Innovation Failure Research Articles

How Do Firms' Innovation Failures Affect the Quality of Subsequent Innovations? The Contingency Role of Knowledge Breadth and Depth

ABSTRACTDrawing on organizational learning theory and knowledge‐based view, this study investigates the relationship between firms' innovation failures and the quality of subsequent innovations. We find an inverted U‐shaped relationship between innovation failures and the quality of subsequent innovations. We theoretically decompose the curvilinear effects of innovation failures on the quality of subsequent innovations into two underlying counteracting forces: the positive impact of learning from innovation failures (LFIF) and the negative impact of survival pressures. Furthermore, firms' knowledge breadth and depth flatten the inverted U‐shaped curve. Our findings reveal the risks and benefits of LFIF.

Does continuous innovation failure lead firm innovation to hesitate to press forward?: Evidence from Chinese-listed technology-intensive industries firms

Continuous innovation failure is a common phenomenon in the process of firm innovation. However, little is known about how continuous innovation failure affects firm innovation, and what factors moderate the relationship between them. Using the empirical data from China’s technology-intensive industries listed firms, we find that continuous innovation failure doesn’t lead firm innovation to hesitate to press forward but promotes firms to increase innovation. Managerial overconfidence strengthens the positive impact of continuous innovation failure on firm innovation. Interestingly, managerial power does not enhance but weakens the regulatory role of managerial overconfidence. Further analysis shows that continuous innovation failure will prompt firms to increase exploratory innovation and reduce exploitative innovation. Heterogeneity analysis finds that the promotion effect of continuous innovation failure on firm innovation will be enhanced in firms with higher financial redundancy, but will be weakened in firms with higher R&D subsidies.

Endogenous innovation scale and patent policy in a monetary schumpeterian growth model

Abstract This paper develops a monetary R&D-driven endogenous growth model featuring endogenous innovation scales and the price-marginal cost markup. To endogenize the step size of quality improvement, we propose a tradeoff mechanism between the risk of innovation failure and the benefit of innovation success in R&D firms. Several findings emerge from the analysis. First, a rise in the nominal interest rate decreases economic growth; however, its relationship with social welfare is ambiguous. Second, either strengthening patent protection or raising the professional knowledge of R&D firms leads to an ambiguous effect on economic growth. Third, the Friedman rule of a zero nominal interest rate fails to be optimal in view of the social welfare maximum. Finally, our numerical analysis indicates that the extent of patent protection and the level of an R&D firm’s professional knowledge play a crucial role in determining the optimal interest rate.

Influence of standards alliance coopetition relationship on enterprises’ technology innovation performance — A dual-path perspective of knowledge acquisition and routine updating

Technology standardisation is becoming a strategic initiative for globalised enterprises committed to innovation and development. However, the role of Technical Standards Alliance (TSA) as the primary method of participating in technology standardisation and the relationship between alliance enterprises for innovation benefits remains unclear, which leads to the partial failure of enterprise standardisation and innovation. This study constructs a research model based on coopetition theory to explore the mediating mechanism and boundary conditions of the Standards Alliance Coopetition Relationship (SCR) affecting enterprises' Technology Innovation Performance (TIP). The researchers conducted a questionnaire survey involving 542 standards alliance participating enterprises in China. The results of the regression analysis and self-help test reveal that (1) SCR positively affects enterprises' TIP; (2) Knowledge Acquisition (KA) and Routine Updating (RU) act as both a two-path mediator and a chain mediator between SCR and the enterprises’ TIP; and (3) Cognitive Proximity (CP) among alliance enterprises positively moderates the relationship between SCR and KA, and SCR and RU. These findings contribute theoretically to the literature on technology standardisation and address the research gap on how enterprises can effectively enhance their TIP through participation in standardisation. Finally, the study provides significant managerial implications for enterprises to construct robust standard alliance coopetition relationships, strengthen knowledge acquisition, and enhance routine updating.

