Does learning from innovation failure enhance innovation performance? A quantitative investigation of small businesses

Innovation is a key driver of growth and competitiveness for small and medium-sized enterprises (SMEs). However, not all innovation efforts are successful, and failure can be costly for SMEs. This study examines whether learning from innovation failure can enhance innovation performance using learning from innovation failure among SMEs. Using a sample size of 324 responses from employees working in SMEs from the USA & UK, this study employs structural equation modeling to analyze the relationship between learning from innovation failure and innovation performance. The findings reveal that SMEs that actively learn from their innovation failures are likelier to have better innovation performance than those that do not. The results are consistent across both the USA and UK samples. SMEs with a culture of experimentation and risk-taking, and supportive management are more likely to effectively learn from their innovation failures and improve their innovation performance. The implications of these findings are significant for SMEs as it suggests that they can benefit from implementing a culture of experimentation and risk-taking, as well as providing management support for learning from innovation failure. The study also suggests that policymakers can design programs that promote a culture of learning from failure among SMEs. Further, the findings benefit the researchers working in the field of innovation to understand better how learning from innovation failure furthers innovation performance.