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Failure, innovation, and productivity growth: Evidence from a structural model
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This study employs a simultaneous equation model to examine the extent to which firms’ innovation failure can affect future innovation and productivity growth. Our findings suggest that experiencing past failure in the innovation process enhances the innovation performance of a firm; this, in turn, contributes to productivity growth. The primary contribution of this study is the proposal of a conceptual model for the innovation process that considers failure experience as a major input to the knowledge production function. Our results also offer several implications for innovation managers and policymakers. For example, innovation policy initiatives should consider not only the tangible accomplishments of firms, but also their failure experiences. This study also highlights a method to enhance innovation by establishing systems that encourage challenging research and recognise and reward the process, even when a project fails.
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... However, the question persists whether failures are invariably negative or something that should be avoided. The literature is inconclusive and offers mixed results, which include positive [7], [8], [9], [10], [11], [12], [13], [14] and negative effects of failure [2], [3], [15], [16], along with claims that not all firms always benefit from them [17], [18], [19], [20], [21]. One perspective emphasizes that innovation failure can enhance efficiency and success in subsequent activities by modifying and supplementing existing information and knowledge through learning from past innovation activities [22]. ...
... Madsen and Desai [6] argued that organizations learn more effectively from failures. Recent evidence also supports the positive impact of failure on a firm's subsequent activities and performance [8], [14], [31]. ...
... The independent variable in this study is failure. This was measured using the share of the number of failed technology development projects compared to the total number of complete technology development projects during the reference period of the survey [14], [33], [52]. Though some authors count the number of failed projects [26], [53], there is a limitation that this approach does not represent the scale of the project. ...
The question persists whether failures are invariably negative and therefore, something that should be avoided. The literature is inconclusive and offers mixed results, which include positive and negative effects of failure, along with claims that not all firms always benefit from them. This study aims to reevaluate the failure-innovation performance relationship. By conducting a quantile regression analysis, this study reveals that only firms beyond a threshold level of innovativeness may benefit from their experiences of failure. Moreover, firms with high innovation performance benefit more from their innovation failures than those with low innovation performance. Our results suggest that the relationship between failure and innovation performance differs at various levels of innovation performance.
... La innovación es un factor fundamental en el crecimiento de la economía de los países y en las estrategias dinamizadoras de la productividad (Bong y Park, 2024). El lanzamiento de nuevos productos, la creación de nuevos negocios y la sofisticación de los procesos, tienen un alto impacto en el mejoramiento de la calidad de vida de las comunidades y la sostenibilidad de las empresas. ...
Introducción: La innovación requiere de ideas novedosas, lo cual se ve afectado por la fijación. Los ingenieros industriales son agentes de innovación y es relevante identificar aspectos, que incorporados a su formación profesional permitan fortalecer sus competencias creativas. El estudio busca identificar fuentes de fijación durante la ideación, así como estímulos que puedan reducirla. Metodología: Se realiza un comparativo de las competencias creativas de 28 estudiantes de semestres inferiores y superiores de ingeniería industrial. Se aplica AUT y RAT como herramientas de medición. Se realiza un análisis del impacto de estímulos generados por métodos de ideación: tormenta de ideas, diseño por heurísticas y pensamiento analógico. Resultados: Se observa un incremento en la cantidad, fluidez y variedad del grupo con entrenamiento en procesos convergentes y divergentes, al igual que una reducción en la fijación a partir del uso de estímulos en la fase de ideación. Discusión: El entrenamiento con AUT evidencia un incremento en la cantidad, fluidez y variedad. La aplicación de estímulos como pensamiento analógico y diseño por heurísticas reducen la fijación. Conclusiones: El entrenamiento en pensamiento divergente, asociativo y convergente, la interacción social y la motivación mejoran la cantidad, fluidez y novedad de las ideas reduciendo la fijación.
... Small changes can trigger larger changes later on, generate radical changes, and create a dynamic of events that escalate in time (Harkema, 2003). Specifically, agents can choose different strategies to learn from innovation failures (Bong and Park, 2022). In this context, ABMs appear particularly useful to model the learning process arising from failures. ...
... Feedback informs people if they misuse their freedom, helping them stay consistent. Feedback affects users' progress differently and has perks and cons (Bong & Park, 2022;Liu et al., 2022). Through psychological rapprochement and checks and balances, believers can maintain their code of behavior. ...
Autonomy, resiliency, and feedback must be prioritized for individuals in industries where behavioral innovation is required, and performance reviews of those employees should reflect this. It is difficult to do either empirical, qualitative, or conceptual research that can disclose such creative work habits in the banking business, but this research endeavors to achieve that. In order to evaluate 258 first-line managers from five regional and private Islamic banks in Indonesia, a literature-based framework has been constructed. The path model supports the idea that autonomy and resiliency foster innovative behavior at work. Resilience, autonomy, flexibility, and feedback are also significantly associated; however, feedback has not been linked to innovative work behavior. This study may be helpful to Islamic banking managers and specialists who want to learn more about innovative work behavior. While discussing this study’s composition, researchers offered valuable suggestions. Implications, limitations, and prospective avenues are discussed after the research results.
Purpose
Past studies on project-related failures (PRF) have focused more on developing criteria for measuring project success and failure and achieving project outputs without addressing the impact of PRF on team members. Therefore, this study aims to focus on reviewing the impact of PRF on team members and the support offered by leaders.
