Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Working Knowledge
Business Research for Business Leaders
  • Browse All Articles
  • Popular Articles
  • Cold Call Podcast
  • Managing the Future of Work Podcast
  • About Us
  • Book
  • Leadership
  • Marketing
  • Finance
  • Management
  • Entrepreneurship
  • All Topics...
  • Topics
    • COVID-19
    • Entrepreneurship
    • Finance
    • Gender
    • Globalization
    • Leadership
    • Management
    • Negotiation
    • Social Enterprise
    • Strategy
  • Sections
    • Book
    • Podcasts
    • HBS Case
    • In Practice
    • Lessons from the Classroom
    • Op-Ed
    • Research & Ideas
    • Research Event
    • Sharpening Your Skills
    • What Do You Think?
    • Working Paper Summaries
  • Browse All
    Negative Shocks and Innovation: Evidence from Medical Device Recalls
    01 Oct 2018Working Paper Summaries

    Negative Shocks and Innovation: Evidence from Medical Device Recalls

    by George P. Ball, Jeffrey T. Macher, and Ariel Dora Stern
    This study examines Food and Drug Administration data on all medical device approvals and recalls over the years 2003-2015, finding that firms slow down their own innovation processes in response to recalls, while their direct competitors accelerate innovative activities. Recalls may thus pose a greater strategic disadvantage than previously understood.
    LinkedIn
    Email

    Author Abstract

    When innovations are successfully commercialized into new products, they can create value for both consumers and firms. When products malfunction, however, they can harm consumers and disrupt firm operations. Product failures are, therefore, likely to impact firms’ subsequent innovation activities. Using 13 years of Food and Drug Administration data, we examine the effects of firm and competitor medical device recalls on subsequent new product innovation. Recalls vary by source, proximity, and severity while innovations vary in their sophistication and novelty. We use recurrent-event accelerated failure time models to examine how product failures experienced by firms and their competitors impact subsequent major and minor innovations. We find that focal firm recalls slow minor innovation, an effect that is strongest when recalls are in the same product area as innovation activity. A one standard deviation increase in the number of proximate focal firm recalls implies more than a one-year delay in minor innovation. However, competitor firm recalls lead to acceleration in both minor and major innovative activity. The relationship between competitor recalls and minor innovation is strongest when recalls are more severe, while the relationship between competitor recalls and major innovation is strongest when recalls are proximate and more severe. Just one localized, severe competitor recall leads to a one-month reduction in time to major innovation. Our results suggest that product failures influence subsequent innovation but that their impact is dependent upon recall source, proximity, and severity. The strategic and public policy implications of these results are highlighted.

    Paper Information

    • Full Working Paper Text
    • Working Paper Publication Date: September 2018
    • HBS Working Paper Number: HBS Working Paper #19-028
    • Faculty Unit(s): Technology and Operations Management
      Trending
        • 17 Jan 2023
        • In Practice

        8 Trends to Watch in 2023

        • 24 Jan 2023
        • Research & Ideas

        Passion at Work Is a Good Thing—But Only If Bosses Know How to Manage It

        • 25 Jan 2022
        • Research & Ideas

        More Proof That Money Can Buy Happiness (or a Life with Less Stress)

        • 25 Feb 2019
        • Research & Ideas

        How Gender Stereotypes Kill a Woman’s Self-Confidence

        • 10 Jan 2023
        • Research & Ideas

        How to Live Happier in 2023: Diversify Your Social Circle

    Ariel D. Stern
    Ariel D. Stern
    Poronui Associate Professor of Business Administration
    Contact
    Send an email
    → More Articles
    Find Related Articles
    • Innovation Strategy
    • Technological Innovation
    • Health
    • Medical Devices and Supplies
    • United States

    Sign up for our weekly newsletter

    Interested in improving your business? Learn about fresh research and ideas from Harvard Business School faculty.
    This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
    ǁ
    Campus Map
    Harvard Business School Working Knowledge
    Baker Library | Bloomberg Center
    Soldiers Field
    Boston, MA 02163
    Email: Editor-in-Chief
    →Map & Directions
    →More Contact Information
    • Make a Gift
    • Site Map
    • Jobs
    • Harvard University
    • Trademarks
    • Policies
    • Accessibility
    • Digital Accessibility
    Copyright © President & Fellows of Harvard College