomena in a “real-world settings and the researcher does not at-

tempt to manipulate the phenomenon of interest” (Patton 2002: 39).  Myers (2013: 23) 

emphasizes that one of the key benefits of the qualitative method is that it allows the 

researcher to see and, also, to understand the context in which actions and decisions 

take place. According to Hirsijärvi et al. (2009), qualitative research requires compre-

hensive data collection that is performed in natural situations. The qualitative method 

is suitable for this thesis since the theoretical framework is built upon effectuation 

which, as a theory, is in a development state that allows either qualitative or quantita-

tive methods to be used. According to Matalamäki (2017), the effectuation research 

has accelerated and undergone a revival which has led to an increase of empirical field 

studies and a decrease of conceptual articles. The author states that the theory is in 

the transition stage toward a mature stage and both methods, qualitative and quantita-

tive, are used in current papers (Matalamäki 2017).  

 

The case study method is the most common method in academia for researchers inter-

ested in qualitative research (Baškarada 2014). Groenland & Dana (2019: 35) argue that 

“a case study is a detailed investigation of a social unit, at times one entrepreneur or a 

firm. The research of a case study is to describe one or more cases in depth and to ad-



35 

dress research questions and issues”. According to Yin (2009: 18) “a case study is an 

empirical inquiry that investigates a contemporary phenomenon in depth and within its 

real-life context, especially when the boundaries between phenomenon and context 

are not clearly evident”. The case study strategy was chosen for this study since it is a 

useful tool for in-depth and diverse explorations of complex issues in their real-life cir-

cumstances. Another reason for choosing the case study strategy is that it is a suitable 

research strategy for keeping the study focused and manageable within the available 

resources. There is only a limited amount of time for the study and when combined 

with the chosen strategy the optimal overall value is reached. 

 

Zainal (2007) states that there are two different ways of conducting a case study: sin-

gle-case or multiple-case design. This study is a single-case study since there is one 

individual case firm. Zainal also points out that “In cases where there are no other cas-

es available for replication, the researcher can adopt the single-case design” (Zainal 

2007: 2). According to Yin (1994), single-case studies can be used, for example, to con-

firm or challenge a theory, or to show a unique or extreme case (Yin 1994). In this 

study, the case firm’s situation offers a unique and interesting case that allows the 

study of the decision-making before expansion to foreign markets. Therefore, the case 

can be regarded as unique within the available resources. According to Tellis (1997), 

the use of a single-case design requires careful investigation to avoid misrepresentation 

as well as to maximize the researcher’s access to the evidence. The author has collect-

ed and analyzed the data in such a manner, that an objective and thorough outcome is 

reached. 

 

Yin (1984) states that there are three common categories of case studies: exploratory, 

descriptive, and explanatory. This thesis uses the exploratory case study since the goal 

of this study is to explore and achieve familiarity with the chosen topic. Explorative 

research is often linked with the early stages of new research topics, and it fits this 

study since there is no prior research about the decision-making logic in the context of 

pre-internationalization. Both topics have been studied on their own, but according to 



36 

the author’s review of academic literature, the two topics have not been combined yet. 

This fact supports the selection of an exploratory case study. This study aims at better 

understanding the phenomenon and creates a foundation for future research. 

 

3.3 Data collection and analysis 

Empirical data for this thesis have been collected through six interviews in late April 

and early May of 2021. This has been done by conducting interviews with the employ-

ees of the case firm as well as with the CEO. Interviews were conducted in natural situ-

ations during office hours, but the covid-19 pandemic affected the gathering of data. 

Most people worked from home due to restrictions of face-to-face meetings by the 

Finnish authorities. Besides interviews, some background variables were collected by 

e-mail, and they are presented in the table below. Interviews consisted of ten main 

open questions that were designed to produce answers that give information about 

the decision-making logic of the case firm. Open questions were preferred since the 

interviewer wanted to receive as comprehensive answers as possible. At the same 

time, the questions were tied to the overall framework of pre-internationalization in 

which the firm operates currently. After each main question, the interviewer asked 

follow-up questions to receive more detailed information as well as to specify the ar-

guments. Specifying questions varied depending on the interviewee’s answers since 

they represented different functions of the firm and had more to say on the topics 

which were related to their field of expertise. Each main question had several follow-up 

questions that were constructed beforehand, and the interviewer used them as a basis 

to guide the discussion in the desired direction. It was also possible to ask follow-up 

questions “out of the box” which made every interview unique. Interviews followed 

the ten main questions and then took unique paths when follow-up questions were 

asked. The aim was to provide as much space as possible for the interviewees to speak 

in their own words. 