Design/methodology/approach
A qualitative research approach was adopted, and data was collected through interviews involving 15 construction professionals. The data was analysed using the narrative data analysis method whilst adopting just culture theory as a theoretical lens.
Findings
Failure impacts team members’ emotions and morale negatively in form of grief, stress and in some cases death. Family and personal relationships are strained due to the financial burden of losing employment. Support offered to team members mostly increased training and supervision with a focus on meeting the project outputs (time, cost and quality) without addressing the emotional and morale-related impact of failure on team members. Instead team members are blamed and punished, which demonstrates a prevalence of a retributive response to failure.
Research limitations/implications
Considering the limited number of participants, the study’s findings cannot be generalised. Hence, future studies with a large population are encouraged.
Practical implications
The implications for practice are that team members should be supported emotionally besides retraining/upskilling and supervision. Accordingly, there is need to adopt a just culture which focuses on who are affected and how they can be supported instead of focusing on who to blame.
Originality/value
Unlike studies that focus on the criteria for measuring and mitigating project with the view of achieving project outputs, this study encourages providing emotional support to team members.
A Magyar Nemzeti Bank 2023. évi Növekedési Jelentése 1 100 olyan innovációvezérelt vállalatot azonosított, amely körnek a növekedési hozzájárulása kiemelkedő volt a 2010-es években. Ezek a vállalatok nemcsak gyors növekedést mutattak, hanem az innováció terén is aktívak voltak az előző üzleti ciklusban. A jelentés leíró eredményei alapján ezek a cégek a fővárosban és olyan vármegyékben koncentrálódtak, ahol többkaros egyetemek működnek. A jelen tanulmány megvizsgálja, hogy az említett körben tapasztalt fővárosi koncentráció egyedülálló jelenség-e a vármegyei vállalatdemográfiai adottságokat figyelembe véve. Az innovációvezérelt vállalatok előfordulási valószínűsége – tekintettel a vállalatok tevékenységi körére, méretére, tulajdonosi szerkezetére és korára – 6 vármegyében nem különbözött szignifikánsan a Budapesten tapasztalttól. Ezek a vármegyék Baranya, Csongrád-Csanád, Fejér, Hajdú-Bihar, Heves és Szabolcs-Szatmár-Bereg.
The Magyar Nemzeti Bank’s 2023 Growth Report identified 1,100 innovation-driven enterprises that demonstrated exceptional growth in the 2010s. These enterprises not only exhibited rapid expansion, but they also engaged in significant innovation during the previous business cycle. According to the descriptive findings of the report, these firms are mostly located in the capital and in counties where there are universities with multiple faculties. This study investigates whether the concentration in the capital city is a unique phenomenon considering the firm demographic characteristics of the counties. The prevalence of innovation-driven enterprises did not significantly differ in six counties compared to Budapest, when considering the scope of activity, size, ownership structure and age of these firms. These counties were Baranya, Csongrád-Csanád, Fejér, Hajdú-Bihar, Heves and Szabolcs-SzatmárBereg.
The basic research aptitude. It covers three main things; Identification of a problem, Space area, & Delimitation.
In this seventh edition, we continue our tradition of differentiating our work from that of others by developing its unique characteristics:
• Strong evidence-based approach to the understanding and practice of managing innovation, drawing upon thousands of research projects, and “Research Notes” on the very latest research findings. Managing Innovation had more than 11,000 citations in Google Scholar;
• Practical, experience-tested processes, models, and tools, including “View,” first-person accounts from practicing managers on the challenges they face managing innovation;
• Extensive additional interactive resources, available from the Wiley Book Companion Site (BCS), including video, audio pod casts, innovation tools, interactive exercises, and tests to help apply the learning. Further video is available on our YouTube channel, innovation masters).
In this fully updated seventh edition, we draw upon the latest research and practice, and have extended our coverage of topical and relevant subjects, including digital innovation [6], business model innovation, open innovation [7], user innovation [8], crowdsourcing [9], service [10] and social innovation [11].
Failure is not the outcome which entrepreneurs strive for when they start their businesses. However, thousands of entrepreneurs fail each year, experiencing painful and damaging consequences in their professional and private lives. Current knowledge on entrepreneurial failure is quite fragmentary. Our study thus aims at integrating knowledge on the effects of entrepreneurial failure. Departing from a systematic literature review, we develop a multilevel framework of entrepreneurial failure effects which categorizes those through: 1) the differentiation of their manifestations over time; 2) the directness of the link to the failure event; 3) the degree of impact on the entrepreneur who failed; 4) the level of long-term outcomes generated, and 5) the direction of long-term outcomes influence. Our findings reveal a broad scope of multilevel and two-sided impacts of entrepreneurial failure.
Building on Cyert and March’s (1963) behavioral theory of the firm, we investigate how firms adjust their exploratory and exploitative innovation activities in response to performance feedback, and how this adjustment is moderated by the firms’ financial slack. We find that firms invest in a different mix of innovation activities when they receive positive versus negative performance feedback. Specifically, our empirical results show that the higher a firm’s performance is above its aspiration level, the lower will be the share of exploratory innovation in its total portfolio of innovation activities. In contrast, the lower a firm’s performance is below its aspiration level, the higher will be the share of exploratory innovation in its total innovation activities. While financial slack has the direct effect of increasing the share of exploratory innovation activities, its interaction with performance feedback appears to moderate this effect when the firm is underperforming.
