Product-harm Crisis Research Articles

Product-harm crisis and perceived betrayal: The moderating effect of cognitive bias

This study utilised an experimental design to examine the moderating effect of cognitive biases (availability of information and herd effect) on the relationship between product-harm crisis and perceived betrayal. In a series of three studies involving 596 young adults (college students: n = 386; female = 51.04%, male= 48.96%; mean age = 21.18 years, SD = 3.50 years) and general population: (n = 210; female= 47.60%, male= 52.40%; mean age= 31.76 years, SD = 12.79 years) we compared whether the single enterprise product-harm crisis perception, group product-harm crisis would lead to higher perceived betrayal. Results from regression analysis and ANOVA indicate that product-harm crisis perceptions predicted perceived betrayal. Group product-harm crisis led to higher perceived betrayal than that of single enterprise product-harm crisis. More importantly, the availability of information and herd effect strengthened the influence of product-harm crisis on perceived betrayal. The present findings are consistent with the theory of attribution of responsibility on crisis management and suggests a need for inclusive crisis management strategies under different perceived crises and cognitive states.

Managing quality and pricing during a product recall: An analysis of pre-crisis, crisis and post-crisis regimes

Product recalls are often consequences of quality failures. While such failures are related to a manufacturer’s or supplier’s design quality, the perceived quality of products may be severely damaged when a product harm crisis occurs. However, most often, such a crisis will not last forever, and a firm at fault eventually recovers. Considering an optimal control model, we investigate the optimal pricing decisions, advertising and quality efforts of a firm while it anticipates a product recall and a subsequent recovery. We show that the decisions and profits of the manufacturer vary widely with the stochastic parameters: crisis likelihood, recovery likelihood, crisis impact and recovery intensity. We illustrate that myopic firms are more severely affected by a product recall than farsighted firms when the impact of recall is high. However, it might not be so detrimental to take myopic decisions for low impact recalls. In the absence of recovery, a product recall can lead to bankruptcy. High initial perceived quality may not insulate a firm against bankruptcy.

Consumers’ Costly Responses to Product-Harm Crises

This paper exploits a major food safety crisis to estimate a full demand model for the unsafe product and its substitutes, recovering consumers’ preference parameters for different product characteristics. Counterfactual exercises quantify the relevance of different mechanisms driving consumers’ responses, such as changes in safety perceptions, idiosyncratic taste, product characteristics, and price. We find that consumers’ reactions are limited by their preferences for the product’s observable and unobservable characteristics. Because of the costs associated with switching from the affected product, the decline in demand following a product-harm crisis tends to understate the true weight of such events in consumers’ utility. We find that unobservable taste is a crucial driver of consumers’ responses. Our counterfactual exercises illustrate that the demand would have declined further if consumers had had access to a closer substitute. For an accurate assessment of product-harm crises, managerial strategies should therefore account for how different demand drivers bind consumers’ substitution patterns.This paper was accepted by Matthew Shum, marketing.Funding: This work was supported by the Ministerio de Ciencia e Innovación [Grants ECO2008-01116 and ECO2010-15052], the Ministerio de Economía y Competitividad [Grant ECO2013-43011-P], and the Deutsche Forschungsgemeinschaft [Grant CRC TR 224]. R. Ferrer received support from [Grant ECO2016-76998-P], and the Severo Ochoa Programme for Centers of Excellence in R&D [SEV-2015-0563].

In families we trust: Family firm branding and consumer’s reaction to product harm crisis

This research examines the impact of family firm branding on consumer attitude and forgiveness during product harm crisis. Two well-powered experimental studies (N = 604) show that consumers are more likely to forgive and maintain favorable attitudes towards family firm brands than non-family firm brands following a product harm crisis. These relationships are mediated by consumers' higher trust in family firm brands. Even when firms are caught engaging in questionable impression management tactics in the aftermath of such a crisis, family firms retain their advantage over non-family firms. The findings contribute to the literature on family firm branding and product harm crisis and have important implications for practice.

