Mapping out Innovation Practices in Knowledge Intensive Firms in Portugal: Is Failure an Indicator of Success?

For long, innovation has been understood as critical to generate competitive advantages for the companies that develop them. Still, being innovation processes future-oriented, and thus, inherently uncertain, they do not always lead to successful results. Despite this, literature has mostly focused on successful pathways, presenting innovative companies as the example others should follow, and innovation practices as linear, straightforward processes. According to these views, innovation failure is a severe setback to innovative practices, companies’ financial performance and, eventually, survival. However, it has been recognized that innovation is not a simple sum of success after success. Rather, it is a cumulative path in which failure to innovate, creating potential learning opportunities through trial and error processes, can be central for firm’s innovative and financial performance. This paper will specifically 1) map successful and unsuccessful technological innovation activities; 2) characterize these trial and error paths and their firm and environmental underpinnings, and 3) assess the relevance of failure to innovation outputs and companies’ turnovers. For this purpose, this paper focuses on Knowledge Intensive firms, mobilizing the Community Innovation Survey data for Portugal (2012-2014) (n=2718). Our data shows that 49.9% of firms developed successful technological innovation activities, while 7.4% presented unsuccessful practices. Moreover, innovation failure was associated with firms’ R&D activities and expenses; cooperation partners; and employees’ formal education. Most importantly, there is a high probability that companies that abandon the process of innovation to i) develop products that are new to the market; ii) present innovation outputs such as patents; models; design and copyrights; and iii) have higher turnovers.

This study characterizes innovation activities and presents a first map of abandoned innovation in Portugal. Our results suggest that learning with ineffective innovative activity might ultimately be critical for firms’ innovative and financial success.