 

The six interviews form the primary data. Five of the six interviews were conducted via 

Microsoft Teams and one interview was conducted face-to-face at the office of the 



37 

case firm in Vantaa. The interviewer suggested face-to-face interviews as the first op-

tion and if it was not possible the interview was conducted by Microsoft Teams. One 

employee agreed on meeting at the office while most preferred to answer online. The 

interviewees were selected based on the priorities of the interviewer. The interviewer 

wanted to interview people from every main operation as well as the CEO. The inter-

viewees should be able to answer the questions about decision-making which means 

that they hold this information within their field of expertise. All the interviewees ac-

cepted the invitation and participated. Questions were translated into Finnish and sent 

to the HR manager to be checked. The aim of the check was mainly to make sure that 

the chosen people were able to answer and discuss the topic. 

 

Five interviews were recorded with Microsoft Teams recording function and one was 

recorded with a mobile phone application. The typical duration of one interview was 

approximately 40 minutes. The length of all interviews ranged from 23 minutes to 76 

minutes. All interviews were conducted in Finnish since it is the native language of all 

the people participating in the process. The material was later transcribed by writing 

down the strongest arguments with Microsoft Word. The overall length of the tran-

scriptions was 49 pages (Calibri, size 12, spacing 1,5). During the transcription process, 

the language changed from Finnish to English since the data were collected in Finnish. 

Transcriptions were used as raw data which formed the basis for the qualitative analy-

sis. 

 

 

 
  



38 

Position Gender Age group Years in the firm International 

working years 

Marketing  

Coordinator 

Female 30-40 years 0-1 3 years in Ger-

many 

Head of  

Partnership  

Success and  

development 

Male 30-40 years 0-1 No 

Head of Product 

Management 

Male 30-40 years Over 5 No 

Head of  

Customer  

success 

Male 30-40 years Over 5 No 

Head of HR and 

Administration 

Female 30-40 years 1-3 No 

CEO Male 40-50 years 3-5 No 

 

Table 2. The background information of interviewees 

 
 

  



39 

Acronym Date of the interview Duration of the  

interview 

Interview method 

Marketing  

Coordinator 

29.4.2021 40 minutes Microsoft Teams 

Head of Partnership 

Success and  

Development 

30.4.2021 40 minutes Microsoft Teams 

Head of Product  

Management 

3.5.2021 23 minutes Microsoft Teams 

Head of Customer 

Success 

4.5.2021 43 minutes Face-to-Face 

Head of HR and Ad-

ministration 

14.5.2021 34 minutes Microsoft Teams 

CEO 14.5.2021 76 minutes Microsoft Teams 

 

Table 3. Overview of the interviews 

 

The collected raw data were analyzed by identifying four categories from the answers 

and analyzing how decisions are being made within every category. The four categories 

are objective, product, network, and resources. The division is based on the idea of 

four main themes behind the questions as well as on the idea of presenting the analy-

sis to the reader as clearly as possible. Each answer from the open questions was cate-

gorized into one of four categories. This way the raw data were divided into smaller 

chunks and were analyzed more in detail. Within each category, answers were inter-

preted to support either causal logic or effectual logic. Causation was recognized from 

pre-set goals and from words, such as “goal”, “plan”, and “survey”. Effectuation was 

recognized from not having pre-set goals and from words, such as “improvisation”, 

“adaptation”, and “reaction”. Another interpretation was made about the interplay of 

causal and effectual logic. After the interpretation, a conclusion about the decision-

making logic was made. The conclusion indicates which logic is more dominant in that 

category and how the two logics interplay. Conclusions are supported by the most de-



40 

scriptive quotes which give more detailed information about how the interviewees 

expressed their thoughts. 

 

3.4 Quality of the study 

Reliability and validity are tools to measure the quality of the collected data as well as 

the quality of the whole study. In what follows, these two aspects of the study are ex-

plained. 

 

3.4.1 Reliability and validity 

Reliability means whether the data collection and analysis techniques produce con-

sistent results. In other words, the results of the analytical procedure can be performed 

by other researchers for other studies. (Saunders et al. 2009; 2012). Reliability can be 

described as the degree to which reliable conclusions can come from the data collec-

tion method or analytical procedures. It is the degree to which results are consistent 

with the analysis. According to Easterby-Smith et al. (2008), reliability can be tested 

through three questions: 

 

1. “Will the results yield the same results on other occasions? 

