An Examination of Effectuation Dimension as Financing Practice of Small and Medium Enterprises in Southwestern Nigeria

This study examined effectuation framework as alternative source of finance for SMEs in developing nation’s context. Specifically, the study examined how the framework fit into the traditional ways and culture of local entrepreneurs as against the formal financial institutions with their attendant obstacles or stringent requirements. A mixed method approach of qualitative approach within a dominant quantitative technique was used to analyse data obtained from a total of 748 firms through questionnaire, while four owner-managers, who were purposively selected, were interviewed in-depth. Data obtained were analysed using descriptive statistical tools and inferential statistical tools of independent t-test, logit regression and effectuation logics. Findings revealed entrepreneurs in SMEs engage in internal financing practices with a strong statistical evidence of dependency on internal financing and that they employ effectuation logics in all its dimensions to circumvent stringent institutional financing requirements with a view to achieving their objectives.

Keywords: Effectuation Theory; Effectuation Logic; Entrepreneurship; Small Business; Internal Financing; External Financing