How Firms Frame Catastrophic Innovation Failure
60 Pages Posted: 9 Nov 2017
Date Written: October 4, 2017
We explore how firms frame catastrophic innovation failure for external audiences. Failure events may lead external audiences to doubt the firm’s ultimate chances of success. Because it is difficult for those audiences to ascertain whether the failure occurred due to the uncertainty inherent to innovation (experimentation uncertainty) or due to managerial or organizational shortcomings (execution uncertainty), a firm’s own framing of the failure may critically influence external audiences’ interpretations. We analyze three cases of catastrophic innovation failure at two firms in the private space industry — SpaceX and Virgin Galactic — using market-facing communications, including social media, blogs, corporate websites, press releases, and news articles. We find that firms frame catastrophic innovation failure considering (1) the extent to which they incorporated the notion of failure into their external narrative prior to the failure, and (2) the nature of the catastrophic event itself. We identify a tension inherent to the crafting of organizational narratives for innovating firms, between promising success (which elicits external audiences’ support) and acknowledging the possibility of failure (which may deter them). Our findings indicate a need for innovating firms to weave a sense of ‘optimal promise’ into their external narratives, balancing the zeal of success with the possibility of failure.
Keywords: organizational identity, organizational innovation, failure, case method
JEL Classification: M14, M13, M10, M19
Suggested Citation: Suggested Citation