A Theory of Experimentation in New Ventures

Andrea Contigiani, Fisher College of Business

Abstract: Experimentation has been the center of a fascinating debate among entrepreneurship practitioners throughout the past decade. While intellectually stimulating and practically relevant, this discussion has received little attention from management research, and therefore has no scientific support. To start filling this gap, I propose a novel theory of experimentation in entrepreneurial ventures. I argue that the impact of experimentation on performance is highly contingent on market-level and organization-level factors. This theoretical exercise seeks to shed light on when experimentation creates value and when it destroys value. By using the value-based strategy approach, I propose that experimentation drives short-run value through the channels of learning, reputation, and imitation, and affects long-run value through the channels of imprinting and positioning. I conclude by listing a set of testable implications for future empirical analysis.