Why does quality fraud occur? A case study of Japanese manufacturers

Abstract

In recent years, Japanese manufacturers' quality fraud has significantly impacted society, and restoring confidence in product quality has become a challenge. Quality fraud is the fabrication or falsification of inspection data related to product or service quality. This study aims to extend understanding of quality fraud mechanisms and suggest lessons for technological management. Among five Japanese manufacturers that developed seismic isolation rubber, we focus on two companies that entered the market simultaneously and operated in the same competitive environment, comparing a company that committed fraud with another that did not. Specifically, we analyze each company's technological influence through its behavior in product development, patent applications, and patent disputes. We show the relationship between technological capabilities and unethical behavior, as well as the nature of technology that influences them. We identify the following mechanism of quality fraud: a company that misassesses its technological capabilities engages in unethical behavior by overlooking technological issues. The inherent nature of technology (i.e., competitiveness, goal orientation, and uncertainty) contributes to this outcome. It is possible that a successful experience in a competitive environment leads to a focus on specific options to achieve goals, resulting in myopia and failure to objectively recognize self-assessment. Uncertainty makes it difficult to determine technical standards or evaluation methods based solely on rigorous theory, leading to technologically ambiguous decisions through trade-offs, which can blur ethical implications and lead to unethical behavior.