Failing to Learn from Failure: An Exploratory Study of Corporate Entrepreneurship Outcomes

Abstract

ABSTRACT Firms that are able react and respond today's dynamic environment through market, process and product innovations--also called Corporate Entrepreneurship (CE)--are better able gain and sustain a competitive advantage. In fact, business strategy can be described as a firm's theory of competitive advantage or a set of hypotheses about firm's competencies and their relationship external factors. This implies that CE initiatives can be thought of as tests of firm's strategic theory-in-use. Thus an innovation that is aligned with a firm's strategy and is successful confirms existing strategy; an unsuccessful innovation indicates a change in strategy may be needed. In this paper we examine 54 new product development projects and assessed whether they were successful, whether they aligned with business strategy, and whether strategy was subsequently modified. We found that successful projects aligned with strategy did indeed confirm strategy, but unsuccessful projects resulted in strategy modifications only 38% of time. The lack of strategy modification when projects are unsuccessful indicates that firms are not learning as much as they might from their failures. INTRODUCTION In today's dynamic environment, static firms are not likely endure. Rather, companies must adapt their environments' varying conditions, react their competitors' actions, and respond their customers' changing requirements. To be successful, organizations must find ways to redefine or rejuvenate themselves, their positions within and industries, or competitive arenas in which they compete (Covin & Miles, 1999). Based on their particular situations, some firms favor sustained regeneration, which support and encourage a continuous stream of new product introductions in current as well as entries with existing products into new markets (Dess, Ireland, Zahra, Floyd, Janney and Lane, 2003: 354), while others engage in strategic renewal, in which the firm is seeking change how it competes (Dess, et al. 2003: 355). In academic literature, these activities are generally aggregated under terms intrapreneurship or, more recently, corporate entrepreneurship. Corporate entrepreneurship (CE), has been defined as and informal activities aimed at creating new business in established companies through product and process innovations and market developments ... with unifying objective of improving a company's competitive position and financial (Zahra, 1991: 262). Research has found that CE initiatives can materially improve an existing organization's agility and are positively associated with financial performance (Zahra, 1991). Although these corporate entrepreneurship initiatives can bubble-up in informal, emergent manner from anywhere in organization (Burgleman, 1983, Mintzberg & Waters, 1985), this study focused on formal or deliberate entrepreneurial activities undertaken by existing firms update or even radically change their strategy. The underlying assumption of deliberate corporate entrepreneurship is that organization members--typically managers--can accurately assess or predict what strategic changes are required by external events such as a new competitor entering its market space or creation of a new technology. Importantly, deliberate CE also presumes that managers can accurately assess implications of outcomes that resulted from internal actions like successful implementation of a new process or failed launch of a new product. Presumably, success would imply that firm was on right track, while failure would indicate a problem or issue. Indeed, as Floyd and Lane (2000: 154) noted, top management often must internalize, as part of organizational knowledge base, information and initiatives that diverge from its view of strategy and must use these shape new competencies. …