Transformation of the governance of failure for radical innovation: The role of strategic leaders

Although failures are inherent in radical innovation activities, many firms do not have clear rules and mechanisms in place to manage them, which can result in a loss of knowledge and resources or inappropriate penalties. The absence of or weak governance of failure might lead to a fundamental misjudgement: Treating a failure (i.e. an unsatisfactory result in uncertain situations in which actors do not know ex-ante the best way to define goals, plans, and outcomes) as an error (i.e. a deviation from expected and desired results in known situations). The governance of failure is more critical for firms shifting from incremental towards radical innovation. In this situation, strategic leaders play a decisive role in performing radical innovation projects and crafting the pathway for transforming the governance to address failure underlying radical innovation processes. However, the current scholarship offers limited guidance on how strategic leaders and organisations transform their governance to cope with failure (i.e. rules and mechanisms) in radical innovation endeavours. Based on a rich qualitative study of eight case studies involving 63 interviews in Brazil, we clarify the role of strategic leaders in transforming the governance of failure in innovation activities. The primary contribution of this study is a new multi-stage, multi-faceted theoretical framework for governance transformation to address failures related to radical innovation processes: Reducing, emancipatory moving, understanding, and incorporating. This new framework contains two significant novelties: A new type of governance, known as the governance of failure, and a unique set of activities and tasks to change the governance structure from error prevention to coping with failures concerning implementing radical innovation processes.