The Capability-Related and Network-Related Causes for Innovation Failure and Success

Abstract

Innovations are often associated with substantial risks and failure is not rare. It is, therefore, important to study what causes innovation failure, how to reduce the risk of failing and how to increase the chance of innovation success. The paper aims to study how network relationships (or the lack of them) and (the lack of) capabilities lead to innovation failure or success in Estonian firms. Based on survey results from 95 firms and the evidence from 48 interviews, it concludes that the lack of capabilities and network relationships may lead to innovation failure. Network relationships may also constrain innovation: for example, if foreign owners do not allow a firm to do (substantial) R&D because its main role is production or if a company’s customers or subcontractors are not interested in innovative products or solutions. For this reason, firms should pay more attention to participating in those networks that could advance their innovative capabilities and increase the success of their innovation efforts. At the same time, they should take into account that participating in networks does not automatically guarantee success: some relationships or their dissolution may also lead to innovation failure. Consequently, partners should be selected very carefully.