Decomposition of double-loop failure risk in post-innovation failure phase

Failing to capitalize on the learning opportunity offered by innovation failure can lead to the risk of what may be called a ‘double-loop’ failure. However, the scholarly literature has not examined the risk of failing to learn from the experienced innovation failure in sufficient detail. We address the deficit in insights by conducting a qualitative study with firms that have experienced innovation failure to decompose the risk of ‘double-loop’ failure. Inductive analysis of 49 responses revealed consequences and responses that characterize the post-innovation failure phase: collateral damage, precipitous response, and missed learning opportunity. Collateral damage captures resource loss, external embarrassment, and jeopardized future innovation as the outcome of failed innovation; precipitous response comprises deliberate avoidance, blame game, and negative affectivity as the reaction of internal stakeholders to failure; and missed learning opportunity unpacks into failing the stakeholders, failure to unlearn, and failure to capture knowledge. These post-innovation failure consequences and responses exacerbate the risk of double-loop failure, reducing firms' capacity to salvage any value from the failure. Based on these findings, we propose a framework, which conceptualizes the post-innovation failure dynamics as a chain reaction leading to double-loop failure. The findings and the framework serve as the basis for offering tangible and actionable suggestions for scholars and managers.