In this article, we apply the concept of optimal distinctiveness to test whether category spanning has a nonlinear effect on new ventures’ risk to fail. We argue that by being optimally distinct, i.e., by attaining a level of category spanning that allows new ventures to benefit from balancing the competing needs of conformity with and differentiation from competitors, new ventures can improve their survival chances. In addition, we argue that the relevance of optimal distinctiveness varies with a venture's age and a category's density. We tested our hypotheses using data from 1668 metal bands that were founded in the United Kingdom between 1967 and 2005. The results indicate that optimal distinctiveness is relevant to new ventures’ failure risk. Moreover, we show that venture age attenuates the relevance of optimal distinctiveness, whereas category density strengthens that factor's relevance.
Studies in the behavioural strategy literature have examined the influence of attainment discrepancy on new geographic market entry with inconclusive results. We clarified the relationship between attainment discrepancy and new geographic market entry by considering the moderating effects of managerial pay gaps with concentration on vertical pay disparity and horizontal pay dispersion. The framework also contributes to our understanding of tournament theory and social comparison theory by identifying specified performance contexts under which types of pay gaps conform to or violate theoretical predictions. Empirical analyses based on a panel data of Standard and Poor’s (S&P) 500 firms from 1996 to 2006 showed that our hypotheses are largely supported.
How to evaluate innovations, especially in the beginning of new product development, is a question constantly posed by academics, managers, and policymakers. One reason for this is that improved front-end decisions greatly affect company performance. To find the answers to this question, this review article analyzes scientific publications on innovation indicators published between 1980 and 2015. The objective of this article is to increase the understanding of the indicator landscape and to complement the various stages of the innovation process with relevant indicators. In doing so, this study categorizes the identified indicators into company-specific and contextual dimensions. Furthermore, this study analyzes the indicators in terms of their potential for ex-ante and ex-post evaluation and investigates the characteristics of relevant publications. The analysis finds that more process rather than product indicators exist in the literature. Current publications emphasize qualitative and indirect indicators but neglect indicators for the early stages of the innovation process. The review identifies 82 unique indicators to evaluate innovations including 26 indicators for the early stages. The results can help managers, researchers, and policymakers to better understand the innovation process and the indicator landscape. However, more concrete indicators are needed to improve front-end innovation decisions.
In year 1998, the seminal paper Research Innovation and Productivity: An Econometric Analysis at the Firm Level was published in this journal. The empirical framework, following on ideas in the research of Zvi Griliches at the NBER and commonly labeled CDM (the acronym of the three authors’ names, Crépon, Duguet and Mairesse) is one of the most influential contributions in recent literature on economics of innovation. The original CDM paper and papers inspired by its framework have received hundreds of citations in the empirical innovation literature. Whether directly linked or not to the CDM framework, the flow of studies improving on and enlarging the scope and methods of the empirical literature on R&D, innovation and productivity is continuing. Some of them, for example, focus on financing innovation, innovation and employment, innovation and trade, competition, or intellectual property; some adopt a managerial perspective, while others prefer an innovation system approach in a Schumpeterian tradition, etc. This introduction to the special issue of EINT surveys a collection of 12 papers on the CDM model by 25 authors from eight countries. The papers take stock of the evolution of research based on the original CDM model launched 20 years ago, linking it to the previous literature, and proposing developments and generalizations of it in various dimensions.
We use an extended version of the well-established Crepon, Duguet, and Mairesse model [1998. “Research, Innovation and Productivity: An Econometric Analysis at the Firm Level.” Economics of Innovation and New Technology 7 (2): 115–158] to model the relationship between appropriability mechanisms, innovation, and firm-level productivity. We enrich this model in three ways: (1) We compare estimates obtained using a broader definition of innovation spending to those that use R&D spending. (2) We assume that a firm simultaneously innovates and chooses among different appropriability methods to protect the innovation. (3) We estimate the impact of innovation output on firm productivity conditional on the choice of appropriability mechanism. We find that firms that innovate and rate formal methods for the protection of intellectual property highly are more productive than other firms, but that the same does not hold in the case of informal methods of protection, except possibly for large firms as opposed to SMEs. We also find that this result is strongest for firms in the services, trade, and utility sectors, and negative in the manufacturing sector.
Almost all empirical research that has attempted to assess the validity of the Porter hypothesis (PH) has started from reduced-form models, for example, single-equation models for estimating the contribution of environmental regulation to productivity. This paper follows a structural approach that allows testing what is known in the literature as the ‘weak’ and the ‘strong’ version of the PH. Our ‘Green Innovation’ model includes three types of eco-investments to explain differences in the incidence of two types of eco-innovation, which are allowed to affect labor productivity. We allow for complementarity between the two types of eco-innovations. Using a comprehensive panel of Dutch manufacturing firm-level data we estimate the relative importance of environmental regulations on eco-investment and eco-innovations. The results of our analysis show a strong corroboration of the weak and a nuanced corroboration of the strong version of the PH.
The knowledge of the innovation-productivity relationship in Latin America, and particularly in the Colombian service sector, is scant. In this study, we explore such relationship comparing the Colombian service industry with manufacturing. Following the Crépon-Duguet-Mairesse empirical approach, the four major findings are as follows: Indeed, Colombian service firms undertake (technological and nontechnological) innovation processes. Regardless of the industry, the probability of innovation increases when there is investment in research and development (R&D) labs and firms are large. The more intensive innovation investment is, the higher the probability of innovation implementation. Finally, labor productivity is enhanced after the introduction of innovations.
