Does Social Media Accelerate Product Recalls? Evidence from the Pharmaceutical Industry

Social media has become a vital platform for voicing product-related experiences that may not only reveal product defects, but also impose pressure on firms to act more promptly than before. This study scrutinizes the rarely studied relationship between these voices and the speed of product recalls in the context of the pharmaceutical industry in which social media pharmacovigilance is becoming increasingly important for the detection of drug safety signals. Using Federal Drug Administration drug enforcement reports and social media data crawled from online forums and Twitter, we investigate whether social media can accelerate the product recall process in the context of drug recalls. Results based on discrete-time survival analyses suggest that more adverse drug reaction discussions on social media lead to a higher hazard rate of the drug being recalled and, thus, a shorter time to recall. To better understand the underlying mechanism, we propose the information effect, which captures how extracting information from social media helps detect more signals and mine signals faster to accelerate product recalls, and the publicity effect, which captures how firms and government agencies are pressured by public concerns to initiate speedy recalls. Estimation results from two mechanism tests support the existence of these conceptualized channels underlying the acceleration hypothesis of social media. This study offers new insights for firms and policymakers concerning the power of social media and its influence on product recalls.

The role of formal and informal institutional pressures in local gatekeepers' responses to international product recalls.

<p>Product recalls are omnipresent and unavoidable in the global marketplace. Despite the financial losses, brand equity damage, and the hazard to consumer health they impose there is little multidisciplinary international research on the phenomenon. A growing number of studies are investigating the impacts of product harm crises and the recalls and providing valuable implications, but little has been done to address the determinants of organisational behaviour and decision making during the product recall. The purpose of this thesis is to conduct an investigation into the role of local New Zealand gatekeepers and their interaction with international brands during an international product recall. I also investigate the institutional environment in which these firms operate in, and the influence it subjects to their product recall strategies and processes. Because of the lack of empirical research on international product recalls in the extant literature, a qualitative interpretative methodology based on semi-structured interviews is employed. Findings suggest that in the event of a potential product harm crisis leading to product recall in New Zealand, home country regulatory institutions take a collaborative approach with focal firms involved in the recall process. The gatekeeper orientation towards the customer, environmental institutional pressures (coercive and normative), and gatekeeper risk avoidance influence the gatekeeper to initiate preventative recalls. Furthermore, in face of a potential product harm crises, where the local gatekeeper is the dominant organisation, coercive institutional pressure to initiate a preventative recall is exerted towards the partnering international brand. In a severe international product harm crisis leading to product recall, normative institutional pressures encourage the local gatekeeper to initiate preventative product recalls and alongside the international brand, undertake proactive recall strategies. Whereas in ambiguous recall situations, mimetic institutional pressures encourage the local gatekeeper to initiate preventative product recalls and alongside the international brand undertake proactive recall strategies. I propose that in environments of weak formal institutions, informal institutional pressures play a greater role on gatekeeper and international brand recall strategies and processes. Traceability and supply chain knowledge are found to be vital in effective international product recalls.</p>

The role of formal and informal institutional pressures in local gatekeepers' responses to international product recalls.

<p>Product recalls are omnipresent and unavoidable in the global marketplace. Despite the financial losses, brand equity damage, and the hazard to consumer health they impose there is little multidisciplinary international research on the phenomenon. A growing number of studies are investigating the impacts of product harm crises and the recalls and providing valuable implications, but little has been done to address the determinants of organisational behaviour and decision making during the product recall. The purpose of this thesis is to conduct an investigation into the role of local New Zealand gatekeepers and their interaction with international brands during an international product recall. I also investigate the institutional environment in which these firms operate in, and the influence it subjects to their product recall strategies and processes. Because of the lack of empirical research on international product recalls in the extant literature, a qualitative interpretative methodology based on semi-structured interviews is employed. Findings suggest that in the event of a potential product harm crisis leading to product recall in New Zealand, home country regulatory institutions take a collaborative approach with focal firms involved in the recall process. The gatekeeper orientation towards the customer, environmental institutional pressures (coercive and normative), and gatekeeper risk avoidance influence the gatekeeper to initiate preventative recalls. Furthermore, in face of a potential product harm crises, where the local gatekeeper is the dominant organisation, coercive institutional pressure to initiate a preventative recall is exerted towards the partnering international brand. In a severe international product harm crisis leading to product recall, normative institutional pressures encourage the local gatekeeper to initiate preventative product recalls and alongside the international brand, undertake proactive recall strategies. Whereas in ambiguous recall situations, mimetic institutional pressures encourage the local gatekeeper to initiate preventative product recalls and alongside the international brand undertake proactive recall strategies. I propose that in environments of weak formal institutions, informal institutional pressures play a greater role on gatekeeper and international brand recall strategies and processes. Traceability and supply chain knowledge are found to be vital in effective international product recalls.</p>

