Does New Technology Impact Product Recalls? An Empirical Examination in the Automotive Indutry

Abstract

As technology increases in prevalence in people’s daily lives, the number of advanced applications are increasing in our vehicles. Technology has inherent risks and failures that are deemed unavoidable. Luxury vehicles typically incorporate more technology than non-luxury vehicles, but consumers believe that luxury brands are of higher quality than nonluxury brands. There appears to be a fundamental disconnect between the perceived quality of luxury vehicles and the failures associated with technologies incorporated in them. This study seeks to examine the effect of technology penetration on vehicle recalls and assess whether luxury status moderates this effect. To address the question, I use secondary data from Ward’s Automotive on US-produced sedans from 2003-2011 and run panel regressions to test the hypotheses. My results show that technology options appear to have no impact on vehicle recalls, and that luxury status appears to moderate the relationship between recalls and technology options.