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The cloud and its silver lining: negative and positive spillovers from automotive recalls

Author

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  • Verdiana Giannetti

    (University of Leeds)

  • Raji Srinivasan

    (University of Texas at Austin)

Abstract

Product recalls hurt the sales of non-recalled products in the category because of negative spillovers. Recently, there has been some evidence of positive spillovers from recalls on the sales of non-recalled products. We focus on spillovers from brand- (i.e., same brand), firm- (i.e., same firm, but not same brand), and country-level (i.e., same country-of-origin, but not same firm) recalls on the sales of non-recalled products. Furthermore, we examine how advertising and price of non-recalled products interact with brand-, firm-, and country-level recalls to affect their sales. We use data on 124 cars in the USA in 2006–2015. Results indicate that brand-level (country-level) recalls hurt (benefit) the sales of non-recalled products. Higher advertising and price of non-recalled products weaken the negative effect of brand-level recalls, while lower advertising and price strengthen the positive effect of country-level recalls. Finally, firm-level recalls result in positive spillovers when advertising is high.

Suggested Citation

  • Verdiana Giannetti & Raji Srinivasan, 2021. "The cloud and its silver lining: negative and positive spillovers from automotive recalls," Marketing Letters, Springer, vol. 32(4), pages 397-409, December.
    • Handle: RePEc:kap:mktlet:v:32:y:2021:i:4:d:10.1007_s11002-021-09568-6
    DOI: 10.1007/s11002-021-09568-6
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    References listed on IDEAS

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