Managing customer satisfaction after a product recall: the joint role of remedy, brand equity, and severity

Firms struggle to respond to product recalls and manage post-recall customer satisfaction. In three studies, we examine the impact of firms’ remedy choice on satisfaction and provide evidence that firms’ post-recall remedy efforts are often not optimal. In Study 1 (field study), we estimate the longer-term effects of remedy on different satisfaction metrics and show that offering full remedy is much more important for low and high (vs. medium) brand equity firms, especially when failure severity is high. In Study 2 (experiment), we find further evidence that the positive impact of full remedy on satisfaction is moderated by brand equity in a u-shaped fashion. Finally, Study 3 (experiment) provides further evidence that the relationship between remedy and brand equity is contingent on failure severity. The findings contribute to the literature on firms’ management of negative relationship events and provide managers with the empirically grounded 5R guidelines to make better remedy decisions in response to product recalls.

Labor Unions and Product Quality Failures

In this paper, we study the impact of labor unions on product quality failures. We use a product recall as our measure of quality failure because it is an objective metric that is applicable to a broad cross-section of industries. Our analysis employs a union panel setting and close union elections in a regression discontinuity design framework to overcome identification issues. In the panel regressions, we find that firms that are unionized and those that have higher unionization rates experience a greater frequency of quality failures. The results obtain even at a more granular establishment level in a subsample in which we can identify the manufacturing establishment associated with the recalled product. When comparing firms in close elections, we find that firms with close union wins are followed by significantly worse product quality outcomes than those with close union losses. These results are amplified in non–right-to-work states, where unions have a relatively greater influence on the workforce. We find that unionization increases firms’ costs and operating leverage and, consequently, crowds out investments that potentially impact quality. We also find some suggestive evidence that unions may compromise quality by hurting employee morale and by resisting technological upgrades in the firm. Overall, our results suggest that unions have an adverse impact on product recalls, and thus, product quality is an important dimension along which unions impact businesses. This paper was accepted by Gustavo Manso, finance.

Product Recalls and Firm Reputation

Product recall data and information on stock price reactions to recalls are used to estimate the value of reputation in a model in which product quality is not contractible. A recall is the result of a product defect that signals low effort. The recall triggers a reduction in the firm’s product price and value, which then both rise steadily until its next defect occurs. We estimate that reputation accounts for 8.3 percent of firm value and that welfare is 26 percent of its first best level. A policy intervention that attains first best is a recall tax accompanied by a flow subsidy. (JEL D22, G32, H25, L25, L62, M31)

Identification of the source of a Listeria monocytogenes outbreak by investigational tracing

The number of identified listeriosis outbreaks has increased since the sequence typing of Listeria monocytogenes isolates was established in Germany. Due to the nature of the disease, listeriosis outbreaks are difficult to solve. We present investigational tracing as a simple and rapid method to conduct outbreak investigations. The method was applied in 2019 to stop a prolonged listeriosis outbreak in Germany. The starting point for the investigational tracing was nine health care facilities (HCF). Single cases developed listeriosis while they were staying at the nine facilities. Data were collected from companies that delivered foods to HCF and from ready-to-eat (RTE) foods that were consumed there. Following a step-wise approach, data analysis identified similarities in the food supply of the HCF. Food data were heterogeneous and needed to be standardised. Own brands and changing article numbers were challenging aspects during the identification of manufacturers. The analysis of the delivering companies revealed no similarities. Detailed information about the consumed risk foods for Listeria contamination became available for six HCF. All facilities served a wide variety of cold cut meat products to their in-patients. Investigational tracing revealed that only meat products from one out of 29 food business operators had been consumed in all six HCF. Further activities of the authorities enabled the identification of the outbreak strain on food products and in the processing environment of this company. A product recall and the measures taken stopped the listeriosis outbreak. Thus, investigational tracing can be crucial for the clarification of listeriosis outbreaks.