MIT Sloan Management Review

When venture capitalists are more tolerant of failure, the successful companies in their portfolio tend to be more innovative.

A new working paper tackles an interesting topic: the relationship between tolerance for failure and innovation. In particular, authors Xuan Tian and Tracy Y. Wang looked at venture capitalists' tolerance for failure  -- and its effect on the innovativeness of the young companies they invested in.

The overall U.S. economy may have so far avoided recession, but things are not looking good for young technology companies hoping to go public in the U.S.  That, in turn, is worrisome for the outlook for technological innovation in the country.Â