The role of experience in a governmental regulatory investigation in the US automobile industry: Organizational learning versus reputational dynamics

Does a government agency's regulatory behaviour become more efficient as it gains experience? Building on organizational learning and reputation-based perspectives, this study examines (a) how governmental regulatory investigation into the firms' product quality in a given industry, an infrequently studied form of government regulations, is invoked; and more intriguingly, (b) whether these processes are reinforced or weakened as the government agency accumulates experience in investigation programmes. These questions are answered through an analysis of the National Highway Traffic Safety Administration's defects investigation programmes over motor vehicle engine products in the US automobile industry from 1977 to 2003. The results show that the agency appears to initially focus on increasing technical efficiency, but shifts its attention to other aspects of performance, such as fairness, as it repeats investigation programmes, seemingly influenced by the reputational dynamics towards a generalized reputation. The study ends with a discussion of the theoretical and practical implications of our findings.