The externalities of managerial myopia: Aspiration performance gap and film quality in China

The shortcomings of managerial myopia in firm development have been widely discussed, yet little attention has been paid to its spillover effects, particularly in the cultural domain. This paper investigates the external effects of managerial myopia, driven by aspiration performance gap, on public aesthetic appreciation within the context of the Chinese film market. Using a sample of domestic films released in China between 2011 and 2019, we integrate film data with information from publicly listed film production companies. Our findings reveal that aspiration performance gap negatively affects the quality of films produced. We show that the gap primarily induces managerial myopia, which is reflected in reduced R&D investment and a greater reliance on established intellectual properties (IPs), well-known directors, and star actors. The adverse effect of aspiration performance gap on film quality is more pronounced among companies whose core business is film production and among non-state-owned enterprises. Furthermore, we find that the positive relationship between film quality and box office performance is weakened when firms face high aspiration performance gap. These findings contribute to the managerial myopia literature from a cultural perspective.