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Foreign entry, quality, and cultural distance: product-level evidence from US movie exports

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  • Isaac Holloway

Abstract

This paper investigates the effect of quality on foreign entry using data on international movie exports and direct and revealed measures of movie quality. Strict quality sorting is predicted by a model of firm heterogeneity. An alternative model is random entry, in which entry decisions are independent of the movie’s quality. I develop a discrete choice model that allows for both of these extremes as special cases, and use graphical techniques and simulations to compare their predictions to the data. I then use regression analysis to estimate the effect of quality on the propensity to enter foreign markets. A one-standard-deviation increase in quality increases the probability of entry by 25–50 %. Systematic differences in taste for different genre types are used to estimate a measure of cultural distance between countries. Movies in “culturally dependent” genres are less likely to enter foreign markets and their probability of entry is less sensitive to quality. The cultural distance measure enters a gravity equation of US bilateral trade significantly. Copyright Kiel Institute 2014

Suggested Citation

  • Isaac Holloway, 2014. "Foreign entry, quality, and cultural distance: product-level evidence from US movie exports," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 150(2), pages 371-392, May.
    • Handle: RePEc:spr:weltar:v:150:y:2014:i:2:p:371-392
    DOI: 10.1007/s10290-013-0180-3
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    References listed on IDEAS

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    1. Zhaobin Fan & Shujuan Huang & W. Robert J. Alexander, 2017. "Do National Cultural Traits Affect Comparative Advantage in Cultural Goods?," Sustainability, MDPI, vol. 9(7), pages 1-16, July.
    2. Sucharita Ghosh & Donald Lien & Steven Yamarik, 2017. "Does the Confucius Institute Network Impact Cultural Distance? A Panel Data Analysis of Cross-Border Flows in and out of China," Asian Economic Journal, East Asian Economic Association, vol. 31(3), pages 299-323, September.
    3. Jane, Wen-Jhan, 2021. "Cultural distance in international films: An empirical investigation of a sample selection model," Journal of Economics and Business, Elsevier, vol. 113(C).
    4. Sun, Jin & Shi, Zehui & Zhou, Yuan, 2024. "The impact of intellectual property articles on the quality of export products: Based on text analysis of China's trade agreements," International Review of Economics & Finance, Elsevier, vol. 92(C), pages 1230-1249.
    5. Jordi McKenzie, 2023. "The economics of movies (revisited): A survey of recent literature," Journal of Economic Surveys, Wiley Blackwell, vol. 37(2), pages 480-525, April.
    6. Yuki Takara, 2018. "Do cultural differences affect the trade of cultural goods? A study in trade of music," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 42(3), pages 393-417, August.
    7. Jing Yan & Feng Yu, 2021. "Can international coproduction promote the performance of cultural products in the global markets? Evidence from the Chinese movie industry," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 157(4), pages 777-798, November.
    8. Holloway, Isaac R., 2017. "Learning via sequential market entry: Evidence from international releases of U.S. movies," Journal of International Economics, Elsevier, vol. 104(C), pages 104-121.
    9. Feng Yu & Ning Li & Jing Yan & Yan Zhang, 2025. "The Spillover Effects of International Co‐production in the Chinese Film Industry," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 33(1), pages 101-131, January.
    10. Gianpiero Meloni & Dimitri Paolini & J. D. Tena, 2018. "American beauty: trade flows and export costs of US movies," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 42(4), pages 701-716, November.
    11. Benjamin Bridgman, 2017. "Market Entry Mode: Evidence From The Golden Age Of Hollywood," Economic Inquiry, Western Economic Association International, vol. 55(2), pages 778-793, April.

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    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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