Working Paper: NBER ID: w26278
Authors: Rembrand Koning; Sharique Hasan; Aaron Chatterji
Abstract: Recent work argues that experimentation is the appropriate framework for entrepreneurial strategy. We investigate this proposition by exploiting the time-varying adoption of A/B testing technology, which has drastically reduced the cost of experimentally testing business ideas. This paper provides the first evidence of how digital experimentation affects the performance of a large sample of high-technology startups using data that tracks their growth, technology use, and product launches. We find that, despite its prominence in the business press, relatively few firms have adopted A/B testing. However, among those that do, we find increased performance on several critical dimensions, including page views and new product features. Furthermore, A/B testing is positively related to tail outcomes, with younger ventures failing faster and older firms being more likely to scale. Firms with experienced managers also derive more benefits from A/B testing. Our results inform the emerging literature on entrepreneurial strategy and how digitization and data-driven decision-making are shaping strategy.
Keywords: AB Testing; Startup Performance; Entrepreneurial Strategy
JEL Codes: M13; M2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| AB testing adoption (C91) | page views (Y10) |
| AB testing adoption (C91) | product launches (M31) |
| AB testing adoption (C91) | likelihood of extreme outcomes (C46) |