Does Organizational Forgetting Affect Vendor Quality Performance? An Empirical Investigation

While previous studies have examined how the development of organizational knowledge (organizational learning) affects quality performance, we investigate how the depreciation of organizational knowledge (organizational forgetting) affects vendor quality performance. We use data on 2,732 quality improvement initiatives undertaken by a car manufacturer at 295 vendors. We find that organizational forgetting affects quality gains obtained from learning-by-doing (autonomous learning) and from undertaking quality improvement initiatives (induced learning); over 16% of quality gains from autonomous learning and over 13% of the quality gains from induced learning depreciate every year. Depreciation of quality gains mainly occurs through the degradation of assimilated organizational quality knowledge and the impact of organizational forgetting on quality is lower than what has been observed in the literature for costs and productivity. Further, the impact of organizational forgetting i) differs across the types of quality improvement efforts: quality gains from process improvement initiatives depreciate while those from quality assurance initiatives do not, and ii) depends on where quality knowledge gets embedded within vendor organizations: depreciation of quality gains is lower for knowledge embedded in technology than for knowledge embedded in organizational routines or organizational members. We contribute by providing insights on how organizational forgetting affects quality performance.