How Innovation Failure Affects Organizational Strategy? The Role of System Thinking and Risk Percept

How Innovation Failure Affects Organizational Strategy? The Role of System Thinking and Risk Percept

Theory of errors in innovation failure and strategic management of winning by failing

ABSTRACT The risk of failure in innovation projects affects organisational behaviour and the performance of firms. This study develops a theory of errors in innovation project-level failure. Error is a set of faults that generates deviations in phases of the R&D process in projects, decreasing the expected results. From a systemic perspective, innovation failure in a project is due to a set of errors that generates a negative outcome. The proposed theory clarifies the general determinants of innovation failure in projects that are due to errors in design, execution and market orientation. Case studies in the drug discovery industry and pharmaceuticals validate the consistency of the proposed theory, giving examples of errors in projects leading to innovation failures. The payoff matrix of success/failure occurrences predicts that the probability of failure in innovation projects can double by setting a difficult goal compared to an easy one. Inductive implications of the proposed theory are that organisations reduce innovation failure in projects with better adaptedness to changes that minimise errors and learn from them. The proposed theory can guide R&D managers, designers, etc. in detecting critical errors in the R&D process to apply strategies of problem solving based on a winning approach by learning from errors that lead to innovation failure in projects to enable the organisation to adapt, take advantage of important opportunities and cope with consequential environmental threats for achieving goals and sustaining the competitive advantage in turbulent markets.

The Urgency of Professional Indemnity Insurance in Research and Innovation Practices in Indonesia

This study explores the importance of legal protection for researchers in Indonesia, particularly in the context of professional indemnity insurance. It highlights the risks faced by researchers in their work, such as potential failures in research and innovation, and examines the legal framework that mandates protection for researchers under Indonesian law. Despite the legal provisions, the study identifies a gap in the implementation of protective policies, which hinders the effective safeguarding of researchers' rights. By comparing best practices from developed and developing countries, the research offers insights into how Indonesia can improve its legal protection for researchers, emphasizing the potential role of professional insurance as a viable solution.

Vicarious learning from peer innovation failures: The moderating effects of venture capital syndication networks

AbstractFirms can derive insights not only from their own failures but also from the innovation failures of counterparts in the same industry. This study investigates how 109 Chinese A‐share listed high‐tech firms (2013–2022) learn from counterparts' innovation failures to improve their success rate of innovation and emphasizes the crucial role of venture capital (VC) syndication networks in facilitating knowledge transfer. Central VCs within the network notably enhance vicarious learning from others' failures. Further empirical analysis shows a significant increase in the success rate of exploitative innovations, while the impact on exploratory innovations is minimal.

Incongruities in Innovation: Exploring Inconsistencies in Business Innovation Strategies

This research explores the phenomenon of incongruities in business innovation strategy through a systematic literature review. Analysis of the current literature reveals different types of incongruities, their causal factors, and their impact on innovation performance. Findings show that strategy-implementation gaps, culture-innovation misalignment, and resource allocation inconsistencies are the most common types of incongruities. Factors such as short-term performance pressure and resistance to change contribute significantly to the occurrence of incongruities. Their impact on innovation performance includes innovation portfolio imbalance and failure in radical innovation. Strategies to overcome incongruities include the development of ambidextrous leadership, balanced innovation portfolio management, and enhancement of organizational dynamic capabilities. This research highlights the importance of a holistic approach in innovation management and provides directions for future research.

Technological innovation, industry platforms or financialization? A comparative institutional perspective on Nokia, Apple, and Samsung

The puzzle of how Nokia lost the smartphone wars has intrigued recent scholarship. Despite Nokia’s dominant position in the mobile phone industry and its technological capabilities and reputation for strategic agility, it was completely wiped out from the market, only a few years after the launch of Apple’s iPhone. The article provides a comparative, historical and institutional account on the smartphone industry by focusing on three key players: Nokia, Apple, and Samsung. This perspective enriches earlier accounts that were overly focused on explaining Nokia’s decline by looking at internal organisational design and conflicts. We propose a two-pronged explanation focused on the reconfiguration of industry platforms and financialisation. The article suggests that single company histories could be enriched by integrating a comparative perspective that examines additional cases. We discuss opportunities for further research to understand how success or failure in technological innovation is embedded in a wider societal and institutional context.

Is innovation failure just a dead end?

This paper explores whether failures in innovation projects at the firm level contribute to strengthening firms’ innovative activities and the odds of future innovation. Building on the literature on NK fitness landscapes, our paper focuses on technological complexity as a key factor that influences the response to innovation failures, guiding whether to discontinue the current path or, alternatively, to leverage the failure as a foundation for future innovation success. We then test the hypothesis derived from our model using a panel data set constituted by ten waves of the Community Innovation Survey held in the Netherlands from 1996 to 2014. Our findings show the fundamental relevance of the different forms of learning that are available to the firm. In particular, we highlight the positive role of learning after a previous innovation project has been abandoned. Previous failure in innovating produces some forms of learning inside the firms, and this learning positively contributes to subsequent successful innovation. Moreover, by differentiating between radical and incremental innovation, and between complex and less-complex innovation landscapes, we highlight the role of incremental innovation over the whole spectrum of landscape complexity, while the role of radical innovation appears to be more limited to less turbulent technological landscapes.

