Learning from failure and firm innovativeness

Abstract

The popular business press and academic articles have promoted the virtues of failure, particularly in the pursuit of innovation. This article argues that is necessary to distinguish tolerance for failure from learning from failure, and that only the latter promotes firm innovativeness. A longitudinal study of 106 U.S. manufacturing firms indeed finds that mere tolerance for failure has no effect on firm product innovativeness. In contrast, firms that make a deliberate effort to learn from failure introduce more innovative new products. Further, the positive effect of learning from failure is enhanced by a climate of constructive conflict within the firm.