The effects of innovation on product recall likelihood

Although the consequences of product recalls are well-documented in the literature, literature on the antecedents of recalls is lacking. This study investigates the effects of innovation practices on the likelihood of product recalls in the automotive industry. In doing so, we assess if pushing too hard on innovation can increase the risks that trigger recalls. We assess this potential by leveraging 284 make-year observations. The results demonstrate that innovation radicalness and product line breadth are positively associated with recalls. Furthermore, previous recall magnitude moderates the relationship between innovation radicalness and subsequent recalls. The authors find that the interaction of innovation radicalness and previous recall magnitude increases subsequent recalls, suggesting that firms that are already struggling with recalls can fall further behind by taking risks with their innovation strategy. The managerial and theoretical implications are discussed.