Normalizing vs. analyzing: Drawing the lessons from failure to enhance firm innovativeness

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.