Why and when firms respond accommodatively to the product-harm crisis: An institutional perspective

Accommodative response, as an attempt to manage product-harm crises to meet consumers' expectations by proactively accepting responsibility and actively taking remedial actions, is gradually becoming institutionalized. Our research explores the impacts of coercive, mimetic, and normative pressure on a firm's accommodating reaction and evaluates the possible mediating effects of top management beliefs (TMB) and participation (TMP), based on institutional theory and upper management echelons theory. The proposed hypotheses are empirically examined with survey data from 178 top managers in Chinese automobile firms. The potential endogeneity problem has been tackled by using firm size as the appropriate instrumental variable. Analysis results suggest that the three types of institutional pressures affect TMB and TMP differently, and TMP influences accommodative response positively while TMB exerts an indirect effect through TMP. Our findings emphasize the crucial mediating effects of top management and uncover the underlying mechanism through which institutional pressures affect accommodative response.

Impact of Product Placement on Purchase Intention in the Context Of Product-harm Crisis

This study investigated whether and how product placement influences purchase intention in the context of product-harm crisis. We collected data from 373 Chinese adults who completed an online survey, and conducted a between-subjects experiment (with/without product placement). Structural equation modeling results show that product placement had a significant positive impact on purchase intention, with perceived risk and brand trust acting as mediators. The association between perceived risk and purchase intention was nonsignificant. The study also revealed that product placement had a negative impact on brand trust, which then suppressed purchase intention. This finding emphasizes the importance of brand trust in the relationship between product placement and purchase intention, and shows that influencing consumers' opinion is more difficult than changing their behaviors through product placement.

Slicing vs chunking product-harm crisis: antecedents and firm performance implications

PurposeThe high prevalence of product-harm crises (PHC) represents a continuing challenge to which firms sometimes react by announcing several smaller recalls (i.e. slicing) but at other times by announcing the recall of all faulty products at once (i.e. chunking). The slicing vs chunking phenomenon has not been identified by prior literature; this study aims to explore two research questions: Why do firms sometimes slice and other times chunk PHC? Do slicing and chunking affect firm performance differently?Design/methodology/approachThe authors examined recall guidelines from the US National Highway Traffic Safety Administration (NHTSA) and conducted expert interviews as well as a quantitative analysis of 378 product recalls to determine the antecedents of slicing vs chunking. The authors further performed an event study to examine the impact of slicing vs chunking PHCs on firms’ financial performance.FindingsThe authors find that slicing vs chunking is not a deliberate strategy but rather the consequence of firms’ resource availability and constraints. Furthermore, the authors show that larger firms have a lower likelihood of slicing versus chunking. By contrast, larger R&D expenditures, and greater reputation, as well as larger recall sizes, increase the likelihood of slicing versus chunking. Finally, the results reveal that, compared to chunking, slicing PHC has a strong negative impact on firms’ stock value.Research limitations/implicationsThe authors relied on recalls in the US automobile industry. A possible extension would be to study the same phenomenon in other industries or other geographical areas. In addition, the results need to be generalized to other types of negative news that can be either decoupled (slicing) or coupled (chunking), especially negative news for which firms have more discretion regarding the timing of their announcements than for product recalls.Practical implicationsAs shown by prior research (Eilert et al., 2017), firms should aim to announce recalls quickly in the wake of a PHC. Importantly though, the results indicate that speed should not come at the expense of comprehensiveness in identifying all defective products, so that only one recall is needed. As suggested by our findings about PHC, investors may react negatively to the slicing of other types of negative news; thus, the results suggest how to best communicate to external stakeholders during crises in general.Originality/valueTo the best of the authors’ knowledge, this is the first study that examines why firms sometimes slice and at other times chunk PHC and identifies the performance implications of these two types of recalls in response to PHC.

Ability or social responsibility? Highlighting the effects of precrisis attitudinal foundations and certainty in product harm crises

AbstractCurrent corporate crisis literature is split on whether a good corporate reputation before a product harm crisis hurts or helps a company after the crisis. We argue that the current views on this issue miss two crucial elements: (1) the primary domain where the company's precrisis reputation lies in: corporate social responsibility contributions or corporate ability in providing quality products and services; and (2) consumers' attitude certainty developed from such precrisis reputation. Through an online experiment, our study not only provides a way to reconcile the current division in the literature but also provides insights for organizations to capitalize on their precrisis reputation when responding to the product harm crisis. Our results show that companies' precrisis reputation and consumer certainty developed from such a reputation matter more than companies' postcrisis communication in restoring consumer evaluations.

