IDEAS home Printed from https://ideas.repec.org/a/spr/opmare/v14y2021i1d10.1007_s12063-021-00184-1.html
   My bibliography  Save this article

The value of downstream traceability in food safety management systems: an empirical examination of product recalls

Author

Listed:
  • David C. Hall

    (Wright State University)

  • Tracy D. Johnson-Hall

    (Raymond A. Mason School of Business)

Abstract

Non-conforming food products that reach consumers create potential for consumer harm and negative financial consequences for recalling firms. Food quality management systems are therefore of critical importance to consumers, policy-makers, and firms. In addition to implementing a Food Safety Management System (FSMS) for regulatory compliance, a firm may invest in a certified FSMS that enables downstream traceability. Downstream traceability is the ability to follow a product through the supply chain from production to point of sale. We use information processing theory (IPT) and supply chain coordination theory (SCCT) to hypothesize that downstream traceability improves integration and coordination, and hence, outcomes, of a product recall. Evaluating the role of downstream traceability systems in enabling firms to manage quality failures and associated outcomes is relevant because managers and policy-makers need to understand incentives for making such investments. We empirically investigate the effect of downstream traceability on the length of time unsafe product is in distribution, number of products recalled, incidence of product harm, and shareholder value using event study and regression methods in a sample of 211 food recalls announced in the United States (U.S.) from 2007–2013. We find downstream traceability enhances food safety by reducing time in distribution and number of products, but is not significant with respect to product harm. Furthermore, this capability mitigates negative shareholder value impacts. These findings suggest that downstream traceability is both fiscally and socially responsible. These results contribute to the extant academic literature and offer new insights to both practitioners and policy-makers.