Using data on 3,225 actively managed U.S. mutual funds from 1980 to 2006, we test hypotheses designed to disentangle risk and change as outcomes of behavioral performance feedback routines. We theorize that managers make decisions involving risk and decisions involving change under different conditions and motivated by different concerns. Our results show internal social comparison across units within a firm will motivate risk, whereas external social comparison across firms will motivate change. When a fund experiences a performance shortfall relative to internal social comparison, the manager is likely to make decisions that involve risk because the social and spatial proximity of internal comparisons trigger individual concern and fear of negative individual consequences, such as job loss. In contrast, when a fund experiences a performance shortfall in comparison with external benchmarks, the manager is more likely to consider the shortfall an organizational concern and make changes that do not necessarily involve risk. Although we might assume that negative performance in comparison with both internal and external benchmarks would spur risky change, our results indicate that risky change occurs most often when a decision maker receives unfavorable internal social performance feedback and favorable external social performance feedback. By questioning assumptions about why and when organizational change involves risk, this study begins to separate change and risk outcomes of the decision-making process.
Do firms learn from their failed innovation attempts? Answering this question is important because failure is an integral part of exploratory learning. In this study, we consider whether and under what circumstances firms learn from their small failures in experimentation. Building on organizational learning literature, we examine the conditions under which prior failures influence firms' R&D output, in terms of amount and quality. Our empirical analysis of voluntary patent expirations (i.e., patents that firms give up by not paying renewal fees) in 97 pharmaceutical firms between 1980 and 2002 shows that the number, importance, and timing of small failures are associated with a decrease in R&D output (patent count) but an increase in the quality of the R&D output (forward citations to patents). Exploratory interviews further suggest that the results are driven by a multilevel learning process from failures in pharmaceutical R&D. Our findings contribute to the organizational learning literature by providing a nuanced view of learning from failures in experimentation.
Organizations learn by reinforcing past actions. When firms experience actions with negative outcomes, they change in response. Any persistence with such actions is said to be suboptimal, attributable to factors such as threat rigidities. This paper theorizes that persistence may sometimes be rational, attributable to the characteristics of feedback. It uses a novel dataset of medical devices to show how organizations learn to search for future novel or incremental innovations based on failure. It finds that firms change innovation activities when novel innovations fail, but persist when incremental innovations fail. These findings support the hypothesis that inferences based on failure from incremental innovations tend to be more robust, leading firms to be more willing to persist when failure occurs.
This paper examines the process that links knowledge resources to innovation performance. We propose that this relationship is mediated by innovation capability and that management commitment moderates this mediation effect. To measure innovation performance, we create an indicator that summarises the impact of innovation activities on products, processes and sustainability. The sample comprises 9432 firms in different sectors included in the Community Innovation Survey (CIS). The results confirm that knowledge resources not only have a direct positive effect on innovation performance but also an indirect effect by improving the firm's innovation capability. We also confirm the moderating role of management commitment, but with limitations. This research, therefore, throws light on how firms can leverage their knowledge resources to gain a competitive advantage based on innovation.
This paper presents a model of team learning and tests it in a multimethod field study. It introduces the construct of team psychological safety—a shared belief held by members of a team that the team is safe for interpersonal risk taking—and models the effects of team psychological safety and team efficacy together on learning and performance in organizational work teams. Results of a study of 51 work teams in a manufacturing company, measuring antecedent, process, and outcome variables, show that team psychological safety is associated with learning behavior, but team efficacy is not, when controlling for team psychological safety. As predicted, learning behavior mediates between team psychological safety and team performance. The results support an integrative perspective in which both team structures, such as context support and team leader coaching, and shared beliefs shape team outcomes.
Organizations are widely encouraged to learn from their failures, but it is something most find easier to espouse than to effect. This article synthesizes the authors' wide research in this field to offer a strategy for achieving the objective. Their framework relates techni-cal and social barriers to three key activities e identifying failure, analyzing failure and deliberate experimentation e to develop six recommendations for action. They suggest that these be implemented as an integrated set of practices by leaders who can 'walk the talk' and work to shift the managerial mindset in a way that redefines failure away from its discreditable associations, and view it instead as a critical first step in a journey of discovery and learning.
How has Japan become a major economic power, a world leader in the automotive and electronics industries? What is the secret of their success? The consensus has been that, though the Japanese are not particularly innovative, they are exceptionally skilful at imitation, at improving products that already exist. But now two leading Japanese business experts, Ikujiro Nonaka and Hiro Takeuchi, turn this conventional wisdom on its head: Japanese firms are successful, they contend, precisely because they are innovative, because they create new knowledge and use it to produce successful products and technologies. Examining case studies drawn from such firms as Honda, Canon, Matsushita, NEC, 3M, GE, and the U.S. Marines, this book reveals how Japanese companies translate tacit to explicit knowledge and use it to produce new processes, products, and services.
