The origins of firm strategy: Learning by economic experimentation and strategic pivots in the early automobile industry

Sandeep D. Pillai, Brent Goldfarb and David A. Kirsch

Strategic Management Journal, 2020, vol. 41, issue 3, 369-399

Abstract: Research Summary We explore the effectiveness of economic experimentation as a learning mechanism through a historical exploration of the early automobile industry. We focus on a particular subset of economic experiments, called strategic pivots, that requires irreversible firm commitments. Our quantitative analysis suggests that strategic pivoting was associated with success. We then use historical methods to understand whether this association is reasonably interpreted as a causal link. We identify lessons that could only plausibly have been learned through strategic pivoting and document that those firms that were able to learn from the strategic pivots were most likely to succeed. We discuss the generalizability of our findings to build the hypothesis that strategic pivots and economic experiments originate firm strategy. Managerial Summary We explore the effectiveness of experimentation as a learning mechanism through a historical exploration of the early automobile industry. We focus on a particular subset of experiments, called strategic pivots, that requires irreversible firm commitments. Our analysis suggests that strategic pivoting was associated with success. We identify lessons that could only plausibly be learned through strategic pivoting and document that those firms that were able to learn from the strategic pivots were most likely to succeed. Even though firms may use lean techniques, market solutions may only be discovered through strategic pivots whose outcomes are unknowable ex‐ante. Therefore, successful strategies reflect an element of luck.

Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Downloads: (external link)
https://doi.org/10.1002/smj.3102

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:stratm:v:41:y:2020:i:3:p:369-399

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0143-2095

Access Statistics for this article

More articles in Strategic Management Journal from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().