Managing the Promise-Risk Tension: Recrafting Narratives of Innovation After Catastrophic Failure

To gain necessary resources and support to succeed, firms pursuing novel innovations typically craft initial narratives that suggest success in innovative outcomes and achieving commercial activity. Acknowledgements of the possibility of innovation failure contradict that narrative. On one hand, raising the possibility of failure in the initial narrative may lead external stakeholders to withhold the very resources the firm depends on, before a failure materializes. On the other hand, not accounting for that possibility may have a detrimental effect. If a failure was to occur, the firm will likely need to reconcile its initial narrative with the failure, especially when it is catastrophic. Our analysis of a case of catastrophic innovation failure at Virgin Galactic in the private space industry reveals how projective narratives are recrafted after such an event. We find that organizations emphasize and deemphasize three types of statements that compose its narrative: positive projections, ambivalent projections, and averted risk statements. We also identify a tension—inherent to the crafting of projective narratives for innovating firms—between promising how it will function once commercially active, which assumes a successful innovative outcome (to elicit external stakeholder support) and acknowledging the risks of failure in the innovation process (which may deter them). Our findings suggest an opportunity for innovating firms to proactively manage and balance this tension between promise and risk in their external narratives even before the occurrence of catastrophic failures.