The Effect of Branding and Firm Size on the Recurrence of Food Recall Events Associated with Pathogenic Contamination in the United States

Abstract

Food recalls caused by pathogens receive considerable public attention due to health risk and the potential loss to the companies involved. There are very few studies analyzing the relationship between food recalls and characteristics of the companies involved. Because of the significance of the problem and lack of available research, the association between food recalls caused by pathogen and characteristics of the companies involved is examined in this thesis.

To address the problem, data on food product recalls in the United States from January 2000 to October 2009 are used. Only the events caused by pathogens are analyzed in the thesis. The firms that have multiple recall incidents are the units of analysis. The study employs an econometric model with discrete choice modeling approaches: logit and probit.

There are two main hypotheses. Firstly, it is hypothesized that branding decreases the likelihood of the occurrence of the repeated recall event. Secondly, size of the firm is hypothesized to be associated with higher likelihood of recurrence. The major finding is that branding and firm size are associated with higher probability of the recurrence of food recall events associated with pathogenic contamination. A firm that produces branded products is around 15 percent more likely to have a recurrence of food recall events than a firm producing unbranded product. This finding points out the interesting and unexpected issue that branding is not associated with improved performance in food safety. Additionally, an increase in firm size has a minute but significant association with rising likelihood to have a recurrence of a food recall event. This study is the first concerning the firm level factors that can influence risk of the recurrence of food recall incidents involving pathogens. Thus, its results are distinctive and can benefit both government and private sectors with respect to food safety policy or food safety standards.