How does failure normalization foster product innovativeness in new product development? The role of passion and learning

Abstract Tolerating failure has gained recognition as a crucial catalyst for product innovation. However, there is a limited understanding of how and under what conditions project leaders' perceptions of failure normalization—the norms regarding failure in their work environment—can enhance product innovativeness in the context of new product development (NPD). Drawing upon sensemaking and motivation theories, we propose a moderated mediation model to address this research gap. Data were collected from 181 high‐tech ventures in China, with responses gathered at three different time points from matched respondents. Utilizing moderated path analysis and the Monte Carlo method, our findings reveal that failure normalization primarily fosters product innovativeness by facilitating learning from failure. Importantly, this positive effect is contingent upon the project leader's passion for inventing. A profound passion for inventing significantly enhances NPD leaders' motivation to learn from failures, thereby acting as a pivotal factor that determines whether failure normalization promotes or impedes product innovativeness. This research thus elucidates the previously inconclusive relationship between failure normalization and product innovativeness as presented in the literature. It underscores the dual importance of organizational culture (specifically, failure normalization) and individual motivation (specifically, the passion for inventing) in driving learning and innovation within the NPD process. The practical implications of these findings are significant for high‐tech ventures seeking to enhance their NPD outcomes. Specifically, cultivating an organizational culture that perceives failure as an opportunity for learning, coupled with recognizing and fostering the passion for inventing among NPD project leaders, can boost NPD product innovativeness.