Strategic Asset Importance and the Adoption of Data-Driven Management Practices
TL;DR
This work exploits an abrupt, externally driven surge in online consumer activity as a natural experiment to identify the causal effect of a sudden rise in a digital asset’s strategic importance on adoption of this practice, and finds evidence that A/B testing adoption is associated with increases in revenue and labor productivity.
Abstract
Quantitative measures of management quality point to wide variation in how practices are allocated within firms. We address this question by examining whether a rise in one asset’s strategic importance triggers adoption of management practices that optimize that asset. Our analysis focuses on business websites and the adoption of A/B testing, a data-driven management practice that enables firms to systematically experiment with and improve their websites. We exploit an abrupt, externally driven surge in online consumer activity as a natural experiment to identify the causal effect of a sudden rise in a digital asset’s strategic importance on adoption of this practice. Using novel monthly data on A/B testing adoption for 654,915 firms across 16 countries, we show that this sudden increase in asset importance led to a substantial rise in adoption. Adoption responses are concentrated among firms with stronger pre-existing management, data and analytics capabilities, rather than among larger or more productive firms. This is consistent with complementarities between advanced management practices and existing organizational capabilities. Finally, we find evidence that A/B testing adoption is associated with increases in revenue and labor productivity.