The Organizational Implications of Creativity: The US Film Industry in Mid-XXth Century
We develop a basic framework to understand the organization of highly creative activities. Management faces a fundamental tradeoff in organizing such activities. On the one hand, since creativity cannot be achieved by command and control or by monetary incentives, internal/contractual production of creative products is plagued by hazards arising from their fundamental characteristics: extremely high input, output and market uncertainty, and the inherent informational advantages of creative talent. Procuring highly creative products in the market place, though, exposes the distributor to a fundamental risk: independently produced creative goods are generic distribution-wise. Thus, in procuring creative products in the marketplace, distributors face the unavoidable winner's curse risk. Since this risk is, to a large extent, independent of the creative nature of the product, the higher the creative content, the higher the relative hazards associated with internal or contractual production. Thus, internal/contractual production of creative goods will tend to be less prevalent the higher the creative content associated with its production. We apply this insight to the evolution of the U.S. film industry in the mid-XXth century. We exploit two simultaneous natural experiments -- the diffusion of TV and the Paramount antitrust decision forcing the separation of exhibitors from distributors and prohibiting the use of block-booking. Both events increased the demand for creative content in movies. We develop empirical implications which we test by analyzing in detail the decision by distributors to produce films internally or to procure then in the market place, in the face of an increase in the demand for creative content.
|Date of creation:||Jul 2007|
|Date of revision:|
|Publication status:||published as “The Organizational Implications of Creativity: The US Film Industry in Mid-XXth Century,” with Ricard Gil, 50/1 California Management Review, 2007: 243-260.|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kagel, John H & Levin, Dan, 1991.
"The Winner's Curse and Public Information in Common Value Auctions: Reply,"
American Economic Review,
American Economic Association, vol. 81(1), pages 362-69, March.
- John H. Kagel & Colin M. Campbell & Dan Levin, 1999. "The Winner's Curse and Public Information in Common Value Auctions: Reply," American Economic Review, American Economic Association, vol. 89(1), pages 325-334, March.
- Darlene C. Chisholm, 1993. "Asset Specificity and Long-Term Contracts: The Case of the Motion-Pictures Industry," Eastern Economic Journal, Eastern Economic Association, vol. 19(2), pages 143-155, Spring.
- De Vany, A. & Walls, W.D., 1999. ""Uncertainty in the Movies: Does Star Power Reduce the Terror of the Box Office?"," Papers 98-99-10, California Irvine - School of Social Sciences.
- Spiller, Pablo T & Zelner, Bennet A, 1997. "Product Complementarities, Capabilities and Governance: A Dynamic Transaction Cost Perspective," Industrial and Corporate Change, Oxford University Press, vol. 6(3), pages 561-94, September.
- Kenney, Roy W & Klein, Benjamin, 1983. "The Economics of Block Booking," Journal of Law and Economics, University of Chicago Press, vol. 26(3), pages 497-540, October.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:13253. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.