The Effects of Organizational Inertia and Dynamic Capability on Firm Performance: Business Model Innovation as a Mediating Variable at Small Industry of Rendang in West Sumatera

This study aims to explore the knowledge management challenges faced by Rendang IKMs in the context of organizational inertia as a barrier and unordinary competencies as antecedents to achieving superior performance in the domestic and global markets. At the same time, know the role of business model innovation in relation to the performance of the IKM business. The research analyzed data from 105 IKM Rendang in West Sumatra and found that despite being in a state of stagnation or inertia, these businesses can still generate profits. However, inertia must still be minimized by innovating. Meanwhile, the unordinary capability (dynamic capability) that dominates rendang entrepreneurs is absorptive capability, indicating that while SMEs have enough knowledge to understand tastes and market conditions, they struggle to transform this knowledge into viable companies. Business model innovation plays a vital role in reducing company stagnation and enhancing dynamic capabilities in implementation. Moreover, it can mitigate the risk of innovation failure, a fear often faced by rendang entrepreneurs, and provide space for converting knowledge into effective strategies and products

Can Foreign Institutional Investors Stimulate Environmental Innovation? Evidence From China’s Stock Market Liberalization

In this paper, the Mainland-Hong Kong Stock (MHKS) Connect Program is used as a quasi-natural experience to study the relationship between foreign institutional investors and environmental innovation. Using the sample of the Chinese mainland A-Share market industrial firms from 2012 to 2019 and Difference-In-Difference model, we find a promoting effect of the foreign institutional investors on the mainland firms’ environmental innovation. The mediating effect tests prove that foreign institutional investors inspire environmental innovation through monitoring channel (supervising the environmental innovation), insurance channel (tolerating innovation failures) and knowledge spillover channel. It is noteworthy that only firms in the regions of high innovation capacity benefit from the knowledge spillover channel. Our study implies that environmental innovation can benefit from the opening-up of the stock market if it can attract foreign institutional investors who fulfill the roles of monitoring, insurance and knowledge spillover.

What fails and when? A process view of innovation failure

Research on innovation failure has proliferated lately but with little theoretical attention given to the diversity of the concept. Using process theorizing, we present a model and propositions to understand how a firm's anticipation and value toward failure depends on the type of failure (task versus outcome) and the phase (divergent versus convergent) and point (early versus later) ‘within’ the process that the failure occurs. Using the anticipation-value stances, we then present a typology of four modes of innovation failure that can arise ‘from’ task and outcomes failure in the innovation process. The four modes (and associated learning response) are unsolicited failures (prevent-alert-eliminate); hazardous failures (predict-modify-mitigate); fortuitous failures (probe-expose-extrapolate); and excursive failures (facilitate-analyze-harness). To help explain the ideas in our process model and typology, we use the well-known IDEO shopping cart innovation project as an illustrative example. Together, these contributions provide contingency oriented insights on how failure varies and journeys within and from the innovation process, which helps researchers and managers to better understand the related causes, effects and learning responses.

Synergistic effect of government policy and market mechanism on the innovation of new energy vehicle enterprises

To accelerate the realization of the "carbon neutrality and carbon peaking" (dual carbon) goal, the "Opinions on Financial Support for Carbon Neutrality and Carbon Peaking" (the "Opinions") advocates the comprehensive adoption of tax incentives, government procurement and market-diversified investment measures to support the green low-carbon innovation transformation of key industries. Taking China's strategic new energy vehicle (NEV) industry from 2009 to 2021 as a sample, this paper empirically investigates the innovation effect of the measures in the "Opinions" on listed NEV enterprises. The results show that: (1) Both "supply-side" tax incentives and "demand-side" government procurement encourage NEV enterprises to innovate independently, jointly and efficiently, and the "supply-side" tax incentives have a stronger innovation effect. At the same time, compared with joint innovation, government policies are more conducive to independent innovation of NEV enterprise. (2) Market venture capital also encourages NEV enterprises to innovate. Government policy signals to the market can attract venture capital, and the "demand side" government procurement signal effect is stronger. (3) Tax incentives and venture capital, government procurement and venture capital have played an innovative synergistic effect on NEV enterprises. (4) There is an innovation failure in the combination of tax incentives and government procurement, but the innovation effect appears after the introduction of market venture capital. This paper not only supports the effectiveness of the innovative measures in the "Opinions", but also recognizes the continuation of the vehicle purchase tax exemption policy for NEVs.

