Oops! I did it again: Effect of corporate governance and top management team characteristics on the likelihood of product-harm crisesby Saim Kashmiri, Jacob Brower

Journal of Business Research

About

Year
2015
DOI
10.1016/j.jbusres.2015.06.019
Subject
Marketing

Text

e t-h tes biq ith de ance arm ich t n p cou sup s w ? 2015 Published by Elsevier Inc. well-pu ry safet isk of s r & Pi ms acr uge so to two

Journal of Business Research xxx (2015) xxx?xxx

JBR-08435; No of Pages 10

Contents lists available at ScienceDirect

Journal of Busin(e.g., Dawar & Lei, 2009; Dawar & Pillutla, 2000; van Heerde, Helsen, &

Dekimpe, 2007), and highlights how such pre-crisis characteristics as firm reputation, brand loyalty, and brand familiarity impact market reactions to product defects (e.g., Cleeren, Dekimpe, & Helsen, 2008;

Rhee & Haunschild, 2006; van Heerde et al., 2007). The second stream, by contrast, recommends actions that a firm at the center of a product-harm crisis can take to minimize the crisis' costs (e.g., Chen,

Ganesan, & Liu, 2009; Cleeren, van Heerde, & Dekimpe, 2013; Dutta &

Pullig, 2011; Siomkos & Kurzbard, 1994). An important question, which has eluded the attention of scholars is, ?Are some firms less likely holder incentives, resulting in firms exhibiting a higher strategic emphasis on product quality. Higher strategic product-quality emphasis, in turn, is likely tomediate these firms' lower likelihood of encountering a product-harm crisis. The conceptual framework of our article, for which our empirical study of 116 S&P 500 firms found broad support is shown in Fig. 1. 2. Theoretical framework and hypotheses 2.1. Strategic product-quality emphasis and relation to product-harm crises to encounter a product-harm crisis??Using age ? Corresponding author. Tel.: +1 662 915 1523.

E-mail addresses: skashmiri@bus.olemiss.edu (S. Kash jbrower@business.queensu.ca (J. Brower). 1 Tel.: +1 613 533 3252. http://dx.doi.org/10.1016/j.jbusres.2015.06.019 0148-2963/? 2015 Published by Elsevier Inc.

Please cite this article as: Kashmiri, S., & Brow on the likelihood of product-harm cri..., Jourmain streams. The first cause to such intangible e, and firm reputation tive. Corporate governance and TMT characteristics, more specifically higher managerial ownership, higher family ownership, and higher influence of marketing in the C-suite, help align managerial and share-stream underscores the damage these crises firm assets as brand value, customer valu1. Introduction

A product-harm crisis is a discrete, firm's product fails to meet a mandato defect that creates an unreasonable r injury, or death to consumers (Dawa

Kurzbard, 1994). Each year, many fir product-harm crises, resulting in h research in this area has been limitedblicized event wherein a y standard, or contains a ubstantial harm, serious llutla, 2000; Siomkos & oss the globe encounter cial costs. Surprisingly, on managerial incentives, we explore whether certain characteristics related to firms' corporate governance and top management teams (TMTs) decrease firms' likelihood of encountering a product-harm crisis. We also investigate the mediating mechanism that links these characteristics to the likelihood of a product-harm crisis.

We argue that self-serving managers tend to under-invest in product-quality-related systems and processes, resulting in product quality levels that are sub-optimal from a value-maximization perspec-Chief Marketing OfficerOops! I did it again: Effect of corporate gov characteristics on the likelihood of produc

Saim Kashmiri a,?, Jacob Brower b,1 a School of Business Administration, University of Mississippi, University, MS 38677, United Sta b Queen's School of Business, Queen's University, Kingston, ON K7L 3N6, Canada a b s t r a c ta r t i c l e i n f o

Article history:

Received 24 June 2014

Received in revised form 1 June 2015

Accepted 2 June 2015

Available online xxxx

Keywords:

Product-harm crisis

Innovation

Family firms

Managerial ownership

Product-harm crises are u consequences associated w attention, however, has been to explore corporate govern of experiencing a product-h ownership, and firms in wh higher strategic emphasis o firms' lower likelihood of en 2011 provides considerable practitioners and for scholarncy theory and literature miri), er, J., Oops! I did it again: Effe nal of Business Research (2015rnance and top management team arm crises uitous in today's marketplace. Prior research has explored the negative these crises and highlighted effective crisis management strategies. Limited voted to exploring the antecedents of such crises. The authors use agency theory and top management team (TMT) characteristics that impact firms' likelihood crisis. They argue that family firms, firms with higher levels of managerial he marketing function has a higher influence in the TMT are likely to exhibit a roduct quality. Strategic product-quality emphasis, in turn, mediates these ntering a product-harm crisis. An analysis of 116 S&P 500 firms across 2006? port for the authors' arguments. These results have important implications for orking in the areas of innovation, family business, and corporate governance. ess ResearchA key manifestation of a firm's emphasis on product quality is the presence of a strong company-wide quality management program.

We expectfirmswith a strong company-wide qualitymanagement program to be less likely to encounter a product-harm crisis.

We have this expectation, because firms with a strong companywide quality management program implement ?very careful business ct of corporate governance and topmanagement team characteristics ), http://dx.doi.org/10.1016/j.jbusres.2015.06.019 2 S. Kashmiri, J. Brower / Journal of Business Research xxx (2015) xxx?xxxprocesses with sufficient [product safety] checks and balances? (van

Heerde et al., 2007, pg. 242). Furthermore, such firms distinguish themselves for their clear traceability and accountability: A missed quality test sends an immediate redflag and enables senior executives to follow the path easily to the cause. When the cause of a safety-related incident is identified, firms with superior quality management programs hold the responsible employee accountable in amanner that improves future work and tightens the safety process (Newman, 2011).