Gopesh Anand and Ujjal Kumar Mukherjee note that firms gain greater insights from design-related recalls compared to process-related ones. They analyze organizational learning from failures, categorizing them into “slip-ups” and “knowledge gaps.”
“Slip-ups” entail knowing the correct course of action but failing to execute it, while “knowledge gaps” involve unknowingly making mistakes. Their study, based on voluntary product recalls of over 100 publicly traded US firms in medical devices and pharmaceuticals from 2000-2016, reveals that firms learn more from design-related recalls.
The scholars find that firms with a focus on innovation, evident from accumulated patents and research and development investments, experience enhanced learning from design-related recalls. Such firms possess a robust knowledge infrastructure, enabling quicker recovery and improved competitiveness following failures.
Their research underscores the importance of fostering a culture of innovation within firms, despite the inherent risk of failure. They caution against shying away from innovation, as it is vital for long-term competitiveness and encourages deep-rooted problem-solving approaches.
While the study focuses on the pharmaceutical and medical device industries, its insights are applicable to other regulated sectors like automotive and toys. A culture of innovation encourages thorough exploration of root causes, contrasting with superficial solutions often associated with compliance-driven responses.
