Aggressive Pivots and Entrepreneurial Skill
Source: https://bm.hkust.edu.hk/bizinsight/2026/01/aggressive-pivots-and-entrepreneurial-skill Parent: https://bm.hkust.edu.hk/bizinsight
[ Innovation and Entrepreneurship ]
Aggressive Pivots and Entrepreneurial Skill
29 Jan 2026
LI, Xuelin
Associate Professor
We study pivots as signaling devices in a dynamic experimentation model. An entrepreneur receives funding from an investor and has private information about a project, which requires costly experimentation to succeed. The entrepreneur has a real option to pivot, i.e., to abandon the project and to start a new one. Investors learn about the project from the arrival of exogenous information and from the entrepreneur's pivoting decisions. We characterize signaling equilibria in which high-skill entrepreneurs pivot early. Such early pivots are associated with higher likelihood of success and with more favorable funding terms following the pivot.