Toward a theory of affordable loss

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12 Citations (Scopus)


Although dozens of empirical studies have been published on effectuation as a whole, much work remains to be done on elaborating each principle in more depth. Based on an exploratory study of seven ventures from the Caribbean island of Curacao, this paper develops an elaborated process model of the affordable loss heuristic in effectuation. The model breaks affordable loss into two components—ability and willingness, and connects these to the concept of loss aversion from prospect theory. Furthermore, these components are encapsulated in a process involving identity, affect, and resourcefulness leading to the entry-stage entrepreneurial investment decision.
Original languageEnglish
Pages (from-to)751-774
Number of pages24
JournalSmall Business Economics, An Entrepreneurship Journal
Issue number3
Early online date28 Feb 2019
Publication statusPublished - 1 Mar 2020


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