Toward an understanding of innovation failure: The timing of failure experience

Failure is a key feature of innovation and learning from innovation failure has been seen as the main source of knowledge production and future success. The timing of the failure experience affects learning from innovation failure as it determines the speed and salience of the feedback firms get, but the research on this issue is relatively scarce. This study uses drug development data in the biotechnology industry and separates innovation into early and late stages to explore this issue. The results show that firms are more likely to learn from early-stage innovation failures than from late-stage innovation failures. This is because the knowledge gained from late-stage innovation failures may not be applied to improve future early-stage innovation. However, slack resources can facilitate such cross-stage knowledge spillover. This paper sheds light on learning from failure literature by examining the heterogeneity of failure experiences in experiential learning.