Better Safe Than Sorry: How CEO Neuroticism Affects Time-To-Recall in Product Recalls

Abstract

Extant research on product recalls provides substantial insights on the determinants of recall frequency, but less is known about what determines time-to-recall, i.e., how quickly firms issue a recall once a defect surfaces. Building on upper echelons theory and personality theory, we argue that CEOs’ personality impacts time-to-recall. Specifically, we propose that more neurotic CEOs are more vigilant when they face uncertainty, as they do when making recall decisions, and strive to avoid the potential threat of social disapproval from recalling late, leading to lower time-to-recall. We contextualize this argument by taking a configurational approach to personality to hypothesize that another personality trait, CEO agreeableness, increases the salience of the threat of social disapproval and thus positively moderates the main relationship. Further, we invoke trait activation theory to argue that more negative recent CEO media tenor provides a trait-relevant situational cue which reinforces CEOs’ neurotic tendencies and thus also positively moderates the main relationship. We find broad support for our theory in analyses on a sample of 1,573 product recalls in the U.S. healthcare industry.