Examining the strategy formation process is central to understanding why some firms in entrepreneurial settings create competitive advantage and succeed while others do not. The strategy formation process, however, remains unclear. While existing work shows the value of learning from experience or having a holistic understanding of how the pieces fit together, there is limited empirical research that fuses the two streams. We first review the extant literature on strategy formation in entrepreneurial settings by organizing around this fundamental tension between strategizing by “doing” versus “thinking.” We then describe recent work that blends the two and conclude with a future research agenda.

An effective strategy can be the difference between becoming the next Google or Netflix or floundering as an also‐ran. But how should executives in entrepreneurial settings form strategy? Are they better off letting strategy emerge incrementally by learning from experience? Or should they create a holistic understanding of the interdependent activities that constitute strategy with cognitive structures like mental models and analogies? Here, we indicate the extant research findings on strategy formation in entrepreneurial settings for each of these approaches. We also discuss the new research on how they can be effectively combined and outline an agenda for future research to help executives improve their strategy formation process. Copyright © 2017 Strategic Management Society