2. Will similar observations be reached by other observers? 

3. Is there transparency in how sense was made from the raw data?”  

 

According to Robson (2002: 176), there are four types of reliability threats. The first 

one appears when the interviewee does not answer the question or keeps neutrality. 

The second threat appears when the interviewee is told beforehand how to answer. 

The third threat appears when the interviewer has formulated the questions poorly or 

incorrectly, and the fourth threat is associated with the incorrect interpretation of the 

answers by the interviewer 

 



41 

According to Sanders et al. (2009) validity refers to whether the findings are really what 

they appear to be. Yin (2009) mentions three different approaches to validity: Con-

struct validity, internal validity, and external validity. Construct validity means whether 

corrective measures have been established to the investigated concepts. Internal validi-

ty focuses on whether relationships among concepts are real or spurious. The internal 

validity can also be defined as whether the researcher’s observations are aligned with 

the theoretical output they create (LeCompte & Goetz 1982).  External validity deter-

mines an area where research findings are valid. In other words, the degree to which 

the findings can be generalized (LeCompte & Goetz 1982). 

 

3.4.2 Guba’s four criteria 

Regardless of the fact, that reliability and validity are adopted to measure the overall 

quality of the collected data, there is criticism concerning their usage as tools to meas-

ure qualitative data (Saunders et al. 2016: 204-205). This leads to a situation in which 

some parallel criteria can be used to measure the qualitative data. Sheton (2004) 

points out the original ideas of Guba (1981) and suggests that four criteria can be used 

to evaluate and measure qualitative data: credibility, transferability, dependability, and 

confirmability. 

 

Credibility refers to whether the study measures what it was originally intended. In 

other words, does the study follow what it was supposed to follow or not. In this study, 

a coherent process was conducted and followed. Interview questions were created 

based on the theoretical framework and the suitable case firm was selected. The inter-

view questions were planned in detail to measure the decision making logic and the 

analysis of the data was made objectively using the theory. Every step has been de-

scribed in detail and justified to make the study as logical as possible. However, there is 

always a possibility for humane errors and misunderstandings concerning the process 

since every person involved in the process will have a unique perception and interpre-

tation of questions and conversations. However, a significant amount of time and re-



42 

sources were used to prepare the questions and interviews to be as accurate as possi-

ble. 

 

Transferability refers to the scaling of the results which means that regardless of one 

case firm the results could be generalized to other similar firms in similar situations. 

Shenton (2004) points out that “since the findings of a qualitative project are specific 

to a small number of particular environments and individuals, it is impossible to 

demonstrate that the findings and conclusions apply to other situations and popula-

tions”. Therefore, it is difficult to say whether the results of this study can be applied to 

a wider population. However, it is possible to apply the results to similar Finnish ICT 

SMEs and the results could reflect their situation up to some degree. It is still unlikely 

that the results would be similar. The results of the study as such measure the case 

firm and are, therefore, unique. 

 

Dependability refers to the repetition of the study. According to Shenton (2004) “if the 

work were repeated, in the same context, with the same methods, and with the same 

participants, similar results would be obtained”. It is possible to repeat the study by 

following the identical steps the author has taken during this study. If the study is re-

peated in an identical situation the results would be in line with the results of this 

study. However, due to the cross-sectional time horizon of the study, an identical repe-

tition is impossible. The case firm is developing and will never be in an identical situa-

tion as it was in spring 2021. 

 

The last criterion is confirmability which refers to the qualitative researcher’s objectivi-

ty. According to Shenton (2004) “steps must be taken to help ensure as far as possible 

that the work’s findings are the result of the experiences and ideas of the informants, 

rather than the characteristics and preferences of the researcher”. In this thesis, the 

collected data has been analyzed according to the theoretical framework and the con-

clusion follows the same pattern. The author has used several direct quotes from the 



43 

interviewees to ensure that the ideas and findings arising from the data collected from 

the interviewees. 

 

3.5 Ethics of the study 

Ethical concerns are an inevitable part of the study. Ethics in the research context can 

be defined as “the appropriateness of your behavior in relation to the rights of those 

who become the subject of your work or are affected by it” (Saunders et al. 2007: 178). 

