Post-Recall Risk Management Strategies and Organisational Knowledge Retention : A Vignette Experiment of Pharmaceutical Industry

Pharmaceutical industry has encountered increasingly prevalent product recalls, whereas the internal mechanism that enables pharmaceutical firms to implement an effective recall management strategy has not been deeply investigated. This paper selects a 3x2 scenario-based vignette experiment with 230 quality managers in China, in which the external environment of recall crisis that is consisted of different recall locus (internal recall locus/supplier recall locus/industrial recall locus) and high/low market pressure has been manipulated to test the decisions of quality risk management and organizational knowledge retention. The results indicate that a closer locus of recall event and the lower level of market pressures result in more preventative post-recall quality risk management strategies, and these effects are positively moderated by the manager’s risk propensity. In addition, this paper finds that preventative post-recall quality risk management strategies lead to more formal knowledge retention. This paper is among the first to apply enactment theory into supply chain risk management through an empirical approach and integrate institutional theory to construct external environment of the enactment process. The findings demonstrate that quality managers should think broadly about implementing more preventative risk management strategies and learning vicariously from others’ failures to help prevent future quality issues