Pioneer Learning From Failure: How Competitor Entry and Consumer Reports Improve Learning From Failure Repositories

Abstract

While learning is key for pioneers—firms introducing new products without existing competitors—a lack of competitors limits learning opportunities. To compensate, pioneers in safety-critical industries frequently resort to failure repositories—databases that track failure reports in an industry. However, the sheer volume, inconsistency, and unstructured nature of such failure reports make them difficult to use without clear referents that provide a benchmark and context for interpretation. We investigate how the entry of a competitor enhances pioneers’ learning effectiveness by offering such a stable basis for comparison and analysis. Specifically, we observe changes in failure reports that support our theory that pioneers adjust their learning processes in response to the altered availability and nature of failure information in a repository after competitor entry. Consumer failure reports, which provide unfiltered and unique information, are crucial for understanding and addressing problems that may result in failure. Our analysis of the medical device industry shows that pioneers learn more effectively after a competitor enters the market. Pioneers learn more effectively from consumer reports, especially when not interspersed with less valuable sources, such as expert and internal firm reports. Notably, pioneer learning after competitor entry leads to lower reported alleged future injuries and product malfunctions. These findings contribute to repository-based learning by showing how competition can improve effectiveness and suggesting that distinct consumer feedback is particularly valuable for pioneering firms. Besides adding to the literature on organizational learning, this study also highlights the role of competition in fostering innovation and improving safety.