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

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.