Fast Reporting of Product Failure: is it Beneficial to Interorganisational Learning

Time, Date, Venue

18 March 2011, Friday 12:15 - 13:30 

University College London

1st floor Exec-ed room, Engineering Front Building
("Malet place" in Google maps)

Abstract

Organizations often improve their own products by learning from their competitor's product failures. A common belief is that interorganizational learning improves when competitors rapidly report failure. Organization learning literature suggests that fast reporting is beneficial because it is easier for firms to pay attention to fast reports, easier for firms to react and change product design if reports are quickly reported, and easier for firms to understand quickly reported product failure. However, many competitors delay reporting product failures. Counter intuitive to common belief, we argue that fast reporting of product failure is also costly to interorganizational learning because slow reporting allows time for understanding and attracts attention to important product failures. This paper shows the timing trade-off between the costs and benefits of reporting delays for interorganizational learning from medical device adverse events between 1998 to 2008. In general, we find that a firm's rate of adverse events decreases with faster competitor reporting. Yet, we find that the rate of adverse events increases with fast reporting of small experiences of competitor adverse events, but decreases with fast reporting of large experiences of competitor adverse events. We argue that the costs of fast reporting outweigh the benefits of fast reporting in smaller experiences and that sometimes reporting delays can enhance interorganizational learning to improve product safety in the medical device industry.
Key words: Interorganizational learning; Product failure; Reporting delays; Medical devices