According to Blumberg et al. (2005: 92), ethics is defined as “moral principles, norms or 

standards of behavior that guide moral choices about our behavior and our relation-

ships with others”. Therefore, the author is responsible for conducting the study in 

such a manner that the rights and anonymity of the people involved are respected 

throughout the research process. The author is responsible for reporting the results 

and findings truthfully and precisely. The whole study is conducted so that readers are 

not misled at any point. Furthermore, the author describes extensively the strengths 

and weaknesses of methods as well as the findings and models which have been used 

in the study (Ghauri & Grønhaug 2005; Saunders et al. 2007). Research ethics is sum-

marized by Saunders et al. (2007: 178): “the way you design your research is both 

methodologically sound and morally defensible to all those who are involved”. 

 

The ethical guidelines were followed throughout the research process. The author 

made sure that the interviewees from the case firm were informed about all the details 

regarding the interviews including interview questions. There was a possibility not to 

participate in the study if they feel uncomfortable at any stage of the process. Before 

conducting the interviews all the interviewees were informed about the purpose of the 

interview and how the data would be processed. The author sent the interview ques-

tions to the case firm in advance to make sure there would be no surprises afterward 

and that all the people involved in the study were fully informed at all stages. Special 

attention was paid to information security. All the information received from the inter-

views was kept under the control of the author himself. The data were used only for 

the study, and they were not given or shown to third parties. Full information security 



44 

is difficult to obtain, and it needs to be mentioned that it is possible that people from 

the case firm recognize participants from their answers after reading the study. How-

ever, all the necessary means were taken to provide as high anonymity to the inter-

viewees as possible. 

 

The author has conducted the study according to the means described in the method-

ology section. All the parts of the study have been described in detail and the readers 

have been made aware of all the details concerning the study. Findings and results are 

reported according to the ethical guidelines stated earlier in this chapter. 

 



45 

4 Findings and discussion 

This section presents the findings of the study and propositions derived from the find-

ings. There are four different categories of decisions that have been identified in the 

interviews: target markets, product and competitors, networks, and resources. The text 

below is organized around these categories and provides the most illustrative quotes 

from the interviews to prove the evidence. At the end of each category, there is a 

proposition which states the dominant logic behind decisions of that category. 

 

4.1 Target markets 

There are several decisions that the case firm has made concerning what it wants to 

achieve on international markets. The decisions are adding internationalization to the 

company strategy, operations in ten different countries by 2025, the revenue of 20 mil-

lion euros, and conducting international market research. Firstly, the CEO mentions 

that the idea of expanding the firm’s operations outside Finland was accepted by the 

board of directors and the whole personnel was made aware of it. According to the 

CEO, it acted as the starting point of the process and enabled the start of planning in-

ternational operations. 

 

“The most important point was to write down the will to internationalize and to 
communicate it with the personnel and with the board of directors, so that was 
the important first step”- CEO 
 
“Internationalization has been written down as a part of our strategy.” - Head of 
HR and Administration 
 
“Strategic goal on a general level is that we would be in ten different countries by 
2025.” - Head of Partnership Success and Development 

 

The decision follows causal logic since the goal is clear. At this point, the firm is aiming 

to expand its operations to foreign markets, but there are no clear steps about how to 

enter ten different countries. The case firm does not have international experience yet, 

and foreign markets are unfamiliar for it. The firm does not know yet how to accom-



46 

plish the goal. The decision follows Sarasvathy’s (2001; 2008) description of causal rea-

soning since it aims at predictive control and is goal oriented. Literature suggests that 

effectuation is often used under uncertain circumstances, since “effectuation is at its 

best in an unpredictable environment” (Matalamäki 2017: 929). However, the firm is 

using causation for setting international strategic goals. Matalamäki (2017: 929) states 

that causation would fit better for familiar domestic market since “causation is relevant 

in an easily predictable operating environment”. Dew et al. (2009) point out that expert 

entrepreneurs who identify potential markets tend to frame their decisions using effec-

tual logic while novices use predictive logic and tend to go “by the textbook”. 

 

Another decision was made concerning the number of countries in which the case firm 

wants to have operations in the future as well as the number of partnerships within 

those countries. Interviewees point out that the case firm aims to have operations in 

ten different countries by 2025. The goal is to create at least ten good partnerships 

within each target country. However, it is not completely clear what countries will be 

the target countries. The countries will be chosen after the case firm conducts interna-

tional market research. 

