This paper explores the notion of strategic innovation and examines mediating mechanisms by which it ultimately contributes to competitive advantage for the firm. The underlying premise of the study is that an innovation effort may result in a variety of outcomes. For the purpose of this study, we narrow the possible outcomes to three possible outcomes: (1) differentiation, (2) learning and new knowledge creation, and/or (3) failed innovation effort. Further, the paper argues that the three outcomes are not mutually exclusive; that is to say, an innovation outcome typically encompasses elements of all three outcomes. The three innovation outcomes exhibit varying strategic and competitive impact and time horizons. Differentiation, typically manifests in a measurable, tangible outcome (e.g. a relatively short-term outcome enabling a premium-priced product or service) and is, of course, the sought-after outcome with most immediate strategic impact. However, innovation effort may, in fact, also result in secondary intangible outcomes such as learning, knowledge creation and (intelligent) failure (failure that enables the extraction of rich learning). This paper explores the proposition that despite often overlooked, these intangible innovation outcomes can, in fact, carry greater potential competitive impact for the firm in the long term, provided they are strategically managed. A conceptual model of strategic innovation is proposed that examines the critical linkages between the three innovation outcomes and mechanisms by which learning, knowledge creation and intelligent failure ultimately can contribute to competitive advantage. The conceptual model is tested empirically using a quantitative approach. Preliminary statistical analysis (factor analysis, regression analysis) identifies some key determining factors linking the various innovation outcomes, in particular, mechanisms by which intelligent failure can contribute to learning and knowledge creation in the firm. The analysis draws on empirical data derived from three different R&D organisations –differing in research intensity, size and maturity. The findings highlight key similarities and differences in how the three organisations manage their strategic innovation. The findings of this study are shown to be consistent with current thinking that links strategic innovation with organisational knowledge, practices and culture.