In innovation literature, some view firms’ failures as negative to their innovative behaviour, while others argue that failures have a net function – learning from failure. However, we question whether classic linear regression methods constrain understandings of patterns by presenting only one side of the cause-and-effect relationship. This paper complements conventional approaches to literature by characterising the forms of innovation behaviour as mutually exclusive alternatives. Through an empirical approach evaluating mutually exclusive alternatives, we detected that firms’ failures simultaneously affect both the probability of choice to increase innovation investment and that to decrease innovation investment. Our results suggest that there is a certain threshold for the degree of failure to trigger innovative behaviour. When this is kept at a low level, innovative behaviour, rather than conservative behaviour, is more likely to be triggered. However, at a high level, companies could choose to increase their innovation investment; but they could also do the exact opposite at any time. Overall, attempts to model the innovation decision-making process as one on choosing the best out of mutually exclusive alternatives allows us to simultaneously compare the probability of innovation behaviour, elucidating the multidimensional aspects of innovation.
Innovation is a widely acknowledged key component of corporate performance management. However, most of the literature on this topic has tended to focus on determinants of corporate failure, thereby neglecting to look at the role of innovation failure in triggering innovative initiatives. By using a sample of companies covered by 2014 Community Innovation Survey data and applying econometric models, this study sought to analyze the impacts of innovative project failure. The results show that innovation failure is negatively correlated with companies’ experience and acquisition of external knowledge. The main findings are consistent with the scarce literature on this research topic, and highlight the positive role that companies’ accumulated experience has in their assimilation of knowledge flows.
Government subsidies have been one of the popular policy instruments to stimulate firms’ R&D activities. We empirically investigate the impact of government subsidies on firms’ R&D decisions of listed manufacturing firms in China. In contrast to prior studies, we split firms’ R&D decision into two elements of ‘whether to invest decision’ and ‘how much to invest decision’. The influences and mechanism of government subsidies on R&D decision are theoretically analysed to develop hypotheses tested in this study. We find that government subsidies have a promotion effect on both elements of the firms’ R&D decision. Moreover, we also demonstrate the heterogeneous effects of government subsidies between state-owned and non-state firms. Due to the inherent principal-agent problem of state-owned firms and soft budget constraint, subsidies can only increase the probability to undertake R&D activities but cannot stimulate further investment in R&D efforts. However, our results indicate that government subsidies take effects in both elements of R&D decision for non-state firms.
In this paper we explore the R&D–innovation–productivity linkage for the Colombian manufacturing industry, paying special attention to the role of human capital. Using data from two firm-level surveys, the Survey of Development and Technological Innovation (EDIT) and the Annual Manufacturing Survey (EAM), we extend the model of Crépon, Duguet, and Mairesse [1998. ‘Research, Innovation and Productivity: An Econometric Analysis at the Firm Level.’ Economics of Innovation and New Technology 7 (2): 115–158] (hereafter CDM) by including human capital at the investment decision stage. We implement an instrumental variable methodology to correct the potential endogeneity that may arise with the inclusion of human capital. Our results suggest that human capital has a causal effect on research and development (R&D) investment decisions, the innovation behavior of the firm, and increases the labor productivity of the firm. The conclusions highlight the relevance of human capital in the surrounding literature which stands in contrast to prior work that has not included this variable.
Sales is a profession that faces an inordinate amount of failure. When salespeople fail and face rejection from customers, the consequences are widespread and lasting. Perhaps, rather than aiming to prevent inevitable failures, salespeople should instead anticipate and control the timing of when failure occurs in the sales cycle. Across three progressive studies, this research explicates the phenomenon of failing fast within a business-to-business sales context. The authors theoretically conceptualize and operationalize a failing fast process model: prospect intent collection, prospect intent interpretation, and salesperson failing fast. The authors then study the focal relationship between salesperson failing fast and sales performance, contingent on individual-level, organizational-level, and environmental-level moderators. While the direct effect is non-significant, the finding is novel in that it shows that certain forms of failure may not actually be a detriment to performance. The moderator analysis sheds further light on this relationship, revealing a mixture of accentuating and attenuating effects. This research collectively brings greater nuance to the study of sales failure and enables future scholars to understand the consequences, and even potential benefits, of failing early in the sales process.
This research evaluates the impact of public funding on the probability of performing various innovative activities in Chilean firms during the period of 2007–2014, using binary choice models applied to a pseudo-data panel. The results indicate that public support for innovation has a positive and statistically significant effect on internal and external Research and Development (R&D) and also increases the probability of having a formal R&D department. However, the results are not robust regarding innovation for products, services, processes, logistics, marketing and organizational innovation. On the other hand, collaborative actions were shown to positively impact the realization of all types of innovation and stimulate internal and external R&D. Thus, it is concluded that public support programs could be more successful if they promote cooperation with public and / or private actors.
Teams have a high potential for innovation development by carrying out innovative work behaviour (IWB), but research remains limited on how engagement in team learning behaviours (TLBs) can foster IWB among team members. Especially longitudinal studies investigating the dynamic character of both constructs are missing. To clarify the relationship between TLBs and IWB over time, we conducted a three-wave longitudinal survey among interdisciplinary work teams in German vocational education. Based on a sample of 66 work teams with 275 team members consisting of vocational educators, such as teachers, school principals and social workers, a manifest cross-lagged panel model was estimated to capture the dynamic relationship between TLBs and IWB. The hierarchical structure was taken into account and missing data were imputed. The results indicate that knowledge sharing and team reflexivity at the beginning of the teamwork predict future engagement in dimensions of IWB. In the further course of the teamwork boundary spanning becomes an important TLB for IWB. The TLBs that are relevant for IWB are influenced by task interdependence and team structure. The results provide insight into how IWB can be fostered through TLBs over time. At the beginning of a work task, knowledge sharing and team reflexivity should be fostered by encouraging discussion and enriching different perspectives to reach high engagement in IWB. In the further course of teamwork information should be gathered from outside the team, for instance by inviting experts.
