The elephant in the room: Leveraging dynamic capabilities to bridge innovation performance, failure, and learning from failure

Which strategic capabilities simultaneously drive innovation and learning from failures (LFF)? We address this question with two objectives. First, synergies between innovation performance, failures, and LFF strategies are assessed. Second, heterogeneities in the determinants of these processes are explored to identify common and specific predictors for each process. Based on a sample of 436 Canadian SMEs and drawing on the dynamic capabilities theory, we developed an original framework that disentangles the sensing, seizing, and reconfiguring capabilities. The econometric exercise revealed that complementarities between innovation failures and LFF and among LFF strategies emerge through complex interactions. Results show nuances regarding levels of microfoundation capabilities, such as those for seizing when managing innovation and LFF. This study provides practical insights for managers on improving innovation performance and capitalizing on unconventional solutions, such as previous failures. We discuss findings along with their theoretical and practical implications.