Suggested Citation

  • David C. Hall & Tracy D. Johnson-Hall, 2021. "The value of downstream traceability in food safety management systems: an empirical examination of product recalls," Operations Management Research, Springer, vol. 14(1), pages 61-77, June.
    • Handle: RePEc:spr:opmare:v:14:y:2021:i:1:d:10.1007_s12063-021-00184-1
    DOI: 10.1007/s12063-021-00184-1
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s12063-021-00184-1
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s12063-021-00184-1?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Nicholas G. Rupp, 2004. "The Attributes of a Costly Recall: Evidence from the Automotive Industry," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 25(1), pages 21-44, August.
    2. Zhang, Min & Hu, Haiju & Zhao, Xiande, 2020. "Developing product recall capability through supply chain quality management," International Journal of Production Economics, Elsevier, vol. 229(C).
    3. David J. Ketchen JR. & Kaitlin D. Wowak & Christopher W. Craighead, 2014. "Resource Gaps and Resource Orchestration Shortfalls in Supply Chain Management: The Case of Product Recalls," Journal of Supply Chain Management, Institute for Supply Management, vol. 50(3), pages 6-15, July.
    4. Stephen W. Pruitt & David R. Peterson, 1986. "Security Price Reactions Around Product Recall Announcements," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 9(2), pages 113-122, June.
    5. Jun Shu & Russell Barton, 2012. "Managing Supply Chain Execution: Monitoring Timeliness and Correctness via Individualized Trace Data," Production and Operations Management, Production and Operations Management Society, vol. 21(4), pages 715-729, July.
    6. Gary H. Chao & Seyed M. R. Iravani & R. Canan Savaskan, 2009. "Quality Improvement Incentives and Product Recall Cost Sharing Contracts," Management Science, INFORMS, vol. 55(7), pages 1122-1138, July.
    7. Hoffer, George E & Pruitt, Stephen W & Reilly, Robert J, 1988. "The Impact of Product Recalls on the Wealth of Sellers: A Reexamination," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 663-670, June.
    8. Michael Ketzenberg & Jacqueline Bloemhof & Gary Gaukler, 2015. "Managing Perishables with Time and Temperature History," Production and Operations Management, Production and Operations Management Society, vol. 24(1), pages 54-70, January.
    9. Dai, Bin & Nu, Yu & Xie, Xia & Li, Jianbin, 2021. "Interactions of traceability and reliability optimization in a competitive supply chain with product recall," European Journal of Operational Research, Elsevier, vol. 290(1), pages 116-131.
    10. Richard L. Daft & Robert H. Lengel, 1986. "Organizational Information Requirements, Media Richness and Structural Design," Management Science, INFORMS, vol. 32(5), pages 554-571, May.
    11. Fama, Eugene F. & French, Kenneth R., 2015. "A five-factor asset pricing model," Journal of Financial Economics, Elsevier, vol. 116(1), pages 1-22.
    12. David C. Hall & Tracy D. Johnson-Hall, 2017. "Learning from Conformance Quality Failures That Triggered Product Recalls: The Role of Direct and Indirect Experience," Journal of Supply Chain Management, Institute for Supply Management, vol. 53(4), pages 13-36, October.
    13. Danny Samson, 2020. "Operations/supply chain management in a new world context," Operations Management Research, Springer, vol. 13(1), pages 1-3, June.
    14. Jay R. Galbraith, 1974. "Organization Design: An Information Processing View," Interfaces, INFORMS, vol. 4(3), pages 28-36, May.
    15. Barbara B. Flynn & Xenophon Koufteros & Guanyi Lu, 2016. "On Theory in Supply Chain Uncertainty and its Implications for Supply Chain Integration," Journal of Supply Chain Management, Institute for Supply Management, vol. 52(3), pages 3-27, July.
    16. Victoria Salin & Neal H. Hooker, 2001. "Stock Market Reaction to Food Recalls," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 23(1), pages 33-46.
    17. Kong, Dongmin & Shi, Lu & Yang, Zhiqing, 2019. "Product recalls, corporate social responsibility, and firm value: Evidence from the Chinese food industry," Food Policy, Elsevier, vol. 83(C), pages 60-69.
    18. Michael R. Thomsen & Andrew M. McKenzie, 2001. "Market Incentives for Safe Foods: An Examination of Shareholder Losses from Meat and Poultry Recalls," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(3), pages 526-538.
    19. Hongyan Dai & Mitchell M. Tseng & Paul H. Zipkin, 2015. "Design of traceability systems for product recall," International Journal of Production Research, Taylor & Francis Journals, vol. 53(2), pages 511-531, January.
    20. Lin-Hi, Nick & Müller, Karsten, 2013. "The CSR bottom line: Preventing corporate social irresponsibility," Journal of Business Research, Elsevier, vol. 66(10), pages 1928-1936.
    21. Christian Busse & Jan Meinlschmidt & Kai Foerstl, 2017. "Managing Information Processing Needs in Global Supply Chains: A Prerequisite to Sustainable Supply Chain Management," Journal of Supply Chain Management, Institute for Supply Management, vol. 53(1), pages 87-113, January.
    22. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, April.
    23. Arshinder & Kanda, Arun & Deshmukh, S.G., 2008. "Supply chain coordination: Perspectives, empirical studies and research directions," International Journal of Production Economics, Elsevier, vol. 115(2), pages 316-335, October.
    24. X. Frank Zhang, 2006. "Information Uncertainty and Stock Returns," Journal of Finance, American Finance Association, vol. 61(1), pages 105-137, February.
    25. Alfred Marcus, 1989. "The deterrent to dubious corporate behavior: Profitability, probability and safety recalls," Strategic Management Journal, Wiley Blackwell, vol. 10(3), pages 233-250, May.
    26. Mark Ferguson & V. Daniel R. Guide , Jr. & Gilvan C. Souza, 2006. "Supply Chain Coordination for False Failure Returns," Manufacturing & Service Operations Management, INFORMS, vol. 8(4), pages 376-393, August.
    27. Shao‐Chi Chang & Heng‐Yu Chang, 2015. "Corporate Motivations of Product Recall Strategy: Exploring the Role of Corporate Social Responsibility in Stakeholder Engagement," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 22(6), pages 393-407, November.
    28. Michael Maloni & Michael Brown, 2006. "Corporate Social Responsibility in the Supply Chain: An Application in the Food Industry," Journal of Business Ethics, Springer, vol. 68(1), pages 35-52, September.
    29. Li, Xiuhui & Wang, Qinan, 2007. "Coordination mechanisms of supply chain systems," European Journal of Operational Research, Elsevier, vol. 179(1), pages 1-16, May.