 
“Our goal is to have operations in ten different countries.” - Head of HR and Ad-
ministration 
 
“We want to begin with ten good partnerships within each country. The number 
might sound small, but Germany, for example, is a big country. If we get ten big 
partners there, they are very big customers compared to our existing ones. This is 
the pre-set goal we are aiming at.” - CEO 

 

This decision follows causation logic. The CEO talks about “pre-set goal” of ten target 

countries and ten partnerships within each country. The decision aims at a given goal 

which is clearly specified. It follows Sarasvathy’s (2001; 2008) description of causal logic 

since the goal has been set in advance. It is unclear which are the most suitable coun-

tries or partners or the appropriate means to reach the goal by 2025. According to Sar-

asvathy & Dew (2005), effectuation logic flourishes in unstable environments which are 

difficult to predict since it allows quick reactions to changes in the operating environ-



47 

ment. Contrary to that, the case firm follows causation logic to set goal in international 

markets. 

 

The case firm represents a strong will to grow its revenue. The aim is to raise the reve-

nue up to 20 million euros. The CEO mentions that he is unsure whether that goal is big 

or small. It is a pre-set goal, and, according to some interviewees, cannot be obtained 

from the domestic market alone. To reach the goal, the case firm needs to generate 

revenue outside Finland. The firm has currently two products: one software in domes-

tic market and new software which is being built for foreign markets. The firm had not 

yet specified how big a percentage of the future revenue is expected from the new 

product. 

 

“We have made a decision about the size of the firm, but we haven’t specified yet 
from which market we will get the growth. We might reach the goal growing only 
domestically, but most likely we need growth from overseas” - Head of Customer 
Success 
 
“What comes to revenue, we have set a goal of 20 million euros. We have not 
specified how much of it comes from domestic market and how much comes from 
foreign markets.” – CEO 

 
“If there is a revenue related goal, it hasn’t been analyzed how much of it is ex-
pected from the new product and how much from the old product.” - Marketing 
Coordinator 

 

The decisions concerning revenue growth follows causation logic. It is a pre-set goal, 

and the firm is targeting a return. This decision is based on financial forecasting. These 

are typical elements of causation logic (Smolka et al. 2016). Steps towards it are un-

clear but the CEO mentions that it is still the goal, and the firm is trying to achieve it. It 

is unknown, how much the new product will generate revenue, and how much comes 

from the old product. Mayer-Haug et al. (2013) point out that planning activities as 

well as the entrepreneurial planning skills affect positively to growth, scale, and sales 

among SMEs. 

 



48 

Based on the interview data, the case firm lacks international experience on all levels. 

There is one employee with international experience, but besides that, the firm has 

been operating in the domestic market only. The CEO points out that the greatest chal-

lenge is that they have never taken a domestic firm to international markets. Limited 

knowledge and experience are common challenges at the pre-internationalization 

phase and Tan et al. (2010) have included it as one of the factors in the ERI index. How-

ever, it does not seem to cause decision maker’s unwillingness to respond to export 

stimuli – quite the opposite. The case firm actively seeks knowledge and solutions. The 

goal is to create a systematic path which the firm can walk step by step. 

 

“By far the greatest challenge is that we have not made this ever before. If one 
does not have the experience, what is the alternative? It is imagination. However, 
proceeding relying only on imagination is dangerous. According to the literature 
and the research, I have read, successful firms rely on empirical evidence rather 
than are visionary. They are systematic, disciplined, and empirical.” -  CEO 

 

A decision has been made about conducting international market research to identify 

the steps to successful international expansion. The CEO points out that the interna-

tional market research would clarify several aspects of the upcoming internationaliza-

tion. A consultant agency is expected to help to monitor target countries and to guide 

the inexperienced firm abroad. However, it remains somewhat unclear which countries 

will be included in the market research. The five big target countries are mentioned 

frequently: Germany, France, England, Italy, and Spain. These countries are seen as big 

markets with big opportunities and are most probably examined. The market research 

might include other countries as well. With the help of the results of the international 

market research, the case firm wants to make successful entries to target countries. 

Specific goals within the target markets will be set after the market research is ready. 

