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Summary Cultural Industries: Item (s) - Summary scientific
articles Cultural Industries
Cultural Industries (Universiteit van Amsterdam)
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Throsby (2008): Modeling the cultural industries
Alternative definitions of the cultural industries lead to the construction of different models of the cultural
production sector of the economy. There is continuing confusion and disagreement on the distinction between
cultural and creative industries and also on the differences between the discourses in which the term cultural
industries is used. Different emphases in defining the cultural industries lead to the construction of different models
of the cultural production sector of the economy and hence to a different array of specific industries which are
contained within the sector.
UNESCO: Cultural industries combine the creation, production and commercialisation of contents which are
intangible and cultural in nature. These contents are typically protected by copyright and they can take the form of
goods or services. Cultural industries are central in promoting and maintaining cultural diversity and in ensuring
democratic access to culture. Or: Cultural industries are a set of economic activities that combine the functions of
conception, creation and production of culture with more industrial functions in the large-scale manufacture and
commercialisation of cultural products.
In the economic theory, an industry can be defined according to several criteria, the most relevant being based on a
product group. Artistic creativity involves imagination and a capacity to generate original ideas and novel ways of
interpreting the world, expressed in text, sound and image. Scientific creativity relates to experimentation and
problem solving in other spheres of human activity.
Cultural goods and services share the following characteristics: the require some input of human creativity, they are
vehicles for symbolic messages (serve a larger goal than just utilitarian) and they contain some intellectual property
that is attributable to the individual. They yield cultural value in addition to the commercial value the may possess.
Cultural goods and services can be seen as a subset of a wider category of goods that can be called creative goods
and services. Defining the creative and cultural industries based on the product-group concept of industrial
organisation theory would result in a wide-ranging group of creative industries, of which the cultural industries
would be identified as a sub-set. Six models are drawn from contemporary discussion of cultural industries:
1. UK-DCMS Model (UK, 1990s). Creative industries are defined as those requiring creativity, skill and talent,
with potential for wealth and job creation through exploitation of their intellectual property.
2. Symbolic texts model. Typical critical-cultural-studies tradition that differentiates between high an popular
culture on the grounds of their different power dynamics in regard to social class, gender and race/ethnicity.
The processes by which a society’s culture is formed and transmitted are portrayed in this model via the
industrial production, dissemination and consumption of symbolic texts or messages.
3. Concentric circles models: based on the proposition that it is the cultural value of cultural goods that gives
these industries their most distinguishing characteristic. The model asserts that creative ideas originate in
the core creative arts in the form of sound, text and image, and that these ideas diffuse outwards through
layers of concentric circles. In this, the proportion of cultural to commercial content declines as one moves
further outwards from the centre.
4. WIPO copyright model: based on industries involved directly or indirectly in the creation, manufacture,
production, broadcast and distribution of copyrighted works. Focus is on intellectual property as the
embodiment of the creativity. A distinction is made between industries that produce intellectual property
and those who convey them only to consumers.
5. Unesco UIS Model: process of development. Identifies five core cultural domains: cultural and natural
heritage, performance and celebration, visual arts, crafts and design, books and press and audio-visual and
digital media.
6. Americans for the Arts Model: based on identifying businesses involved with the production and
distribution of the arts (arts centric businesses).
Each of the six models gives rise to a different set of industries that go to make up the cultural production sector of
the economy. When trying to identify a common core in these models, there is a reasonable degree of commonality
when comparing symbolic texts, concentric circles and the WIPO models. Because of different combinations of
industries included in each model, estimates of the size and economic contribution of the cultural industry sector to
the national economy will differ significantly between the models. The immediate implications of the assessment of
the economic importance of the cultural sector and of its role in economic policy will vary substantially according to
which model in use. A balanced policy mix might be best.
Industry models are constructed from different sets of assumptions. A number of methodological approaches may
be adopted in undertaking economic analysis of cultural industries:
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1. Industrial organization theory: basic from is to simply measure the standard economic variables for which
data are routinely collected for all industries. This enables the usual structure/conduct/performance
analyses to be carried out. Structure: the organisational characteristics of markets (degree of seller/buyer
concentration, product differentiation, entry/exit barriers), conduct: the ways in which firms in the industry
behave in setting prices and output levels. Performance: how efficiently firms adjust to effective demands
for their output in terms of costs, prices and product quality.
2. Value chain analysis: creative ideas are combined with other inputs to produce a creative good. The
underlying framework for the model defines a seven-phase supply chain: creation – production –
dissemination – exhibition – consumption – archiving – education.
3. Inter-industry analysis: capacity to depict the ways in which output is produced in the economy. Often the
arts are categorized in a category too broad to enable meaningful analysis.