Executive summary
The popular business press and academic articles have promoted the virtues of failure, particularly in the pursuit of innovation. Surprisingly, there has been very little systematic empirical study to support this belief. This article distinguishes two organizational approaches to failure: normalizing it (tolerating failure as a necessary part of the innovation process) and analyzing it (purposeful attempts to convert failure experiences into knowledge). 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 deliberate efforts to analyze past failures introduce more innovative new products. Further, this effect is contingent on a climate of constructive conflict within the firm. Hence, to foster firm innovativeness, organization members need to extract lessons from failure, and such analysis must take place in a climate of constructive conflict that enables open and honest discussion.
Using 693 000 datacells from 33 000 sample construction firms that operated or failed between 2008 and 2017, failure prediction models were developed using artificial neural network (ANN), support vector machine, multiple discriminant analysis (MDA), and logistic regression (LR). The accuracy of the models on test data surprisingly showed ANN to have only a slightly better accuracy than LR and MDA. The ANN's number of units in the hidden layer and weight decay hyperparameters were consequently tuned using the grid search. Tuning process led to tedious machine computation that was aborted after many hours without completion. The state of art big data analytics (BDA) technology was, for the first time in failure prediction, consequently employed and the tuning was completed in some seconds. Mean accuracy from cross validation was used for selection of the model with best parameter values, which were used to develop a new ANN model that outperformed all previously developed models on test data. Subsequent use of selected variables to develop new models led to reduced tuning computational cost, but not improved performance. Since the real-life effect of a misclassification cost is greater than the tedious computation cost, it was concluded that BDA is the best compromise. IEEE
This paper contributes to the debate on the determinants of business failure and helps to clarify the effect of internal innovation efforts and external knowledge sources in a hazard model of firm exit. Using panel data of manufacturing and service firms in Spain for the period 2009–2015, our findings show that the financial crisis increased the probability of business failure; however, firms with high levels of R&D human capital are better positioned to survive under uncertain financial conditions. In addition, we find evidence that cooperation with vertical partners reduces the effect of business failure in manufacturing sectors. This study provides new insight into the antecedents of business failure and how firms can match their business capabilities to prevailing economic conditions.
This meta-analysis serves to integrate evidence about the outcomes of absorbtive capacity (ACAP) resulting from different conceptualizations of its dimensionality. At the conceptual level, we examine three conceptualizations of ACAP—unidimensional, bidimensional, and multidimensional ACAP—and discuss their links to technological innovation and financial performance outcomes. At the empirical level, we examine effect sizes resulting from unidimensional, bidimensional, and multidimensional views of ACAP, and assess the impact of several methodological moderators on the links between ACAP and its outcomes. A total of 330 correlations from 96 studies show that ACAP is positively associated with organizational technological innovation and firm financial performance, and that these relationships are moderated by dimensionality, proxy choice, use of survey versus archival data, and cultural and industry context of the study. Recommendations for future theoretical and empirical studies of ACAP are included.
Using unique innovation survey data collected from a homogenous sample of firms in Pakistan, this paper presents an analysis of the firm level determinants of product innovation and its impact on firm performance. We employ a multi-stage structural model linking the decision of a firm to innovate, its innovation investment, product innovation, and firm performance using primary data from the textile and wearing apparel sector, which is the largest export sector of Pakistan. We find that product innovation leads to increased labor productivity as well as higher labor productivity growth. A 10 percent increase in innovative sales per worker is associated with a greater than 10 percent increase in labor productivity and labor productivity growth. On the determinants of innovation, we find that vertical knowledge flows from foreign clients and suppliers are important determinants of a firm's decision to innovate. Larger firms are more likely to engage in innovation, however, there is no significant evidence that they invest more in innovation. Exporting is positively associated with innovation performance and firms exporting to Europe and America are more likely to engage in innovation. There is mixed evidence on the impact of competition: foreign competition adversely affects a firm's decision to innovate, whereas, local competition increases investment in innovation. Subsidies seem to have a crowding out effect since firms receiving national subsides invest less in innovation. Furthermore, firms that have higher investment in innovation, that are more productive, and that introduce organizational innovations have higher innovative sales per worker.
Business failure and its effect on entrepreneurial engagement has attracted substantial scholarly attention in entrepreneurship research. We contend that knowledge is lacking on the entrepreneurial learning mechanism and entrepreneurial alertness condition under which business failure experience influences new venture performance. In an empirical examination of 240 entrepreneurs operating in multiple industries in a sub-Saharan African country, we use a longitudinal data set to show that business failure experience does not always influence
new venture performance. Rather, business failure experience influences new venture performance when it is channelled through entrepreneurial learning under conditions of increasing levels of entrepreneurial learning and a greater degree of alertness to new business opportunities. We discuss these findings and provide avenues for extending this emerging area of scholarly research.