 

“We have evaluated target countries and the next step is to conduct market re-
search about the countries we have searched.” - Head of Partnership Success and 
Development 
 



49 

“We have started negotiations about the international market research. It is im-
portant that we make thorough research and define our key paths which we start 
to walk during the internationalization phase.” – CEO 

 
“We haven’t made market specified goals, but they are probably made after the 
consultant agency has finished the first market research. After that, we are more 
aware of the goals which we are aiming at within those markets.” - Head of Part-
nership Success and Development 
 
“We have planned a schedule so, that the international research would be con-
ducted in the autumn and the first steps would be taken next year. Before that, 
we want some proof of concept from the domestic market.” – CEO 

 

The decision about the international market research follows causation since market 

analyses and predictive planning are typical for it. Causation reflects such ideas as sys-

tematic analysis and integrative planning (Matalamäki 2017). Conducting international 

market research aims at systematic approach for reaching goals and, therefore, follows 

causation. According to Delmar & Shane (2003), planning acts as an important precur-

sor to action among new ventures. It helps entrepreneurs to in decision making and 

allows them to take steps towards achieving their goals. The research will help the case 

firm to take the next step. This CEO states that this is the main reason for conducting 

the research. 

 

It seems that there has not been a decision concerning the target markets within the 

case firm. It depends also on the results of the international market research. Some 

countries will be examined more in detail, but still, interviewees have different views 

about where to expand. On one hand, some employees see that the expansion starts 

from the countries which are geographically and culturally close, such as the Scandina-

vian countries and Estonia. On the other hand, the new product can be sold anywhere 

in the world through the internet. If the case firm starts internationalization from the 

neighboring countries and continues proceeding stage by stage towards geographically 

and culturally more distant target markets, it would follow the Uppsala model from 

Johanson & Vahlne (1977). If the case firm starts to sell online to multiple countries, it 

is more likely to follow the INV model by Oviatt and McDougall (1994). If the expansion 



50 

of the new product is very intense, it might even be considered as a born global (Knight 

& Cavusgil 1996). 

 

“We will start from the Nordic countries - excluding Iceland. After that, we will 
head to Central Europe. Estonia has also been mentioned in the conversations.”  – 
Marketing Coordinator 
 
“We will start so, that our first target areas are regionally selected European 
countries. […] Big countries in the first international market survey are Spain, 
France, Italy, England, and Germany.” – CEO 
 

“To start with, the product is scalable. Target markets will be then selected de-
pending on the customer base, and contacts.“ – Head of Product Management 
 
“At the moment the target market is Finland. In the future, when we have the 

language versions, the target area is the whole world. Any kind of software which 
is sold through the internet can be anywhere in the world. I don’t think there are 
boundaries anymore.” – Head of Customer Success 

 

Decisions concerning target markets follow causation logic. They gravitate around the 

main idea of causation which is “the use of planning to for achieving predetermined 

goals (Smolka et al. 2016: 575). After conducting the international market research, the 

case firm might have a plan which include a list of target markets and entry modes. The 

lack of experience within the case firm and uncertainty of the international markets 

makes it difficult to determine the exact steps to follow at this since there is much un-

certainty related to internationalization. This kind of uncertainty is typical for the pre-

internationalization phase (Tan et al. 2010). However, according to Sarasvathy (2001), 

effectual logic tends to be dominant in uncertain conditions. Under these conditions, 

firms tend to rely on focusing on the controllable aspects. Unlike Sarasvathy (2001) 

suggests, the case firm uses causation to set goals in international markets. 

 

The discussion above allows for offering the first proposition: 

P1: SMEs at the pre-internationalization phase are likely to follow causation logic when 

making decisions about their target markets. 

 



51 

4.2 Product and competitors 

The case firm has made decisions concerning the product and the competitors. The 

decisions are creating a new product for international markets, changing the coding 

language from Finnish to English, modifiability of the product, and a platform-type of 

approach to product development. The case firm is creating a new software product. 

During the interviews in April and May 2021, it had not been launched yet. However, 

the webpage was almost ready. Decisions have been made concerning the product as 

well as the competitors. The key decision concerning the new product is that it has 

been created for the international markets from the beginning while the old product 

continues to sell in the domestic market and lacks the international ability as such. 

