Safety hazard and time to recall: The role of recall strategy, product defect type, and supply chain player in the U.S. toy industry

Abstract

This research identifies and tests key factors that can be associated with time to recall a product. Product recalls due to safety hazards entail societal costs, such as property damage, injury, and sometimes death. For firms, the related external failure costs are many, including the costs of recalling the product, providing a remedy, meeting the legal liability, and repairing damage to the firm's reputation. The recent spate of product recalls has shifted attention from why products are recalled to why it takes so long to recall a defective product that poses a safety hazard. To address this, our research subjects to empirical scrutiny the time to recall and its relationship with recall strategies, source of the defect and supply chain position of the recalling firm. We develop and verify our conceptual arguments in the U.S. toy industry by analyzing over 500 product recalls during a 15-year period (1993–2008). The empirical results indicate that the time to recall, as measured by difference between product recall announcement date and product first sold date, is associated with (1) the recall strategy (preventive vs. reactive) adopted by the firm, (2) the type of product defect (manufacturing defect vs. design flaw), and (3) the supply chain entity that issues the recall (toy company vs. distributor vs. retailer). Our results provide cues that could trigger a firm's recognition of factors that increase the time to recall.