CSR crises from the consumers’ perspective: a multidimensional typology and future research agenda

PurposeThe purpose of this paper is to develop a multidimensional corporate social responsibility (CSR) crisis typology from the consumers’ perspective and to provide an agenda for future research.Design/methodology/approachBasic content-related dimensions for characterizing CSR crises from the consumers’ perspective are derived from a review of relevant static crisis typologies. Different types of consumer responses to negative CSR information are derived from various theoretical approaches. Dynamic process models of corporate crises are reviewed to assign various types of consumer responses to different crisis phases. Linking both static and dynamic approaches leads to a comprehensive consumer-oriented typology of CSR crises that is illustrated with examples.FindingsA CSR crises typology is developed based on three consumer-related dimensions: the extent to which the company is attributed blame by consumers; the amount of perceived damage potential; and the perceived CSR relevance of the crisis situation. The combination of these dimensions results in eight different crisis types. For each of these crisis types, different forms of consumer responses are assigned that prevail in the so-called potential, latent and manifest crisis phase.Research limitations/implicationsFuture research could address the empirical review of the crisis typology presented, its refinement by considering various consumer and stakeholder segmentation approaches and the advanced dynamic analysis of CSR crises by including stakeholder characteristics that impact the diffusion of CSR-related negative publicity.Practical implicationsThe results of this paper support early crisis detection and effective crisis management by identifying relevant target variables for crisis communication.Originality/valueThe typology developed enables a broad spectrum of CSR crises to be classified, including those that have been neglected in previous systematization approaches, such as CSR-related tensions, general sustainability crises and product-harm crises. Due to its theoretical foundation, this paper also contributes to a clearer demarcation of existing CSR crisis constructs.

Enhancing frontline employee support during a product-harm crisis: Evidence and strategic managerial implications for firms

Product-harm crises can negatively affect a firm's corporate image, reputation, and credibility. This research investigates antecedents and factors that can impact the extent to which frontline employees will be supportive of their organization when the firm faces such a crisis. Leveraging social exchange theory and its focus on reciprocal exchanges, we theorize and test processes using regression models, which shed light on how managers can solicit employee support during crises situations by providing the frontline employees with ethical and supportive working conditions. To offer convergent validity across multiple methodologies, we also test the influence of experimental effects of the relative severity of a crisis and whether a firm was quick or slow in its response on frontline employee support. Furthermore, our research demonstrates that the firm's strengths in corporate social responsibility, the employees' organizational citizenship behavior, and employee organizational identification serially mediate the supportive relationship, which provides a unique contribution to the marketing literature. Finally, we provide managerial implications to further enhance frontline employee support.

How do foreign customers' perceptions of product-harm crises affect their transfer of capability- and character-based stigma?

PurposeCustomers often trace a product-harm crisis to the deviant firm's capability- or character-relevant issues. This study examines how capability- and character-based stigma associated with product-harm crises influence foreign customers' product preferences (i.e. brand affect and purchase intention) for other firms from the same country of origin.Design/methodology/approachQualitative survey data are used to test hypotheses with a structural equation model.FindingsThe authors find that negative capability judgment significantly affects foreign customers' product preferences for other firms from the same country of origin, whereas negative character judgment does not. However, customers' national animosity and product knowledge moderate the stigma spillover effects. Specifically, national animosity and product knowledge weaken the spillover effects of capability-based stigma but strengthen those of character-based stigma.Research limitations/implicationsFuture research could examine strategies for uninvolved firms to avoid the stigma-by-association effect. Moreover, due to the lack of resources to collect data, this study does not investigate how customers' generalized favorability and familiarity with crisis-stricken firms and uninvolved firms moderate the stigma-by-association effect.Originality/valueThe findings of this study advance our knowledge on product-harm crises and the stigma-by-association effect.

