Emerging market firm’s persistence with failed innovations

We explore the conditions under which firms persist with failed innovations. While prior literature suggested firm’s persistence with failure may vary by their experience with novel vs incremental innovations, we argue the institutional experience of the innovating firm can explain their persistence via their ability to interpret failure events. Firms from advanced economies may react to failure by persisting with innovations after setback, whereas firms from emerging markets may react to failure by abandoning failed innovations. Additionally, emerging market firms may transform negative feedback from one type of innovation into developments for another (i.e., switch the type of innovations they undertake). We test hypotheses using FDA-approved drugs (1998-2019). Our analysis provides insights on learning from failure and innovation efforts in an international business context, and their consequences.