Corporate lobbying and product recalls: an investigation in the U.S. medical device industry

Abstract

While corporate political activity is increasing, its effects on firms’ marketing-relevant outcomes have been largely overlooked in the literature. We propose that corporate lobbying will decrease a firm’s emphasis on product safety and, in turn, increase its product recalls. We further propose that the positive indirect effect of corporate lobbying on a firm’s product recalls via lower emphasis on product safety will be moderated by the firm’s (a) CEO’s functional background and (b) focus on radical (vs. incremental) innovation. We provide empirical support for the proposed model using data on 86 U.S. medical device firms from 2005–2018. The findings extend the literature on the effects of non-market forces on firms’ marketing-relevant outcomes. They also extend the literature on the antecedents of product recalls, which has, hitherto, overlooked the role of non-market forces. The findings on the moderating roles of the firm’s marketing CEO and focus on radical (vs. incremental) innovation generate actionable managerial implications.

When consumers lose power: An examination of the stakeholder dynamics in the pharmaceutical industry

“…In industries where regulators wield more influence than consumers, firms' countering strategies would likely focus on regulators and devote significant resources to influence the regulatory process (Krueger, 1974; Mahmood & Rufin, 2005; Oosterhuis‐Blok & Graafland, 2022; Peltzman, 1976; Singh & Grewal, 2022; Stigler, 1971), which explains the prevalence of pharmaceutical lobbying (c.f., Ahen, 2017; Barber IV & Diestre, 2019; Goldacre, 2014; Ozcan & Gurses, 2018). A recent study has found that lobbying regulators indeed reduce medical device companies' emphasis on product safety (Giannetti & Srinivasan, 2022). Moreover, the specific structure of the industry increases the chance of “regulatory capture,” i.e., when the regulatory agency is dominated by the special interest groups that the agency is supposed to regulate (Abraham, 2008; Dal Bó, 2006; Laffont & Tirole, 1991; Nocera, 2020).…”

Contemporary challenges of consumption: a Kafkaesque and critical marketing perspective

“…They argue that regulation has failed miserably in preventing discrimination against black consumers, implying that the market's hand is visible and white instead. In a more direct indictment, Giannetti and Srinivasan (2022) show that corporate lobbying reduces firms' attention to product safety, thereby endangering consumers and increasing product recalls. Similarly, Vadakkepatt et al (2022) argue that lobbying often furthers a firm's interest among regulators to the detriment of its market effectiveness.…”