Effect of different food recall strategies on consumers’ reaction to different recall norms. A comparative study
| DOI | https://doi.org/10.1108/IMDS-10-2016-0464 |
| Date | 16 October 2017 |
| Published date | 16 October 2017 |
| Pages | 2045-2063 |
| Author | Haiju Hu,Ramdane Djebarni,Xiande Zhao,Liwei Xiao,Barbara Flynn |
| Subject Matter | Information & knowledge management,Information systems,Data management systems,Knowledge management,Knowledge sharing,Management science & operations,Supply chain management,Supply chain information systems,Logistics,Quality management/systems |
Effect of different food recall
strategies on consumers’reaction
to different recall norms
A comparative study
Haiju Hu
Economics and Management School, Yanshan University,
Qinhuangdao, Hebei, China
Ramdane Djebarni
Business School, University of South Wales, Pontypridd, UK
Xiande Zhao
China Europe International Business School, Shanghai, China
Liwei Xiao
Business School, University of South Wales, Pontypridd, UK, and
Barbara Flynn
Kelley School of Business, Indiana University, Indianapolis, Indiana, USA
Abstract
Purpose –Usingthe combined theoreticalumbrella of organizationallegitimacy theory,service-dominantlogic,
fairness heuristic theoryand two-factor theory, the purpose of this paper is to investigate the effectiveness of
different food recall strategies (recall proactiveness and compensation) in terms of both how consumers react
(perceived organizational legitimacy and purchase intention) and how recall norms would influence the
effectiveness in threecountries. In additionto the reportingof important results,this paper providesimplications
for food companies to handle effectively therecalls, especially whenthe recalls are cross-country.
Design/methodology/approach –A 2 compensation (high vs low) ×2 recall strategy (proactive vs passive)
scenario experiment was conducted in Hong Kong, the USA and Mainland China. After checking the
effectiveness of manipulation, the paper tested the main effect and interaction effect of recall proactiveness
and compensation on perceived organizational legitimacy and purchase intention. In addition, the mediating
effect of perceived organizational legitimacy between recall strategies and purchase intention was also tested.
Findings –Significant main effect, interaction and mediation effect were found across the three countries with a
different pattern. For the USA and Mainland China which have strong recall norms, the interaction found
followed the predictions of the two-factory theory. However, the pattern found in Hong Kong, which has weak
recall norms, followed the predictions of the fairness heuristic theory. Full mediation effect of perceived
organizational legitimacy between compensation andpurchase intention was found in the USA and Mainland
China,while it was only partialin Hong Kong. For the mediationbetween proactiveness andpurchase intention,
full mediation was found in Hong Kong and the USA, while it was only partial in Mainland China.
Originality/value –First, this study differentiated food recall strategy into two dimensions –recall
proactiveness and compensation. Second, this study tested the applicability of two-factor theory and fairness
heuristic theory in recalls by testing the competing hypotheses proposed according to the two theories.
Finally, this study can further help our understanding of the recall effectiveness across different recall norms.
Keywords Product recalls, Organizational legitimacy, Fairness heuristic theory, Recall norms,
Recall strategy, Two-factor theory
Paper type Research paper
Industrial Management & Data
Systems
Vol. 117 No. 9, 2017
pp. 2045-2063
Emerald Publishing Limited
0263-5577
DOI 10.1108/IMDS-10-2016-0464
Received 31 October 2016
Revised 5 February 2017
Accepted 9 March 2017
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/0263-5577.htm
© Haiju Hu, Ramdane Djebarni, Xiande Zhao, Liwei Xiao and Barbara Flynn. Published by Emerald
Publishing Limited. This article is published under the Creative Commons Attribution (CC BY 4.0)
licence. Anyonemay reproduce, distribute, translate and create derivativeworks of this article (for both
commercial & non-commercial purposes), subject to full attribution to the original publication and authors.
The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode
2045
Food recall
strategies
1. Introduction
The sustainable success of manufacturing organizations has been and will continue to be, at
least for a while, a backbone of the economic growth in developed, emerging and developing
countries (Srinivasan, 2009).
Successful manufacturing organizations, all over the world, are under great pressure to
implement several forward-thinking strategies in order to enhance their competitiveness and
sustainabilityin the competitive globalmarketplace (Liu and Takala,2010; Fuentes-Henríquez
and Del Sol, 2012; Liu, 2013; Zhang et al., 2017).
One of these strategies is effective management of product recall as it helps enterprises
not only to keep damage to a minimum but also ensure that brand reputation and customer
loyalty are not affected in long term (Ni et al., 2016; Steven and Britto, 2016).
Product recall is a follow-up action of product-harm crisis and is defined as an action by a
manufacturer or a distributor to remove a product from the market because it may cause
health and/or safety problems and possibly death of consumers. Product recalls are
increasing with product-harm crises due to the increasing complexity of products
(Heerde et al., 2007), more complex global supply chains (Lyles et al., 2008), greater consumer
awareness and more stringent product safety legislation (Dawar and Pillutla, 2000). As a
case in a point in the food industry, the reinsurance company Swiss Re reported that in 2015,
the number of US food products recalled, and the costs associated with those recalls, had
nearly doubled since 2002.
Product-harm crises and product recalls are recognized as one of a firm’s worst
nightmares (Van Heerde et al., 2007) since they frequently result in a decline of the stock
price (Chen et al., 2009; Zhao and Flynn, 2013), denigrate carefully cultivated brand equity,
tarnish a company’s reputation (Cheah et al., 2007), increase sensitivity to rival firms’
marketing activities (Van Heerde et al., 2007) and lead to loss in sales or even bankruptcy. In
more than half of food recalls in the USA, the process of recalling the food cost the affected
company more than $10 million. Some companies lost more than $100 million in direct costs
associated with the recalls. Moreover, they trigger a chain effect throughout the supply
chain and society as a whole (Dai et al., 2015).
In view of the negative effects stated above, the subject of product recalls has attracted more
and more attention. An increasing number of scholars are engaged in this research area
approaching the subject from different angles such as the impact of product-harm crisis and
product recall on performance or brand image (Zhao et al., 2014), the op erational factors that
may lead to recalls (Steven and Britto, 2016) and design mechanisms to improve the supply
chain traceability which will help the companies to prevent from recalls (Dai et al., 2015).
Also, some scholars focused on the investigation of the effectiveness of recall strategies
(Siomkos and Kurzbard, 1994; Smith et al., 1996; Chen et al., 2009; Hora et al., 2011; Claeys and
Cauberghe, 2014) to help companies effectively handle recalls and reduce their negative effects.
Overall, previous studies attempted to test the effectiveness of recalls’strategy from two
perspectives –firms’perspective and consumers’perspective.
From the firms’perspective, some researchers investigated how product recalls influence
future performance of recall companies in terms of future product reliability and future
accidents (Kalaignanam et al., 2013); on the other hand, some scholars tried to study the
impact of different types of recalls on financial performance (in terms of stock price). For
example, Chen et al. (2009) drew the conclusion that proactive strategies had a more negative
effect on firms’value than passive strategies. Davidson and Worrell (1992) found evidence
that the abnormal returns associated with recall announcements that replace the product or
return the purchase price were more negative than those that announced a repair or check of
a product. Ni et al. (2016) differentiated recall types by the initiators (producer, retailers or
distributors) and found that stock market would react more negatively to recalls by retailer
or distributors. This stream of studies was based on secondary data which were analyzed
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IMDS
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