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

We explore the effectiveness of eco- nomic 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 com- mitments. Our quantitative analysis suggests that strategic pivoting was associated with success. We then use histori- cal methods to understand whether this association is rea- sonably interpreted as a causal link. We identify lessons that could only plausibly have been learned through strate- gic pivoting and document that those firms that were able to learn from the strategic pivots were most likely to suc- ceed. We discuss the generalizability of our findings to build the hypothesis that strategic pivots and economic experiments originate firm strategy.