Design-based and theory-based approaches to strategic decisions

We develop a unified framework to examine the implications of two primary approaches tostrategic decision-making under uncertainty: designing and shaping future scenarios vis-`a-vistesting theories about future scenarios. We conducted a three-arm randomized controlled trialinvolving 308 early-stage entrepreneurs, dividing them into three groups: design-based training,theory-based training, and a control group, and tracked them over approximately 1.5 years. Ourfindings reveal that both approaches reduce the need for information in decision-making andlead to higher commitment rates. The design-based approach encourages action despite negativebeliefs, resulting in less frequent and later project termination. In contrast, the theory-basedapproach promotes a more conservative termination rule, leading to earlier and more frequentproject abandonment. Although the theory-based approach is associated with higher averageperformance upon survival, the design-based approach fosters breakthroughs decision-makers. Insum, the design-based approach is well-suited for innovative ventures that gather informationto shape their environment, whereas the theory-based approach is optimal for pursuing highperformance under lower degrees of uncertainty.