Does it Pay to Recall Your Product Early? An Empirical Investigation in the Automobile Industry

Journal of Marketing, Forthcoming

52 Pages Posted: 23 Nov 2016 Last revised: 28 Dec 2016

See all articles by Anne Eilert

Anne Eilert

University of South Carolina - Department of Marketing

Satish Jayachandran

University of South Carolina - Darla Moore School of Business

Kartik Kalaignanam

Moore School of Business (University of South Carolina)

Tracey A. Swartz

Georgia Institute of Technology, Scheller College of Business, Marketing; University of South Carolina - Department of Marketing

Date Written: November 20, 2016

Abstract

Defective products are often recalled to limit harm to consumers and damage to the firm. However, little is known about why the timing of product recalls varies across firms after an investigation is opened. Likewise, there is little evidence on how the timing of product recalls impacts firm performance. This study tests the effect of problem severity on time to recall and the contingent role of brand characteristics in moderating this relationship. The hypotheses are tested on a sample of 381 recall investigations conducted in the automobile industry between 1999 and 2012. The results show that while problem severity increases time to recall, this relationship is weaker when the brand under investigation has a) a strong reputation for reliability and b) experienced severe recalls in the recent past. However, the positive effect of problem severity on time to recall is stronger when brands are diverse. Importantly, the findings reveal that on average higher times to recall are punished by stock markets. The study suggests that time to recall has significant consequences for managers and policy makers.

Keywords: Product recalls, time to recall, brand reliability, brand diversification, stock market performance

Suggested Citation

Eilert, Anne and Jayachandran, Satish and Kalaignanam, Kartik and Swartz, Tracey A., Does it Pay to Recall Your Product Early? An Empirical Investigation in the Automobile Industry (November 20, 2016). Journal of Marketing, Forthcoming . Available at SSRN: https://ssrn.com/abstract=2873138

Anne Eilert

University of South Carolina - Department of Marketing ( email )

United States

Satish Jayachandran

University of South Carolina - Darla Moore School of Business ( email )

1705 College St
Francis M. Hipp Building
Columbia, SC 29208
United States

Kartik Kalaignanam (Contact Author)

Moore School of Business (University of South Carolina) ( email )

1014 Greene Street
Columbia, SC 29208
United States

Tracey A. Swartz

Georgia Institute of Technology, Scheller College of Business, Marketing ( email )

Atlanta, GA 30332
United States

University of South Carolina - Department of Marketing ( email )

United States

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