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The more I err, the less I pay: Effect of firm recall experience, firm type and recall severity on remedy to consumers

Etayankara Muralidharan (School of Business, MacEwan University, Edmonton, Canada)
Hari Bapuji (Department of Management and Marketing, Faculty of Business and Economics, The University of Melbourne, Carlton, Australia)
Manpreet Hora (Operations Management, Scheller College of Business, Georgia Institute of Technology, Atlanta, Georgia, USA)

European Journal of Marketing

ISSN: 0309-0566

Article publication date: 27 March 2019

Issue publication date: 6 June 2019

Abstract

Purpose

This study aims to investigate the effects of firm characteristics and crisis characteristics on remedies offered to consumers by firms in the event of a product recall crisis.

Design/methodology/approach

Published data on 868 product recalls in the US toy industry from 1988 to 2011 have been used to investigate the effects of firm experience in product recalls, type of firm (company versus intermediary) and product recall severity in predicting remedies offered to consumers in the event of a product recall.

Findings

The findings show that firm recall experience, firm type and recall severity are negatively associated with recall remedies offered. Specifically, firms offer lower remedies if they have higher recall experience, if they are upstream firms in the supply chain (farther from consumers) and if the recall is more severe.

Research limitations/implications

This study focuses on the toy industry and does not consider product complexity, firm reputation and the role of external regulatory agencies in the prediction of remedies offered by firms. Future research may extend this study to include the above factors.

Practical implications

Offering a high remedy to consumers of a recalled product may be a responsible decision by a firm, but it may also attract shareholder wrath. The study has implications for managing multiple goals in product recall crisis management.

Originality/value

Studies focused on issues of interest to consumers during a recall crisis, such as swift recalls and appropriate remedies, are limited. This study contributes to the understanding of the antecedents of recall remedies.

Keywords

Acknowledgements

This research was funded by the School of Business, MacEwan University. The authors thank the Associate Editor and the three anonymous reviewers for their constructive feedback for improving the paper. They thank Jason (Huashan) Li for reading and commenting on the paper. They also thank Sejal Tiwari for providing research assistant support during the study.

Citation

Muralidharan, E., Bapuji, H. and Hora, M. (2019), "The more I err, the less I pay: Effect of firm recall experience, firm type and recall severity on remedy to consumers", European Journal of Marketing, Vol. 53 No. 5, pp. 916-943. https://doi.org/10.1108/EJM-12-2017-0964

Publisher

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Emerald Publishing Limited

Copyright © 2019, Emerald Publishing Limited