Why Companies fail? The boiling frog syndrome

Abstract

Why do nations fail? An answer is given by Acemoglu and Robinson (2012) by pointing out the importance of institutions for an economy that leads to innovations for economic growth. Christensen (2012) asks a similar question for a firm and diagnoses why companies fail. This study relates Acemoglu and Robinson (2012) with Christensen (2012) in order to better understand how to make companies more prosperous, powerful, healthier, and live longer via innovations. In order not to cause a company to fail, instead of traditional financial ratios, in addition to understanding types of innovations, right metrics and incentives have to be employed in order to foster the innovative environment in a company. Only then companies are able to avoid slow, persistent deterioration that will result in fatalities, the boiling frog syndrome.