The decision to recall: A behavioral investigation in the medical device industry

• DOI: http://doi.org/10.1016/j.jom.2018.07.003
• Published date: 01 September 2018
• Author: Rachna Shah,George P. Ball,Karen Donohue
• Date: 01 September 2018

Contents lists available at ScienceDirect

Journal of Operations Management

journal homepage: www.elsevier.com/locate/jom

The decision to recall: A behavioral investigation in the medical device

industry

George P. Ball

a,∗

, Rachna Shah

b

, Karen Donohue

b

a

Operations and Decision Technologies Department, Kelley School of Business, Indiana University, 1309 East 10th Street, Bloomington, IN, 47405, United States

b

Supply Chain and Operations Department, Carlson School of Management, University of Minnesota, 321 Nineteenth Avenue South, Minneapolis, MN, 55455-0438,

United States

ARTICLE INFO

Accepted by: S. de Treville.

Keywords:

Product recalls

Behavioral operations

Human experiment

Cognitive reflection

ABSTRACT

The decision to recall a product can significantly affect an operations manager's career, the credibility and

financial performance of the firm, and the safety of customers. Despite the importance of this decision, there has

been little behavioral research on what influences judgment in this task. Leveraging insights from interviews

with regulators and professionals in the medical device industry, and supported by behavioral theory, we

identify a set of factors that may influence the recall decision. We test the effect of these factors using a primary

experiment with 167 managers from a Fortune 500 medical device firm and a replication study with 614 subjects

from Amazon Mechanical Turk. We find that a physician's ability to detect a defect prior to product use decreases

the likelihood to recall, while a manager's understanding of the root cause of the defect increases the likelihood

to recall. In a second study with 372 Amazon Mechanical Turk subjects, we find that perceived patient customer

harm and perceived cost of the recall both mediate the relationship between defect detectability and recall

likelihood, but that harm is more influential than cost. Further, the perceived cost of the recall also mediates the

relationship between root cause understanding and recall likelihood. By uncovering behavioral factors and their

mechanisms in the recall decision, this study offers important insights to both industry and regulators.

1. Introduction

The question of whether to recall a product is one of the most im-

portant, yet complex, decisions an operations manager may face in their

career. The criteria for recalling a product is highly contextual, multi-

dimensional, and necessitates balancing the firm's profitability and re-

putation with customer satisfaction, customer safety, and regulatory

oversight. This is particularly salient in the medical device industry.

The Food and Drug Administration (FDA), the federal regulator re-

sponsible for medical device recalls in the U.S., recently reported that

after controlling for market growth, the number of medical devices

recalled between 2002 and 2012 increased nearly 50%, with the ma-

jority of these recalls having customer safety implications.

1

Surpris-

ingly, the FDA does not clearly specify how a manager should integrate

the multiple, and potentially conflicting, criteria influencing whether or

not to recall a product. Consequently, managers frequently use

individual judgment in arriving at recall decisions.

Examples of recently publicized product recall incidents suggest

that managerial judgment related to recalls may benefit from rigorous

academic study. On the one hand, some products are not recalled when

perhaps they should be. For instance, in 2010, Johnson & Johnson was

sanctioned by the Food and Drug Administration (FDA) for neglecting

to issue a product recall in a timely manner after receiving numerous

customer complaints related to multiple faulty products.

2

Conversely,

there is also evidence of products being recalled perhaps unnecessarily.

For example, between 2008 and 2010, Toyota recalled almost ten

million vehicles due to alleged unintended acceleration or “sticky gas

pedals.”Initially, Toyota denied that their cars had a quality problem,

but later succumbed to intense pressure from customers, regulators, and

the media, and recalled all potentially faulty units.

3

Eventually, after

numerous investigations, including those completed by the National

Aeronautics and Space Administration (NASA), it was determined that

https://doi.org/10.1016/j.jom.2018.07.003

Received 20 July 2017; Received in revised form 15 July 2018; Accepted 23 July 2018

∗

Corresponding author.

E-mail addresses: gpball@indiana.edu (G.P. Ball), shahx024@umn.edu (R. Shah), donoh008@umn.edu (K. Donohue).

1

https://www.gao.gov/assets/320/319565.pdf.

2

http://www.washingtonpost.com/wp-dyn/content/article/2010/05/01/AR2010050103051.html.

3

http://www.theatlantic.com/business/archive/2011/05/who-was-really-at-fault-for-the-toyota-recalls/238076/.

Journal of Operations Management 62 (2018) 1–15

Available online 07 August 2018

0272-6963/ © 2018 Elsevier B.V. All rights reserved.

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