The business environment faced by contemporary organizations is highly uncertain and constantly changing. Thus, organizations have adopted and implemented a continuous stream of innovations to achieve sustainable growth and survival. Considering the demand for additional resources to implement innovations, the present study explores organizational conditions that may lead to innovation-targeted burnout and fatigue among employees, which impede their active participation in a subsequent innovation. To this end, we propose a theoretical framework that elucidates the effects of previous innovations on the subsequent implementation behavior of employees. We identify two dimensions of the cognitive appraisal of previous innovations (i.e., intensity and failure) that shape employees' beliefs regarding innovations, such as innovation-targeted helplessness, which ultimately results in innovation fatigue. Data collected from 84 managers and 397 employees of Chinese and Korean organizations prove the significant role of employee perceptions of previous innovations in shaping the innovation-targeted helplessness and fatigue of employees, which ultimately affect employee behavior toward a subsequent innovation. The present conceptual and empirical analyses suggest that given continuous streams of innovation implementation, managers should carefully consider employee's perceptions of previous innovations (i.e., intensity and failure) for successful implementation of a subsequent innovation. Copyright
Organizations often experience failures when managing complex innovation projects. While experiences of failure can often lead to frustration and create a downward spiral, they are also a vital source for organizations to develop new knowledge and enhance innovation. This, however, depends on their capacity to learn from these experiences. Research indicates that organizations do not learn all they can from failures. This study implemented a micro-relational perspective and examines whether and why generative work relationships help facilitate both direct and indirect learning from experiences of failure and how these learning modes influence the innovation of small organizations. Multi-source data from 63 software firms in the ICT sector show that generative work relationships facilitate both modes of learning from failures. However, only learning from direct experiences of failure facilitates innovation agility, whereas vicarious learning from failure enhances product innovation (patent) outcomes. The implications for a micro-relational view of organizational learning and innovation are discussed.
This paper integrates innovation input and output effects of R&D subsidies into a modified Crépon–Duguet–Mairesse (CDM) model. Our results largely confirm insights of the input additionality literature, i.e. public subsidies complement private R&D investment. In addition, results point to positive output effects of both purely privately funded and subsidy-induced R&D. Furthermore, we do not find evidence of a premium or discount of subsidy-induced R&D in terms of its marginal contribution on new product sales when compared to purely privately financed R&D.
Failure to innovate has been only recently recognized as one of the key elements in determining successful firms' innovative performance. However, as this literature focuses only on the determinants of firms' failure, it neglects the role of failure in spurring innovative activity. In this paper, the relationship between innovative performance and failure to innovate is empirically tested, through a two step econometric model, on the 2008 CIS Innovation survey dataset. The main results of the paper are, first, that failure is negatively correlated to the firms' experience (proxies by R&D), and to the acquisition of direct external knowledge (through productive links in product and process innovation). Indirect learning from the failures of similar firms is moderated by firms engagement in R&D and in searching for external knowledge. The second step reveals that failure in turn has a positive impact on performance in term of percentage of turnover from new to the market innovative products. Finally, an additional test is performed on still ongoing innovation (rather than abandoned), and the results show a minor impact on innovation activity.
The increasing liberalization of markets coupled with the creation of new markets for intermediate products is stripping firm-level competitive advantage back to its fundamental core: difficult to create and difficult to imitate intangible assets. This article explores these developments and elucidates implications for the management of intellectual capital inside firms.
There is an extensive literature on the success/failure of firm-funded R&D projects, but growing policy interest focuses on publicly funded R&D projects. We discuss this literature, which builds on a long stream of research of which Albert Rubenstein was a prime investigator, and use the literature to motivate the theoretical and empirical parts of the paper. Using data from 1878 Phase II R&D projects funded through the U.S. Small Business Innovation Research (SBIR) program, of which 624 had been discontinued prior to technical completion, we provide for the first time quantitative findings on the success/failure of publicly funded firm-performed R&D projects. Using a single-equation qualitative choice model, we find that prior R&D experience with the technology funded by SBIR projects, the amount of the SBIR award, and having a female as a principle investigator, other factors held constant, are all negatively related to the probability of project failure. In contrast, firm size is positively associated with project failure. We did not find evidence that human capital, experiential knowledge embodied in the firm conducting the R&D, or university involvement in the R&D project affected the probability of project failure. We discuss the implications of these findings for practice, policy, and further research.
We contribute to the behavioral theory of the firm and the behavioral agency model by developing a theoretical framework that predicts the differential interaction effects of performance feedback and values of stock option grants of multiple agents on firm risk taking. We explain how chief executive officers (CEOs) versus outside directors awarded with stock option grants perceive negative or positive deviations from prior performance. We argue that in a negative attainment discrepancy context, high values of option grants will increase the risk aversion of CEOs who already bear excessive employment and compensation risks, resulting in less risk taking; however, it will enhance the risk-taking propensity of influential outside directors who increase monitoring and support for risky projects because their risk preferences are better aligned with those of shareholders. In a positive attainment discrepancy context, high values of option grants will amplify risk aversion in both CEOs and outside directors who perceive risky strategies as potential threats to anticipated incentive values associated with a gain domain, thereby reducing risk-taking activities. Analysis of panel data from 1992 to 2006 on the research and development spending of U.S. manufacturing firms based on Arellano–Bond dynamic panel regression reveals findings largely consistent with our predictions.
