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

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  • Guocai Chen
  • Jing Xiao
  • Tongying Liang

Abstract

Drawing 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.

Suggested Citation

  • Guocai Chen & Jing Xiao & Tongying Liang, 2025. "How Do Firms' Innovation Failures Affect the Quality of Subsequent Innovations? The Contingency Role of Knowledge Breadth and Depth," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 46(2), pages 1245-1264, March.
    • Handle: RePEc:wly:mgtdec:v:46:y:2025:i:2:p:1245-1264
    DOI: 10.1002/mde.4431
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