Consumers’ reaction to automobile recalls: The role of corporate non-market strategies and interstate relations

Abstract

We investigate how the two signals of non-market strategies of foreign automakers (i.e. the domestic share of ownership and recognition of social responsibility) and the relations between China and the foreign automaker’s home country (i.e. interstate relations) jointly affect the business performance of Sino-foreign joint venture automakers (SJVAMs) when an automobile recall event occurs. Analysing 422 automobile recall events in 2013–2019 befalling SJVAMs in China, we find that the domestic share of ownership and recognition of social responsibility can buffer the negative impact of recalls on SJVAMs’ business performance. Meanwhile, the buffering effect of recognition of social responsibility is stronger when the domestic share of ownership is lower. Additionally, the buffering effects of domestic share of ownership and recognition of social responsibility are stronger when the interstate relation is poorer. We discuss our contributions to research on corporate legitimacy and crisis management.