Theory-Based Reasoning and Performance

Arnaldo Camuffo, Alfonso Gambardella and Diego Jannace

No 20300, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: While theory-based decision-making is widely discussed in economic literature, its practical impact on decision performance remains largely untested. We develop a theoretical framework of decision-making under uncertainty, arguing that causal theories raise economic performance. We provide the first large-scale empirical evidence of this phenomenon by conducting eight field randomized controlled trials with 1,556 early-stage startups across eight countries, comparing theory-and-evidence-based training to evidence-only and control conditions. We estimate that theory-trained entrepreneurs achieve significantly higher growth in cumulative sales and employee productivity relative to both counterfactual groups. Additional analyses through specific measures of theory quality and experimentation reinforce that the former drives these performance gains, whereas experimentation alone offers no significant short-term benefits. Our findings establish theories as a critical determinant of economic performance and advocate embedding causal theorizing alongside experimentation in decision-making.

JEL-codes: L21 L26 M13 M21 (search for similar items in EconPapers)
Date: 2025-05
New Economics Papers: this item is included in nep-exp
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP20300 (application/pdf)

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:cpr:ceprdp:20300

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP20300

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().