Unpacking innovation in digital multi-sided platform startups: making sense of path creation in generating two distinct types of innovation

Purpose This study aims to investigate the role of effectual logic as the basis of entrepreneurial action in path creation for influencing the performance of open innovation outcomes within the context of digital multi-sided platform (MSP) startups. Design/methodology/approach We utilize the PLS-SEM method with a sample of 70 Indonesian digital MSP startups that have implemented open innovation practices. Findings The empirical findings indicate a path creation between effectual logic and the open innovation process, particularly through the integration of absorptive capacity and crowds or communities management practices. Absorptive capacity development fosters incremental innovation, whereas crowds or communities management practices lead to radical innovation. Originality/value The research findings suggest that, despite limited resources and experience, young entrepreneurs can successfully implement an open innovation strategy for their digital MSP platforms by utilizing effectual logic principles, which capitalize on the external resources provided by digital platform ecosystem members.