Proactive versus passive product recall: Does a CEO’s early-life disaster experience matter?

Abstract

Product harm crises occur increasingly frequently, resulting in proactive or passive product recalls for various considerations that influence firms differently. Many recent studies have explored the influence of traumatic experiences in CEOs’ early lives on firm behavior, but product recalls have received limited attention. Drawing on imprinting theory and post-traumatic growth theory, we investigate whether and how CEOs’ early-life disaster experiences affect a firm’s product recall decisions, considering the following moderating effects: CEO age, firm performance, severity, and the number of experienced disasters. Through an analysis of 259 product recall events, which covered listed firms in China from 2010 to 2019, we find that companies led by CEOs with early-life disaster experiences, who may gain psychological growth from such traumatic events, tend to make a proactive recall decision in response to product harm crises. Furthermore, when a CEO is older, or the firm’s performance is higher, the impact of their disaster experience intensifies, as certain organizational features contribute to the persistence and enhancement of imprints over time. Consistent with the fact that post-traumatic growth is associated with post-traumatic stress induced by the severity of traumatic experiences, we find that CEOs who experienced multiple disasters may gain more positive psychological strength, so that they are more likely to recall proactively. However, CEOs with extremely severe disaster experience are less inclined to make proactive recall decisions. This study presents new insights into the research on product recall decisions, indicating that firms attaching importance to consumer safety and social benefit should consider CEOs’ early-life disaster experiences in dealing with product recalls.