    30. Sriram Thirumalai & Kingshuk K. Sinha, 2011. "Product Recalls in the Medical Device Industry: An Empirical Exploration of the Sources and Financial Consequences," Management Science, INFORMS, vol. 57(2), pages 376-392, February.
    31. Jiuchang Wei & Ming Zhao & Fei Wang & Dingtao Zhao, 2016. "The effects of firm actions on customers’ responses to product recall crises: analyzing an automobile recall in China," Journal of Risk Research, Taylor & Francis Journals, vol. 19(4), pages 425-443, April.
    32. Jarrell, Gregg & Peltzman, Sam, 1985. "The Impact of Product Recalls on the Wealth of Sellers," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 512-536, June.
    33. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
    34. Hartman, Raymond S, 1987. "Product Quality and Market Efficiency: The Effect of Product Recalls on Resale Prices and Firm Valuation," The Review of Economics and Statistics, MIT Press, vol. 69(2), pages 367-372, May.
    35. Verónica León-Bravo & Federico Caniato & Maria Caridi, 2019. "Sustainability in multiple stages of the food supply chain in Italy: practices, performance and reputation," Operations Management Research, Springer, vol. 12(1), pages 40-61, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Tracy D. Johnson-Hall & David C. Hall, 2022. "Redefining Quality in Food Supply Chains via the Natural Resource Based View and Convention Theory," Sustainability, MDPI, vol. 14(15), pages 1-26, August.
    2. Thanh Tiep Le & Abhishek Behl, 2022. "Role of corporate governance in quick response to Covid-19 to improve SMEs’ performance: evidence from an emerging market," Operations Management Research, Springer, vol. 15(1), pages 528-550, June.
    3. Neeraj Kumar & Mohit Tyagi & Anish Sachdeva & Yigit Kazancoglu & Mangey Ram, 2022. "Impact analysis of COVID-19 outbreak on cold supply chains of perishable products using a SWARA based MULTIMOORA approach," Operations Management Research, Springer, vol. 15(3), pages 1290-1314, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Li, Huashan & Bapuji, Hari & Talluri, Srinivas & Singh, Prakash J., 2022. "A Cross-disciplinary review of product recall research: A stakeholder-stage framework," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 163(C).
    2. Astvansh, Vivek & Eshghi, Kamran, 2023. "The effects of regulatory investigation, supplier defect, and product age on stock investors’ reaction to an automobile recall," Journal of Business Research, Elsevier, vol. 167(C).
    3. Unsal, Omer & Hassan, M. Kabir & Zirek, Duygu, 2017. "Product recalls and security prices: New evidence from the US market," Journal of Economics and Business, Elsevier, vol. 93(C), pages 62-79.
    4. Kathleen Cleeren & Marnik G. Dekimpe & Harald J. Heerde, 2017. "Marketing research on product-harm crises: a review, managerial implications, and an agenda for future research," Journal of the Academy of Marketing Science, Springer, vol. 45(5), pages 593-615, September.
    5. Hall, David C. & Johnson-Hall, Tracy D., 2021. "Recall effectiveness, strategy, and task complexity in the U.S. meat and poultry industry," International Journal of Production Economics, Elsevier, vol. 234(C).
    6. Ni, John Z. & Flynn, Barbara B. & Jacobs, F. Robert, 2014. "Impact of product recall announcements on retailers׳ financial value," International Journal of Production Economics, Elsevier, vol. 153(C), pages 309-322.
    7. Eng Cheah & Wen Chan & Corinne Chieng, 2007. "The Corporate Social Responsibility of Pharmaceutical Product Recalls: An Empirical Examination of U.S. and U.K. Markets," Journal of Business Ethics, Springer, vol. 76(4), pages 427-449, December.
    8. David C. Hall & Tracy D. Johnson-Hall, 2017. "Learning from Conformance Quality Failures That Triggered Product Recalls: The Role of Direct and Indirect Experience," Journal of Supply Chain Management, Institute for Supply Management, vol. 53(4), pages 13-36, October.
    9. Hsu, Liwu & Lawrence, Benjamin, 2016. "The role of social media and brand equity during a product recall crisis: A shareholder value perspective," International Journal of Research in Marketing, Elsevier, vol. 33(1), pages 59-77.
    10. Rashid Ameer & Radiah Othman, 2023. "Stock market reactions to US Consumer Product Safety Commission enforcement actions," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(3), pages 3709-3735, September.
    11. Yao, Liufang & Parlar, Mahmut, 2019. "Product recall timing optimization using dynamic programming," International Journal of Production Economics, Elsevier, vol. 210(C), pages 1-14.
    12. Kong, Dongmin, 2012. "Does corporate social responsibility matter in the food industry? Evidence from a nature experiment in China," Food Policy, Elsevier, vol. 37(3), pages 323-334.
    13. Pozo, Veronica F. & Schroeder, Ted C., 2016. "Evaluating the costs of meat and poultry recalls to food firms using stock returns," Food Policy, Elsevier, vol. 59(C), pages 66-77.
    14. Hannah Oh & John Bae & Sang‐Joon Kim & Ryan Choi, 2019. "Product recall as a way of responsible management of a firm: The roles of corporate social responsibility and board members' sense of ownership," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 26(4), pages 902-915, July.
    15. Shalpegin, Timofey, 2020. "Collaborative product development: Managing supplier incentives for key component testing," European Journal of Operational Research, Elsevier, vol. 285(2), pages 553-565.
    16. Alfred Z. Liu & Angela Xia Liu & Sangkil Moon & Donald Siegel, 2024. "Does Corporate Social Responsibility Always Result in More Ethical Decision-Making? Evidence from Product Recall Remediation," Journal of Business Ethics, Springer, vol. 191(3), pages 443-463, May.
    17. Zhang, Shafu & Magnan, Michel & Qiu, Yetaotao & Zeng, Cheng Colin, 2022. "Do banks price production process failures? Evidence from product recalls," Journal of Banking & Finance, Elsevier, vol. 135(C).
    18. Zhao, Xiande & Li, Yina & Flynn, Barbara B., 2013. "The financial impact of product recall announcements in China," International Journal of Production Economics, Elsevier, vol. 142(1), pages 115-123.
    19. Yoseph, Nir Shlomo, 2018. "The Impact of Environmental Fraud on the Used Car Market: Evidence from Dieselgate," CEPR Discussion Papers 12899, C.E.P.R. Discussion Papers.
    20. Gokhale, Jayendra & Brooks, Raymond M. & Tremblay, Victor J., 2014. "The effect on stockholder wealth of product recalls and government action: The case of Toyota's accelerator pedal recall," The Quarterly Review of Economics and Finance, Elsevier, vol. 54(4), pages 521-528.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:opmare:v:14:y:2021:i:1:d:10.1007_s12063-021-00184-1. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.