The 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.
The 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.
The 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.
New 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.
The 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.
The authors acknowledge the help of Johny K. Johansson and Hari Bapuji in the preparation of this manuscript. The authors would also like to thank the anonymous reviewers and the editor for their valuable feedback throughout the review process. This work was supported by the Ministry of Education of the Republic of Korea and the National Research Foundation of Korea (NRF-2017S1A5A2A01025232).
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