4. Locational analysis: there is a spatial dimension to the delineation of the cultural industries, noticeable in
which firms in these industries tend to form clusters in urban and regional settings, leading towards colocation of firms.
5. Contract theory and property rights: complex creative industries depend on contractual agreements. These
creative activities are characterized by several fundamental properties, namely: uncertainty of demand (the
outcome cannot be predicted), arts-for-art’s-sake (irrational labour market theory decisions), infinite variety
and durability. Contractual arrangements for creative products depend importantly on being able to identify
the intellectual property that is both the source of reward to the creator and the incentive to continued
production.
6. Trade and development: cultural goods are argued to be more than commercial merchandise, they are also
vehicles for the transmission of cultural value. Threats to local cultural expression are experienced in the
developing world. Suggestions have been made to emphasize on linking local economic and cultural
development through small-scale cultural production.
It can be argued that the status of cultural policy has been changing as a result of the emergence of the cultural
industries as an object of interest to economic policy-makers. Developments that contributed to this trend are
globalisation and multimedia, which lead to an integration of the means by which cultural content is produced,
distributed and consumed. Governments are also searching for ways to surf the wave of new information economy.
Arts can be seen as a part of a wider and more dynamic sphere of economic activity. In urban and regional policy, the
marriage of cultural policy and cultural industries is finally consummated. A focus on cultural industries as an
essential component of cultural policy is an opportunity to legitimise cultural policy in the eyes of economic-policy
makers. The task of cultural policy must be to find that elusive balance between economic and cultural value
creation in the production and use of art and culture in contemporary society.
De Marchi & van Miegroet (1994): Art, Value and Market Practices in the Netherlands in the 19th Century
The present study tries to reconnect ideas. An obvious starting point is how people in the 17 th century explained
their behaviour. There is no unambiguous perception of the market that was shared by all painters. Paintings
themselves were approached differently in our period: there are connoisseurs (kenners), lovers, serious collectors
and dealers. Economists think of economic agents as striving to pursue their interests. Income is a constraint for
consumers, resources are a constraint for producers. The behaviours involve efforts to alter the constraints to gain
temporarily competitive advantage. Ultimately, the market will be in a passive and anonymous equilibrium. Markets
are also forums for experimental interactive behaviour among many individuals and groups. Competitive markets
are those in which competitors repeatedly alter the basis on which they compete.
In 1608: public sales by foreigners of artists other than Amsterdam born was forbidden, a few year later all import
via intermediation of Amsterdam citizens was also forbidden. There are distinct markets for quality paintings and
inferior paintings. The painting guilds wanted to preserve quality for their craft and keep the market separate.
Unrestricted sales in large numbers of ordinary paintings might be sold at low prices. Copying on a large scale would
devalue the original.
Mandeville (Rotterdam 1670, author and amateur collector) concluded that market value was a relative notion and
that is must be based on usefulness and scarcity. Scarcity combined the quantity available with the intensity of
demand, including need and desire as well as means. Mandeville lists four factors on which the value set on
paintings will depend: name of the master, time of his age, scarcity of work and quality. Scarcity of deceased
masters’ paintings was not only affected by the pricing of works, but also led to repetitive copying. Even Rubens was
engaged in producing vast amounts of painted and printed copies of his own paintings. The reputation of the master
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also influenced the price by strengthening demand for paintings. Because of the physical limit of paintings, there
were single-handed creations and multi-handed ones. The practice of retouching paintings made by assistants and
selling these as original may have been cost-effective and name-promoting.
“Time of his age” refers to the stage in the artists career and also includes fashion. The quality implies that paintings
from famous collections enjoy increased demand by acquiring a reputation of their own . Gallery paintings invariably
reflect and propagate particular interest in what was fashionably collectible and purposely encode the name of the
collector. Established painters of some reputation will feel more at ease in treating the market as an experimental
form. Guilds had to defend both quality painting and the income of members against market interlopers peddling
cheap and inferior works. The Haarlem Guild sought to exclude non-members from selling their works in Haarlem.
Protester argued that without free sales, liefhebbers would not be created and the market based on existing demand
would be too limited to support new artists. The proposed prohibition, by limiting the availability of paintings, might
well cause buyers to purchase ordinary paintings. To avoid deals, members of the public bought ordinary paintings at
the annual free markets. The magistrates did not accept the arguments in favour of free sales and restricted public
sales in 1644. 30 years later the agreed to two extra yearly public sales and sales of paintings after an owner’s death
was allowed.