Executive team risk appetite, financial development and re-innovation strategy after enterprise innovation failure: evidence from China

PurposeThis article empirically tests the impact of risk appetite of the executive team on the re-innovation strategy after technological innovation failure using a panel regression model from the perspective of regional financial development level of enterprises.Design/methodology/approachBy means of time series global principal component analysis and panel regression model method, the study validated and analyzed the impact of risk appetite of the executive team on the re-innovation strategy after enterprise technological innovation failure.FindingsThe research found that the higher the risk appetite of executive team, the more inclined the enterprise is to choose the “focusing on quantity, ignoring quality” re-innovation strategy after technological innovation failure. The better the financial development level of the region where the enterprise is located, the better it can effectively reduce the re-innovation strategy of “focusing on quantity, ignoring quality” of the enterprise due to the high risk appetite of the executive team.Originality/valueThe findings of this study are helpful in improving the financial development level of the region where the enterprise is located. It can help the executive team of the enterprise to more objectively choose the innovation strategy after technological innovation failure, and reduce the phenomenon that the executive team of the enterprise only pays attention to the quantity of re-innovation and underestimates the quality of re-innovation after technological innovation failure due to its high risk appetite.

Can stakeholders’ attention to innovation promote corporate innovation?

PurposeGiven the significance of innovation in enabling firms to maintain a long-term competitive edge and secure excess profits, this paper aims to investigate whether and how stakeholders’ attention to innovation (SATI) influences corporate innovation.Design/methodology/approachThis paper introduces a novel variable, SATI, which is achieved by segmenting stakeholders’ attention into two categories: attention to innovation and attention to other facets, using textual analysis methods. Subsequently, this paper empirically examines the influence of SATI on corporate innovation.FindingsThis paper finds that SATI positively affects corporate innovation input, and the result remains true after addressing possible endogeneity issues using instrumental variable regression. Furthermore, the positive effect of SATI on corporate innovation is stronger in firms facing greater financing constraints, thus verifying the financing constraints hypothesis. The positive effect is also stronger in firms with lower risk-taking levels, thus confirming the innovation failure tolerance hypothesis. Further analysis suggests that SATI increases both corporate innovation output and efficiency, thus ruling out the catering hypothesis.Originality/valueThis paper highlights the importance of SATI in driving corporate innovation. It enriches the literature on the repercussions of stakeholders’ attention and determinants of corporate innovation. In addition, it provides practical suggestions for further implementing China’s national innovation-driven development strategy.

An examination of spiritual capital and innovation: insights from high-growth aspiration entrepreneurs in a developing economy

PurposeThis study aimed to examine the relationship between spiritual capital and small business innovation in a developing market economy and the highly religious society of Minangkabau.Design/methodology/approachA quantitative method was used by analyzing the data with partial least squares (PLS), comprising 278 entrepreneurial and high-growth aspiration small and medium-sized enterprises (SMEs) owners in a developing economy such as Indonesia.FindingsThe results showed that spiritual capital was a source of acquiring knowledge from innovation failure situations, serving as a catalyst for the occurrence of novelty and differentiation-related innovation.Research limitations/implicationsThe perspective of spiritual capital was provided within a religious community, showing that future reports should produce comparative analyses from varying contexts. Since understanding entrepreneurs' perspectives and spiritual capital situation remained ambiguous, the performance of qualitative analysis was crucial.Practical implicationsEntrepreneurs were expected to obtain considerable benefits from spiritual capital as a source of inspiration for differentiation and higher levels of novelty-related innovation. Similarly, policymakers should implement the capital and learn from failure to evaluate entrepreneurial SMEs concerning their capabilities.Originality/valuePrevious studies were unable to acknowledge an alternative source of innovation in a specific context, such as entrepreneurial SMEs with high-growth aspirations and spiritual capital. This is because capital contributes to innovation, helps in the assimilation of innovative knowledge and causes novelty-related innovation.

What fails and when? A process view of innovation failure

What fails and when? A process view of innovation failure

Theory of Innovation Failure and Strategic Management Implications

Theory of Innovation Failure and Strategic Management Implications