Failure Is Not an Option,But It Should Be: Evaluating the Positive Impacts of Company Failures in Space Innovation Ecosystems

Abstract

The innovation process is highly uncertain, and some failures are inevitable. Social acceptance of failure has proven to be an essential cultural component for successful innovation ecosystems. Despite the centrality of failure to innovation, there has been limited study of the impact of company failures on the actors, networks, institutions, knowledge, and technology that constitute an innovation ecosystem. This study leverages the entrepreneurial failure and system of innovation literature to understand how company failures contribute to the learning process, which is a critical nonmarket interaction in innovation ecosystems. Data collected are provided from a variety of space sector stakeholders, including investors, founders, employees, and board members using survey methodologies. From these data, the following 3 areas are studied in depth: (1) geographic and sectoral retention of stakeholders following company failures, (2) network dynamics, and the capacity for learning within networks, following company failures, and (3) variation in failure attribution across stakeholder type. Results from these 3 areas of study indicate that company failures contribute to the maturation of innovation ecosystems as lessons learned from the failure can diffuse through innovation ecosystems because company stakeholders become dispersed across many other firms and entities following a failure. This dispersion creates new networks across an innovation ecosystem creating new communication channels for further learning. By understanding such positive effects of space company failures and the role they play in maturing space innovation ecosystems, it can aid space innovation policymakers in bringing nuance to innovation policy that can be used to maximize the positive impacts of inevitable failure and minimize the negative impacts.