It can be suggested that successful artists who, in addition to having talent, had a sophisticated, positive
understanding of the market as a forum for experimentation, rather than seeing it as a threatening place, and who
acted creatively and aggressively in their own interests. The value of paintings is relative to the quality of others in
the same category. Van Hoogstraten’s hierarchy: history paintings, cabinet pieces, and flower paintings and still lifes.
Where merchant thinking goes beyond qualitative rankings is in attaching a set of prices to the ranks and the routine
of reducing one item or quality to its equivalents. The first step in passing from the mental routine of the art theorist
to the merchant is accepting that reduction is unavoidable. The pure trader’s mentality is different from a kenner or
liefhebber. Art is always a product of unnatural, acquired sense of seeing since it involves using perspective to
project space and distance on a flat surface.
Baumol & Baumol (1994): The Economics of Musical Composition in Mozart’s Vienna
The article provides historical evidence suggesting that a substantial element in the explanation of the profusion of
talented composers in the 18th century empire was the fragmentation of the state into many near-independent
states. The resulting profusion of jobs attracted people into the profession. Economic and political conditions can’t
create talent, but provide opportunities. The decade encompassed the end of the American revolution, the adoption
of the US constitution and the first years of the French revolution. Enlightened rules sought to preserve their
vestiges of absolute power by using the bourgeoisie, who used this opportunity to acquire for themselves benefits
suited to the wealth they were accumulating. Mozart’s emperor Joseph II was a dedicated amateur performer and
tries to introduce liberalism. Mozart’s decade is a period of transition. It was part of the changeover from the
universal system of private patronage to the beginnings of a market mechanism under which the product of the
composer and the performer became a commodity that could be bought and sold.
Profound changes helped to make such musical entrepreneurship feasible. One is the replacement of the Kapelle
arrangement (musical demands were supplied by the Kapellmeister). The Kapelle system was largely replaced when
it became fashionable to maintain Harmonien mastered by hired musicians and the introduction of the Opera.
Composers and musicians declared themselves for hire. There was a rise in public concerts featuring own works and
charging admission. Musicians also gave music lessons and started the publication of their own works.
The 18th century also brought invention of which musical instrument also benefited. The organ, the clavichord and
the harpsichord were the only keyboard instruments available until the emergence of the pianoforte. The piano
helped expanding the market for the composer’s efforts in two ways: it facilitated concert performance and entered
increasingly the number of private, thus the demand for new music also rose. The demand for musician’s service was
also reinforced by low wages. Thirdly, the advent of the gallant style of musical writing, with its expressiveness and
avoidance of contrapuntal complexities, made attendance at operas and concerts more popular and facilitated
amateur performance and the demand by amateurs for new compositions. Musical activities were also sought as a
matter of honour and prestige.
During Mozart’s time, Vienna was the largest and wealthiest in German lands. It attracted both nobility and
members of the rising bourgeoisie, involving many business opportunities for composers and tradesman. However, it
lacked an adequate concert hall and had only the Burgtheather and the Karntnerthortheater. Musical salons were
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the basis of musical life in Vienna. Mozart’s income put him well above the poverty level, gaining income from
private salons, subscriptions of series of concerts, private music lessons and publication of sheet music. It would
appear that is was not Vienna, but its hinterlands to which one should assign the credit for the emergence of so
great a number of composers. It is difficult to believe that the political fragmentation of the country and the
associated proliferation of job opportunities for musicians had little or no role in attracting into the profession many
person who otherwise might have gone elsewhere.
Peterson & Anand (2004): The Production of Culture Perspective
The production of culture perspective focuses on how the symbolic elements of culture are shaped by the systems
within which they are created, distributed, evaluated, taught and preserved. The utility of the production
perspective seems clear, but in the 1970s, when it emerged as a self-conscious perspective, it challenged the thendominant idea that culture and social structure mirror each other. Then, a symbiotic relationship between singular
functioning social system and its coherent overarching culture was embraced by a wide range of theorists of
contemporary society. Breaking from these mirror views, the production perspective views both culture and social
structure as elements in an ever-changing patchwork. The early work that embodies the production process is by
Harrison & White, they found that theories associating changes in art with revolutionary changes in society or with
the emergence of persons of genius could not account for the emergence of impressionist art in the 19 th century
France. Together, these studies illustrate the emerging production of culture perspective insofar as they 1) focus on
the expressive aspects of culture rather than values, 2) explore the processes of symbol production, 3) use the tools
of analysis developed in the study of organizations, occupations, networks and communities and 4) make possible
comparisons across the diverse sites of culture creation. In common they show that culture is not so much society
wide and virtually unchanging as it is situational and capable of rapid change.
