Experimentation and Start-up Performance: Evidence from A/B Testing

Recent scholarship argues that experimentation should be the organizing principle for entrepreneurial strategy. Experimentation leads to organizational learning, which drives improvements in firm performance. We investigate this proposition by exploiting time-varying adoption of A/B testing technology, has drastically reduced cost business ideas. Our results provide first evidence on how digital affects a large sample high-technology start-ups using data tracks their growth, technology use, and products. find that, although relatively few firms adopt testing, among those do, performance improves 30%–100% after year use. then argue substantial effect low rate arises because do not only test one-off incremental changes, but also use as part broader strategy experimentation. Qualitative insights additional quantitative analyses show helps develop more new products, identify scale promising ideas, fail faster when they receive negative signals. These findings inform literatures strategy, data-driven decision making. This paper was accepted Toby Stuart, entrepreneurship innovation.