In simple though approximate terms, the two-stage least squares method of estimating a structural equation consists of two steps, the first of which serves to estimate the moment matrix of the reduced-form disturbances and the second to estimate the coefficients of one single structural equation after its jointly dependent variables are “purified” by means of the moment matrix just mentioned. The three-stage least squares method, which is developed in this paper, goes one step further by using the two-stage least squares estimated moment matrix of the structural disturbances to estimate all coefficients of the entire system simultaneously. The method has full-information characteristics to the extent that, if the moment matrix of the structural disturbances is not diagonal (that is, if the structural disturbances have nonzero “contemporaneous” covariances), the estimation of the coefficients of any identifiable equation gains in efficiency as soon as there are other equations that are over-identified. Further, the method can take account of restrictions on parameters in different structural equations. And it is very simple computationally, apart from the inversion of one big matrix.
The growing complexity and pace of industrial technological change are
forcing firms to forge new alliances and to respond more efficiently to
market changes. This process is leading some companies towards more
strategically directed integration within external agencies. Some are
also adopting a sophisticated electronic toolkit in their design and
development activities. These leading edge innovators are beginning to
take on elements of the fifth-generation (5G) innovation process.
Describes developments towards this process.
This chapter discusses the perceptible movement of empirical scholars from a narrow concern with the role of firm size and market concentration toward a broader consideration of the fundamental determinants of technical change in industry. Although tastes, technological opportunity, and appropriability conditions themselves are subject to change over time, particularly in response to radical innovations that alter the technological regime, these conditions are reasonably assumed to determine inter-industry differences in innovative activity over relatively long periods. Although a substantial body of descriptive evidence has begun to accumulate on the way the nature and effects of demand, opportunity, and appropriability differ across industries, the absence of suitable data constrains progress in many areas. It has been observed that much of the empirical understanding of innovation derives not from the estimation of econometric models but from the use of other empirical methods. Many of the most credible empirical regularities have been established not by estimating and testing elaborate optimization models with published data but by the painstaking collection of original data, usually in the form of responses to relatively simple questions.
Failures are difficult to learn from, and organizations unable to learn may continue to fail. This study reconciles conflicting
theoretical predictions regarding whether organizations are able to learn from failure, by examining the moderating role of
knowledge gained through an organization’s operating experience. The study also forwards the possibility that generalist and
specialist organizations systematically differ at this process. Hypotheses are tested on a panel of railroad companies. These
tests provide strong support for the role of operating experience, and partial support for differences across generalists
and specialists. Contributions to organizational learning theory and related literatures are discussed.
Understanding communication processes is the goal of most communication researchers. Rarely are we satisfied merely ascertaining whether messages have an effect on some outcome of focus in a specific context. Instead, we seek to understand how such effects come to be. What kinds of causal sequences does exposure to a message initiate? What are the causal pathways through which a message exerts its effect? And what role does communication play in the transmission of the effects of other variables over time and space? Numerous communication models attempt to describe the mechanism through which messages or other communication-related variables transmit their effects or intervene between two other variables in a causal model. The communication literature is replete with tests of such models. Over the years, methods used to test such process models have grown in sophistication. An example includes the rise of structural equation modeling (SEM), which allows investigators to examine how well a process model that links some focal variable X to some outcome Y through one or more intervening pathways fits the observed data. Yet frequently, the analytical choices communication researchers make when testing intervening variables models are out of step with advances made in the statistical methods literature. My goal here is to update the field on some of these new advances. While at it, I challenge some conventional wisdom and nudge the field toward a more modern way of thinking about the analysis of intervening variable effects.
This paper draws on a sample of innovative Catalan firms to identify how two main sources of innovation – internal R&D and external R&D acquisition – affect productivity in the manufacturing and service industries. The sample comprises 1612 innovative firms from the fourth European Community Innovation Survey (CIS-4) during the period 2002–2004. We compare empirical results when applying the usual OLS and quantile regression techniques controlling with a non-parametric sample selection. Our results indicate the different patterns that are attributable to the two sources of innovation as we move up from lower to higher conditional quantiles. First, the marginal effect of internal R&D on productivity decreased as we moved up to higher productivity levels. Second, the marginal effect of external R&D acquisition increased as we moved up to higher productivity levels. Finally, empirical results show significant complementarities between internal and external R&D, which are higher for knowledge-intensive service sectors.
Innovation is a trial and error process in which both successes and failures contribute to knowledge creation and destruction. In this paper we test theoretical predictions about the role of failures in new product development on private and public knowledge and interfirm knowledge transfer. We analyse the outcomes of world-wide R&D projects in the pharmaceutical industry, and proxy knowledge flows with forward citations received by patents associated with each project. We find that patents covering successfully completed projects (i.e., leading to drug launch on the market) receive more citations than those associated to failed (terminated) projects, which in turn are cited more often than patents lacking clinical or preclinical information. Failures by specialized firms are cited more frequently than the ones of generalist companies. We therefore offer evidence of the value of failures as research inputs in (pharmaceutical) innovation.
Our theory extends the situational considerations explaining firm R&D search intensity beyond the behavioral theory of the firm by including shifts in the focus of attention among bankruptcy, aspirations, and slack. We also allow that search can reflect institutionalized investment patterns within firms and industries. We find stable firm-specific R&D investment patterns (i.e., institutionalized search) and variations in R&D intensity depending on firms' situations—including performance relative to aspirations, proximity to bankruptcy, and slack. Our empirical results evidence shifts in the focus of attention relevant to explaining R&D search intensity for subsamples of firms in different situations. Copyright © 2007 John Wiley & Sons, Ltd.