Experimentation and Startup Performance: Evidence from A/B testing

Rembrand Koning, Sharique Hasan and Aaron Chatterji

No 26278, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: M13 M2 (search for similar items in EconPapers)
Date: 2019-09
New Economics Papers: this item is included in nep-ent and nep-sbm
Note: PR
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Citations: View citations in EconPapers (4)

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