Institutional Uncertainty and Startup Failure Trajectory: The Mediating Roles of Strategic Experimentation and Digital Opportunity Capability and the Moderating Role of Adaptive Learning Agility

Abstract

Startups increasingly operate in environments characterized by institutional uncertainty, yet the mechanisms through which such uncertainty shapes startup failure trajectory remain insufficiently understood. This study develops and empirically tests a dual-path model explaining how institutional uncertainty influences startup failure trajectory through strategic experimentation and digital opportunity capability. Drawing on institutional theory, dynamic capabilities, and contingency theory, the study argues that uncertainty triggers both risk-enhancing and risk-reducing responses. Strategic experimentation may accelerate failure due to resource dispersion and operational inefficiencies, whereas digital opportunity capability helps startups identify and exploit emerging opportunities more effectively. Adaptive learning agility is further introduce as a moderating factor influencing the effectiveness of these responses. Using survey data from 312 startups and analyzing the model through SmartPLS 4, the findings reveal that institutional uncertainty significantly increases both strategic experimentation and digital opportunity capability. The results further show that experimentation intensifies the failure trajectory, while digital capability mitigates it. Additionally, adaptive learning agility mitigates the harmful effects of experimentation and enhances the effectiveness of digital capabilities. The study contributes by reframing startup failure as a dynamic trajectory rather than a binary outcome and highlights the importance of adaptive capabilities in uncertain entrepreneurial environments.