From the findings of her study of entrepreneurial decision making, Sarasvathy–an associate professor at the Darden School–has constructed a model of entrepreneurial activity, and perhaps of all creative endeavors, that she calls "effectuation."

Most students of entrepreneurship, Sarasvathy writes, are trained in causal reasoning and decision making. The entrepreneur is meant to select a target market segment on the basis of expected returns–calculated through market research and techniques for predicting demand–and then create an offering for that market. Sarasvathy found, however, that "expert entrepreneurs"–individuals who had founded one or more companies, been a full–time founder/entrepreneur for ten or more years, and had taken at least one company public–displayed the inverse of causal reasoning, hence the term "effectual."

She uncovered this approach through think–aloud protocols, in which her 27 subjects talked through ten decisions involved in turning a product into a new business. A striking similarity among her subjects was a distrust of attempts to predict demand and to predict the future, in general. From this shared attitude, a general approach emerged: The entrepreneurs started with a given set of means rather than a predetermined goal; they invested only what they could afford to lose; they enlisted their initial customers as partners; they expressed a desire to create a new market rather than targeting an existing one; and they were open to surprises and contingencies.

This effectual approach to new–business creation, Sarasvathy writes, points to a deeper logic and way of interacting with the world. Expert entrepreneurs, she writes, perceive the world as human–made, capable of being shaped through people's actions and decisions. They believe that if they start with a set of means–who they are, what they know, and whom they know–they can create multiple ends.

Sarasvathy's model builds on recent research examining the connection between individuals and opportunities. Mark Casson, for example, has focused on how entrepreneurs apply their unique knowledge and skills to spot an opportunity, create a market, and erect barriers to competition. But whereas Casson assumes an adversarial tone in negotiations with various stakeholders, the effectual entrepreneur enlists them in market creation. Scott Shane and Sankaran Venkataraman have written about the nexus of enterprising individuals and promising opportunities, but while their entrepreneur discovers and then exploits opportunities, the effectual entrepreneur fabricates opportunities from the means around her.

In Effectuation, Sarasvathy demonstrates how effectual logic can be found in stories of the founding of such businesses as CarMax and RealNetworks. She also explores the implications of effectuation for current scholarship in strategic management, how the philosophy of pragmatism relates to effectuation, methods for teaching effectuation, and how other researchers are building on her work.

Perhaps most compelling, she writes of the potential for applying effectual logic to markets for social goods and services, which could address human suffering. Entrepreneurs who create such "markets in human hope" could eliminate the artificial divide between for–profit and nonprofit ventures and unleash entrepreneurial creativity to help solve social problems.