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Edited by Shankar Ganesan
12 Product-harm crisis management and firm value Yong Liu, Yubo Chen, Shankar Ganesan and Ronald Hess INTRODUCTION Product-harm crisis occurs when a product fails to meet a mandatory safety standard, contains a defect that could cause substantial harm to consumers, creates an unreasonable risk of serious injury or death, or fails to comply with a voluntary standard adopted by the specific industry (Mullan, 2004). As one of the most damaging incidents that the firms have to cope with, product-harm crises span a wide variety of product categories and, once occurred, usually cause a significant amount of media attention, policy scrutiny, and public outcry. Many of the crises have led to well-publicized product recalls. For example, Bridgestone Corporation of Japan recalled 6.5 million Firestone brand tires on 7 August, 2000, which were reportedly exhibiting tendencies to come apart at high speed, causing vehicles to roll over (Govindaraj et al., 2004). In 2007, Mattel issued more than ten toy recalls for problems such as lead paint hazard and the magnets being too small and likely to detach from the toy. From the end of 2009 to early 2010, Toyota, a company that has been long acclaimed for product quality, was involved in three major recalls involving floor mats and accelerator pedals. Unfortunately, some of the recalls were issued after serious injuries and/or death to consumers. As an example, Playskool recalled about 255 000 of its Tool Bench toys only after receiving the death reports of two toddlers (CPSC, 2006). The consequences of...
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