Learning from the failures of others: The effects of post-exit knowledge spillovers on recipient firms

Purpose – The purpose of this study is to examine the effects of post-exit knowledge diffusion created by departed firms on recipient firms. Design/methodology/approach – This is an inductive and exploratory study that tries to understand questions of how and why. This research used a qualitative interview methodology and data analysis using within and cross-case analysis. Findings – Analysis of the data revealed that recipient firms’ strategic directions and organizational design are fundamentally shaped by the career imprint of the former managers of the departed firm. Research limitation/implications – Practical and policy implications are identified and discussed. The study suggests that organizational failure should be viewed as having wider externalities on both markets and society as a whole. The demise of an industry incumbent should not be viewed as necessarily having a negative impact, rather as a strategic opportunity for new firms to enter and for existing ones to expand by drawing on the expertise released by its departure. Originality/value – This paper makes an original contribution to the literature by integrating learning-from-failure, knowledge spillover and career imprinting theories to examine the post-exit effect of firm departure. The paper also counters prior emphasis of the extant literature on the relationship between work experience and job performance, which has focused mainly on experience within the current firm, overlooking the importance of work experience acquired in prior firms.