Firm/product reputation and new-product recalls

Abstract

PurposeThe purpose of this paper is to identify the rate of recall for new products vs established products and to explore the simultaneous impact of a firm’s reputation and a product’s reputation on the market response to a product recall.Design/methodology/approachThe authors first use an accelerated hazard model to establish that new products are more vulnerable to damage than established products. Once this is established, the authors use a hierarchical linear model to explore the simultaneous impact of the firm and product reputation on the market response to a product recall.FindingsThe findings indicate that new products have a greater probability of recall over time than existing products and after a product recall a positive firm reputation can negatively impact the firm and hence becomes a liability. However, when the product is first introduced, the product reputation can help offset any negative market response; the product reputation can therefore be an asset.Research limitations/implicationsNew products are more flawed than their established counterparts. A positive reputation can be a liability but a positive product reputation can offset the negative impact of the firm reputation and this is especially pertinent to new products.Originality/valueThe majority of prior research has focused on the reputation and assumed that the firm represented the product as well; the findings of this study reveal that the reputation of the product can have contrasting effects to the reputation of the firm.