How to Overcome the Negative Images Due to a Product-Harm Crisis Through CSR Activities in a Foreign Market: Evidence from Samsung Galaxy Note 7 in the United States

Purpose - The current research seeks to investigate how consumers respond to a company’s CSR activities in the product-harm crisis in the foreign market, focusing on the case of the Samsung Galaxy Note 7 Battery Explosion case in 2017 in the U.S. market. Adopting the specific types of corporate responsibilities that Carroll (1991) suggests, we classified the CSR activities into three (i.e., the legal, ethical, and philanthropic responsibilities) and examined which type of CSR activity is the most effective in dealing with consumer response to the product-harm crisis. Design/Methodology/Approach - For this purpose, we experimented in the United States. 65 US participants were recruited for our experiment. Samsung’s Galaxy Note 7 Battery Explosion crisis was described to participants first; then one of the three types of CSR activities was presented according to the conditions in which participants were randomly assigned. Then participants indicated the evaluation of Samsung. Findings - The results indicate that consumers’ evaluation of Samsung was more positive when Samsung involves in ethical or philanthropic responsibility than a legal responsibility. Research Implications - We make significant theoretical and managerial contributions. We advance the CSR literature as well as the product-harm crisis literature by incorporating that companies’ CSR initiatives could be a good way to soothe dissatisfactory consumers. Our results are also managerially meaningful by providing specific guidelines regarding which type of CSR activity is more effective in handling the negative consequences due to a product-harm crisis.

Are unsuccessful entrepreneurial experiences harmful?: Product failures in medical device ventures

Entrepreneurial processes are learning journeys; as entrepreneurs found one company after another, they learn from those experiences to create better-performing companies. Compared with this widely documented learning effect, knowledge on debilitating behavioral consequences of entrepreneurial processes, especially involving unsuccessful entrepreneurial experiences (UEEs), remains limited. By drawing on behavioral decision theories, we argue that UEEs can lead to entrepreneurs’ increased desperation to succeed and higher tolerance for risk, which in turn may result in the dysfunctional outcome of product-harm crises in their subsequent ventures. We further argue that desperation effects may be stronger when the venture is founded by a solo entrepreneur or during an economic recession. On the other hand, the positive effect of higher risk tolerance on product-harm crises is argued to be less pronounced when the penalty against risk taking is high, such as when the venture has several product lines and one product-harm crisis can have a spillover effect on other products, or when the venture faces stricter regulations for product functionality, quality, and safety. An analysis of new ventures in the U.S. medical device industry provides an overall support for our claims.

Product-harm crisis intelligent warning system design based on fine-grained sentiment analysis of automobile complaints

Due to the huge losses caused by product-harm crises and subsequent recalls in the automobile industry, companies must urgently design a product-harm crisis warning system. However, the designs of existing warning systems use the recurrent neural network algorithm, which suffers from gradient disappearance and gradient explosion issues. To compensate for these defects, this study uses a long and short-term memory algorithm to achieve a final prediction accuracy of 90%. This study contributes to the research and design of automatic crisis warning systems by considering sentiment and improving the accuracy of automobile product-harm crisis prediction.

Exploring consumers’ attitude formation toward their own brands when in crisis: cross-national comparisons between USA and China

PurposeThis study aims to examine how culture influences consumer attitudes toward the brands of products they own during a product-harm crisis. To this end, average consumers from two countries - the USA, representing a highly individualistic society and China, a less individualistic (i.e. collectivist) society – are compared.Design/methodology/approachThe study conducts an invariance test of the measurement model for a more rigorous comparison of the two countries. Structural equation modeling is performed to identify how average consumers respond to a product-harm crisis (e.g. iPhone explosion) based on survey results of 188 American and 197 Chinese consumers.FindingsThese results reveal that in both countries, an individual’s susceptibility to a normative interpersonal influence determines their brand consciousness, which, in turn, enhances consumer attachment to well-known brands, resulting in favorable brand attitudes. During a brand crisis, an owned brand’s buffering effect is observed among consumers high in brand consciousness in collectivistic but not in individualistic societies. The moderating role of feelings of betrayal on the brand attachment-consumer attitude relationship is also reported.Originality/valueCulture shapes consumer behavioral patterns. In today’s global market, a company’s decisions are no longer limited by borders and many companies experience product failures. Thus, findings that show consumers’ distinguishable psychological experiences between different cultures contribute to crisis management literature.

