Mind the time: failure response time, variations in the reasons for failures, and learning from failure

Abstract

Abstract How does a firm’s response time to past failures affect its likelihood of experiencing future failures? Does this likelihood depend on the reasons for past failures? Using drug recalls during 2006–2016, we examine the effect of pharmaceutical firms’ response time to their past failures on their learning from failure. Longer response times reduce the likelihood of subsequent failure. Variations in the reasons for past failures increase the potential for subsequent failure. However, a longer response time helps overcome the challenges associated with this variation. By focusing on the temporal dimension of learning from failure, we provide unique theoretical insights into when and how organizations can learn from failure.