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Learning from Failure

Author

Listed:
  • Philip R. P. Coelho

    () (Department of Economics, Ball State University)

  • James E. McClure

    () (Department of Economics, Ball State University)

Abstract

Failures may lead to ultimate success in both nature and business. Just as dynamic ecosystems depend on death to replace senescent organisms with vigorous growth, the termination of uneconomic activities is essential to wealth creation. This paper explores the benefits of failures, and uses aspects of the analogy between death and business failure to analyze how failures in business economize upon resources and lead to better firms and greater efficiencies. A distinguishing feature of our work is the analytic use of competitive markets to provide insights into the processes of success and failure. Recognizable patterns of business failures are discussed in an effort to provide entrepreneurs and mangers with a basis for understanding and acting upon changing circumstances.

Suggested Citation

  • Philip R. P. Coelho & James E. McClure, 2004. "Learning from Failure," Working Papers 200402, Ball State University, Department of Economics, revised Jan 2005.
  • Handle: RePEc:bsu:wpaper:200402
    as

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    File URL: http://web.bsu.edu/cob/econ/research/papers/bsuecwp200402coelho.pdf
    File Function: First version, 2004
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    References listed on IDEAS

    as
    1. Mata, Jose & Portugal, Pedro, 1994. "Life Duration of New Firms," Journal of Industrial Economics, Wiley Blackwell, vol. 42(3), pages 227-245, September.
    2. Jovanovic, Boyan & MacDonald, Glenn M, 1994. "The Life Cycle of a Competitive Industry," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 322-347, April.
    3. Holmes, Thomas J & Schmitz, James A, Jr, 1995. "On the Turnover of Business Firms and Business Managers," Journal of Political Economy, University of Chicago Press, vol. 103(5), pages 1005-1038, October.
    4. Armen A. Alchian, 1950. "Uncertainty, Evolution, and Economic Theory," Journal of Political Economy, University of Chicago Press, vol. 58, pages 211-211.
    5. John R. Baldwin & Paul K. Gorecki, 1990. "Firm Entry and Exit in the Canadian Manufacturing Sector," Working Papers 767, Queen's University, Department of Economics.
    6. Uma V. Sridharan & Lori Dickes & W. Royce Caines, 2002. "The Social Impact of Business Failure: Enron," American Journal of Business, Emerald Group Publishing, vol. 17(2), pages 11-22.
    7. Jerker Denrell & James G. March, 2001. "Adaptation as Information Restriction: The Hot Stove Effect," Organization Science, INFORMS, vol. 12(5), pages 523-538, October.
    8. George J. Stigler, 1951. "The Division of Labor is Limited by the Extent of the Market," Journal of Political Economy, University of Chicago Press, vol. 59, pages 185-185.
    9. Jerker Denrell, 2003. "Vicarious Learning, Undersampling of Failure, and the Myths of Management," Organization Science, INFORMS, vol. 14(3), pages 227-243, June.
    10. Audretsch, David B, 1991. "New-Firm Survival and the Technological Regime," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 441-450, August.
    11. Gort, Michael & Klepper, Steven, 1982. "Time Paths in the Diffusion of Product Innovations," Economic Journal, Royal Economic Society, vol. 92(367), pages 630-653, September.
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    Cited by:

    1. Gottschalk, Sandra & Greene, Francis J. & Höwer, Daniel & Müller, Bettina, 2014. "If you don't succeed, should you try again? The role of entrepreneurial experience in venture survival," ZEW Discussion Papers 14-009, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    2. repec:spr:svcbiz:v:11:y:2017:i:4:d:10.1007_s11628-016-0330-5 is not listed on IDEAS
    3. Nitin Pangarkar, 2009. "Do Firms Learn from Alliance Terminations? An Empirical Examination," Journal of Management Studies, Wiley Blackwell, vol. 46(6), pages 982-1004, September.

    More about this item

    Keywords

    Entrepreneurship; Business Failure; Evolution; Uncertainty; Learning from Failure;

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