Capturing the strategic pivot: Identifying the performance outcomes of new venture pivots

Although pivoting is one of the most recognizable and highly taught subjects in entrepreneurship, relatively little empirical work has been done to establish the causal impact that it has on new venture performance. This is likely due to the methodological challenges that arise when approaching the subject, which include the difficulty of identifying when a pivot has taken place (in real-time, and for a sufficiently large number of ventures that researchers can have confidence in their results); and identifying publicly available performance data for what are in most cases, privately owned firms. To address these issues, I employ a novel research design in which individual pivots are identified using the self-reports of high-growth ventures that participated in seed accelerator programs between 2008 and 2018. Utilizing pre-recorded interviews and press releases issued at the time of the pivot, I identify both the type of pivot that occurred, and when it was undertaken. Timestamp data from the venture’s Twitter feed is then used to identify when the pivot was first announced to the public. Because these reports occur at a time when the ultimate failure or success of the pivot is unknown, they provide an ideal source of information that avoids many of the retrospective and survivor biases that have hindered previous research. By using the change in customer traction and top management team turnover that occurs in the three months leading up to, and following, a strategic pivot, I determine the success or failure of individual pivots using a sample of approximately 118 early-stage, high-growth firms. This study makes three main contributions to the literature. First, it develops a more full distribution of the performance outcomes that accompany new venture pivots, and provides scholars with a strong initial prior for determining when pivots are likely to produce successful outcomes. Second, it introduces the concept of traction as a short-term performance measure in the study of early-stage, high-growth firms. Last, this paper connects pivoting’s origin in practitioner publications to long standing research in entrepreneurship and innovation, and uses it to highlight the broader relevance of academic research in the field.