Internalising and internationalising country specific CSR practices of a Japanese multinational company

PurposeApplying mainstream, Western-centric corporate social responsibility (CSR) theory to make sense of CSR practices of multinational firms of non-Western origin seems to be problematic for CSR theory and practice. The purpose of this study is to critically analyse the CSR integration journey of a Japanese multinational firm with a view to understanding CSR integration in a global business context.Design/methodology/approachThis study used a qualitative research method using a single case study approach to investigate a contemporary phenomenon within its real-life context. A theoretical lens of seven patterns of CSR integration interwoven with Japanese and mainstream CSR discourses is used to make sense of internalisation and internationalisation process.FindingsMain findings are presented under four themes: product harm crisis as a call for CSR, CSR governance and bottom up initiatives, recycling oriented CSR and product designing, co-existing Japanese CSR in the global marketplace. An external misfit of a firm’s practice in the domestic market can lead to internalising country-specific CSR through CSR integration resulting in successful internationalisation of country-specific CSR practices.Research limitations/implicationsCountry-specific CSR integration follows context-specific routines and practices; this process can be shaped and reshaped by the prevailing international CSR discourse due to internationalisation of a firm’s operation.Originality/valueAlthough CSR is viewed as a fundamental strategic priority driving firms to focus on shared value-creating products and services, how best a firm can integrate CSR into an existing business model is unclear. This gap is addressed in this current study.

The effects of brand equity and failure severity on remedy choice after a product recall

PurposeThere is limited insight concerning a firm’s remedy choice after a product recall. This study aims to propose that failure severity and brand equity are key antecedents of remedy choice and provides empirical evidence for a non-linear relationship between pre-recall brand equity and the firm’s remedy offer that is moderated by severity.Design/methodology/approachThis study uses field data for 159 product recalls from 60 brands between January 2008 to February 2020 to estimate a probit model of the effects of failure severity, pre-recall brand equity and remedy choice.FindingsFirms with higher and lower pre-recall brand equity are less likely to offer full (vs partial) remedy compared to medium level pre-recall brand equity firms. Failure severity moderates this relationship positively, i.e. firms with low and high brand equity are more sensitive to failure severity and then select full instead of partial remedy.Research limitations/implicationsThis research reconciles contradictory arguments and research results about failure severity as an antecedent of remedy choice by introducing brand equity as another key variable. Future research could examine the psychological process of managerial decision-making through experiments.Practical implicationsThis study increases the awareness of the importance of remedy choice during product-harm crises and can help firms and regulators to better understand managerial decision-making mechanisms (and fallacies) during a product-harm crisis.Originality/valueThis study theoretically and empirically advances the limited literature on managerial decision-making in response to product recalls.

A CONCEPTUAL REVIEW ON PRODUCT-HARM CRISIS AND PRODUCT RECALL LITERATURE

Despite the developments in quality and business processes, many recent incidents have shown that product-harm crises and product recall based on these crises have brought along complex processes affecting both consumers and the company and its stakeholders. There are many studies in the field due to the unique nature of each crisis, the differentiation of its context, and the differences in research approaches. While this situation contributes to the deepening of the knowledge on the subject, it also causes the related literature to become quite intense and complex. On the other hand, studies focusing on the product-harm crisis are mainly concentrated on developed countries while the interest in the subject has just been increasing recently in developing countries such as Turkey. Therefore, this study aims to explain the basic concepts and processes, present the studies in the field systematically, and make suggestions for future researches to attract researchers from Turkey to encourage new studies in the field. In this context, firstly the basic concepts and processes have been explained, then the studies in the field have been presented and suggestions for future studies have been made.

To Know the Source Credibility First: Effects of Source Credibility on Consumers’ Attribution of Responsibility in a Product-Harm Crisis

To Know the Source Credibility First: Effects of Source Credibility on Consumers’ Attribution of Responsibility in a Product-Harm Crisis

Mitigating negative spillover effects in a product-harm crisis: strategies for market leaders versus market challengers

Prior research indicates that a brand’s product-harm crisis can lower consumer evaluations of competing brands within the same industry, which are known as negative spillover effects. Competing brands should proactively respond to the crisis to dissociate from the crisis-stricken brand. In the current research, two experiments were conducted to examine the relative efficacy of crisis response strategies (bolstering vs. differentiation vs. no response) in mitigating negative spillover effects on competing brands with different market positions (market leader vs. market challenger). The context of these experiments is a product-harm crisis in which a brand’s product is recalled due to food-borne illness. The moderated mediation analyses reveal that the bolstering strategy leads to similar positive indirect effects on brand attitude and purchase intention through message evaluations regardless of whether market leaders or challengers employ the strategy. In contrast, the differentiation strategy yields a more positive indirect effect on brand attitudes and purchase intentions through message evaluations when a market challenger employs the strategy rather than a leader.