 

“We have tried to create the product as flexible as possible so that it fits any kind 
of market.” – Head of Partnership Success and Development 
 
“We decided to create a new product on a such Microsoft platform which enables 
internationalization and operations anywhere in the world.” – Head of Product 
development 
 
“In my opinion, it has been clear since the beginning that we don’t make the 

product only for the domestic market. We already have a good product for that, 
but it doesn’t scale up in the same way.” – Head of Customer Success 

 

The decision about the international new product can be interpreted to follow either 

causal or effectual logic. On the one hand, the goal is to create a product that can be 

sold outside Finland and will ultimately generate revenue to reach the financial goals 

which were stated earlier: operations in 10 different countries and reaching the reve-

nue of 20 million euros. From this perspective, the decision follows causation. On the 

other hand, creating an innovative new product is a risky venture which is based on the 

case firm’s know-how and ability to offer something new to the markets. From this 

perspective, the decision is effectual. According to Coviello & Joseph (2012), effectua-

tion explains successful new product development. This is aligned with the decision 

concerning the new product and, therefore, the decision follows effectuation. The de-

cision is tied to the central idea of effectuation which is “the use of control strategies 



52 

such as exercising flexibility and experimentation to create new products and markets” 

(Smolka et al. 2016: 573). 

 

There are also other decisions that are connected to the development of an interna-

tional product. Another important decision is that the coding language has been 

switched from Finnish to English. This decision is closely connected to the development 

of the new product as well as a preparation for the upcoming internationalization. 

When the coding language is English, the case firm can employ foreign employees. An 

easy decision would have been to continue coding in Finnish since all the employees 

speak it as their first language. However, continuing coding in Finnish would have made 

the whole internationalization more difficult. 

 

“The language of product development was switched to English which creates 
new opportunities, such as international partnership creation and expanding op-
erations abroad.” – Head of Product Development 
 
“In the old software the coding language was Finnish, and in the new software, 
it’s English. Now when the language of product development is English, employ-
ees can also come from anywhere.” – Head of Customer success 
 

This decision follows effectual logic. On the one hand, it is a step that enables the de-

velopment of an international product. On the other hand, it is a decision that will help 

the case firm to aim at international markets with a potential new product. However, 

the final goal remains unknown since changing the coding language to English is not a 

final goal on its own. Still, it increases the new product’s possibility of international 

success. There is practically little risk involved in this decision, but it requires some ex-

tra effort before all the employees are used to it. According to Sarasvathy (2001; 2008) 

effectual entrepreneurs focus on their affordable loss which can be defined as the 

amount of available resources they are ready to lose in the start-up process This way 

they limit their downside risk. The decision has practically no risk which could be inter-

preted as affordable loss, but it requires resources for opening new possibilities for the 

product development. 

 



53 

The new product can be modified for most firms. However, the product is designed 

especially for the needs of SMEs. The software has been developed in a way that it 

adapts to different operational environments anywhere in the world. The idea is that it 

is easy for customers to implement the new software, and they can modify it according 

to their specific needs. Customers can use either all the features or just the features 

which are useful for them. They will pay only for the features that they use. The prod-

uct is also developed in co-operation with the customers. Coviello & Joseph (2012) 

point out that successful innovators are likely to engage with customers. For this pur-

pose, special attention has been given to the development of effective feedback chan-

nels between the customers and the case firm. 

 

“User-friendliness is the main argument and besides that, a subscription-type 
model of operations which doesn’t require consultant help with implementation 
nor the usage of our product.” – Marketing Coordinator 
 
“The development of the software needs to be done according to the needs of the 
markets. […] I still don’t believe that modifications are done according to the 
opinion of a single client, but rather so, that we ask a thousand customers 
whether this is good.” – Head of Customer success 

 

“The product itself adapts. The customer can modify it according to his/her 
needs. It adapts to the use of different customers in different countries based on 
how the customers modify it.” – CEO 

 

The decision concerning the modifiability of the product as well as the active role of 

customers in developing the product through active interaction with the case firm is 

effectual. The case firm is prepared to continuously improve the product. Murtomäki 

(2017) points out that one significant aspect of effectuation is continuous learning, 

especially when the operating environment require firms to change and learn new 

ways of operating to respond changing situations. The decisions are connected to the 

idea of continuous learning and responding to changing situations. It is impossible to 

know what the customer needs are after five or ten years. Still, the case firm is pre-

pared for learning and adapting itself and the product. The “markets” will eventually 



54 

determine the final form of the product. This way of operating follows the effectual 

logic described by Sarasvathy (2001; 2008). 

 

The firm and its new product will face competition abroad. There are three categories 

of competitors: old habits, Office products, and othe