Creators as Firms: The Organization of Creative Production

Why do creators sometimes act as firms, integrating multiple stages of production, while in other settings they rely on markets or hierarchical employment? We develop an analytical framework in which creators choose how to organize the realization of their work, balancing coordination costs against the ability to appropriate returns when contracts are incomplete. We apply the framework to Western classical music, where some composers worked under patrons, others contracted with publishers and performers, and still others organized and financed the realization of their works themselves. Because composition and realization are technologically distinct yet jointly necessary for value creation, composers faced a transparent version of the make-or-buy problem central to theories of the firm. The framework explains the evolution of musical organization from Bach and Haydn, whose salaried posts under patronage made integration unnecessary, to Mozart and Beethoven, who organized performances and dissemination when copyright was weak, to Brahms and Tchaikovsky, who relied on specialized publishers and orchestras once professional intermediation matured. Similar trade-offs continue to shape how creators interact with intermediaries in contemporary music markets.