Not all (innovation) failures are created equal: A typology of companies’ responses to the consequences of innovation failure

Failure and innovation have always been inextricably linked. What matters in today's complex environment, however, is how companies deal with failure from innovation. Although recent research indicates that they are often likely to fail, failure still overall assumes a negative connotation and is thus perceived as something to avoid. By combining prior research on types of failure (spurious vs traditional learning), consequences of innovation failure (trauma vs opportunity), and entailing key influencing factors (e.g., types of learning, dynamic capabilities, time, negative social evaluations), we outline a typology of approaches to innovation failures. We examine and discuss illustrative case studies of companies (Theranos, Space X, IBM, and Pfizer) to demonstrate how they approach the different types and consequences of innovation failures. We also speculate on how their strategies might change over time, how this might affect their learning curve depending on the negative social evaluations they receive, and the role dynamic capabilities play in shaping managerial decisions. These illustrative cases help readers visualize theoretical concepts and recognize the potential benefits and consequences of different types of innovation failures. We outline implications for theory and practice and suggest a future research agenda to improve our understanding of the processes at work when innovation and dealing with failure.