Indian American professors at U Illinois lead study on organizational learning

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Professors of Business Gopesh Anand and Ujjal Kumar Mukherjee, at University of Illinois, Urbana-Champaign, conducted a new study on organizational learning from failures.

Their study which was published in the journal Organization Science recently, found that results can vary significantly based on the nature of the failures and the innovative capabilities of the firm involved, an April 22, 2024, news report from U Illinois, said.

The research team divided the failures into two types – process-related, and design-related. The first could be attributed to ‘slip-ups’ and the second to actual ‘knowledge gaps.’

The conclusion determines which of these failures happened – “I should have known better” relates to slip-ups or process-related learning; Compare that to “I had no idea I was making this mistake,” which is related to design-related knowledge gaps.

The two types of failures — slip-ups and knowledge gaps — can be roughly translated into, respectively, “I should have known better” versus “I had no idea I was making this mistake,” Anand, the William N. Scheffel Faculty Scholar and Professor at the Gies College of Business, is quoted saying in the news report.

“A slip-up is when you know you should be doing something, but you don’t do it,” he said. “We know we should eat a healthy diet and exercise 30 minutes a day, but we don’t always do that, right? That’s a slip-up. The other failure is not knowing you were making a mistake. Not knowing, for example, that you shouldn’t be eating a certain food while taking a certain medication. That’s a knowledge gap, and we find that firms learn more from knowledge-gap failures than slip-up failures,” Anand noted.

The team examined very specific data – viz. voluntary product recalls made from 2000-2016, by more than 100 publicly traded U.S. companies in the medical device and pharmaceutical sectors.

Firms learned more from design-related recalls than process-related recalls, the research revealed.

“This implies that either slip-up failures do not create an impetus in firms encountering them or that it’s more challenging for firms to reduce the occurrence of slip-up failures,” Mukherjee said. “In either case, it points to the unresolved challenge of maintaining continuous attention to compliance and the need for deliberate efforts to maintain compliance regardless of the presence or absence of any impetus from slip-up failures,” he added.

Another research finding from the study was that a firm’s accumulated patents and investment in research and development enhanced learning from design-related recalls, the news report noted.

“Firms that place a premium on innovation face a higher risk of failures,” Mukherjee explained, because the work is by definition more experimental and therefore more prone to failures. But this same experimentation builds a knowledge foundation which, he said, helps firms to recover from failures much quicker.

“A key takeaway from our research is not to shy away from innovation,” Anand concluded. “Because if you do, sure, you might reduce failure in the short run. But your competitiveness in the long run will be impacted because you’re not fostering that culture of innovation within the firm,” he added.

The study findings can be applied to other sectors as well, the researchers said.