Exploration, Exploitation, and Failure Correction Speed: A problem Formulation Perspective

Abstract

Product failures present a great risk to the responsible organization, its customers, and other stakeholders, but to a certain degree, may be unavoidable for boundedly rational organizations. As a result, an important strategic challenge for organizations is to effectively and quickly correct product failures. Drawing on the problem formulation perspective, we introduce and develop the concept of remedial comprehensiveness, which we suggest would play a key enabling role in product failure correction. We theorize that exploration tendencies increase the inputs of problem formulation, whereas exploitation is expected to increase the impediments, suggesting the former facilitates remedial comprehensiveness, and in turn, product failure correction. Analyses of 8,250 medical device recalls in the U.S. provide an overall support for our theory.