Cultural products change slowly over time, but occasionally such drift gives way to rapid change. there are six facet
of the production nexus and changes in each faced seemed mundane, but working together they made possible the
rapid change.
1. Technology provides the tools with which people and institutions augment their abilities to communicate,
and changes in the communication technology profoundly destabilize and create new opportunities in art
and culture. Examples are the introduction of the pianoforte and in current times the digital media.
2. Law and regulation create the ground rules that shape how creative fields develop. Changes in copyright law
can influence kinds of novels that are published. Regulation and censorship of the culture industries have
shaped what could be produced.
3. Industry structure. Industrial fields tend to coalesce around new technologies, evolving legal arrangement,
and newly conceptualized markets, a process identified as “institutionalization”. Creative industries tend to
be structured in three ways:
a. Many small competing firms producing a diversity of products.
b. A few vertically integrated oligarchal firms that mass produce a few standardized products.
c. More open system of oligarchy composed of niche-market-targeted divisions plus many small
specialty service and market development firms where the former produce the most lucrative
products and the latter the most innovative.
4. Organizational structure. Three forms of organizations are characteristics of the cultural industry:
a. The bureaucratic form with a clear cut division of labour and a many-layered authority system
committed to organizational continuity.
b. The entrepreneurial form having neither a division of labour, nor a layered hierarchy committed to
short-term success.
c. A variegated form of large firm that tries to take advantage of the potential flexibility of the
bureaucratic form without giving up central control by acquiring creative services through shortterm contracts.
Large firms are better at exploiting commercial potential, while small firms are better in exploring new
trends. The logic of synergy and branding strategies led to the rise of a few dominant conglomerates. To
reap the benefits of simple structures, they tend to reorganize in multiple smaller units.
5. Occupational careers. Culture is produced through sustained collective activity, so each cultural field
develops a career system and the networks of working relationships developed by creative workers make for
what some have called “cultures of production”. The distribution of creative occupations in a field is
determined largely by its structuration. There are two general ways in which careers are shaped. In
normatively controlled fields, regulative societal forces create an institutional pattern of predictable careers
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from the top down. In competitive environments, careers tend to be chaotic and foster culture innovation
and enact bottom up.
6. Markets are constructed by producers to render the welter of consumer tastes comprehensible. Markets
result from the actions of cliques of producers who interact with and observe each other’s attempts to
satisfy consumer tastes.
Two regularities can be found: the facets appear to be coupled so that a major change in one can result in the
destabilization of the entire nexus. And two, cultural fields trend towards three states: oligopolistic and stable,
turbulent and competitive and innovative, and competitiveness managed by oligopolistic control. .
The production perspective or the “culture industries model” include studies of how theories of management
change over time, the institutional processes that guide decision making, how networks work and the dialectic
between specialist and generalist organizations in making markets. Innovations that appear contrary to existing
practice require extensive symbol processing to find acceptance. In the early stage of an innovative management
practice, demonstrations of its efficacy are important to make it lead to final adoption. Rationalist theories tend to
gain currency at the end of an economic contraction, whereas humanist theories emerge at the beginning of an
expansion cycle. Institutional theory has developed a rich body of studies that inform how culture is produced. There
are two key themes. When there is high social uncertainty, producers of cultural products use mimicry and links to
legitimate actors to get their work accepted. And second, overarching logics within an institutional sphere govern
the type of organizational decision processes in play at any given time.
The production of culture can occur within tightly knit networks. Three implications of network-based systems of
organizations are important. First, production networks are restrictive by nature. Second, sociological editing
processes play out in the form of networks of discovery and of routinization. In empty fields, peripheral actors who
obtain a connection to a central player help initiate a new genre, but once the genre is established, peripheral actors
are cast out in favour of members of the inner core. Finally, although networks shape the creation of new cultural
entities, innovative cultural products in turn reshape production networks.
A diachronic dialectic: interaction over time between large and smaller firms, shaping the industry. Numerous
specialist firms create innovations and in the process, market niches were created, refined and reconceptualised.
Resource-partitioning theory suggest that the niches supporting the generalist and specialist organizations are
clearly distinct. It is the competition to capture the broadest range consumers that opens specific niches to specialist
organizations. The dialectic has the following changes:
1. The multinational producers of popular cultural goods attempt to structure consumer desires.
2. Individuals pick and choose among the goods to create an expression of themselves.
3. “Different” people seek out like-minded rebels and consolidate a distinctive set of cultural choices.
4. Authorities may ignore the resistant style, but this changes when they defy the norms of behaviour.
5. The reaction of the authorities attracts large numbers of diffusely disaffected youths who emulate the
superficial style of resistance.
6. The final stage is the first of the next cycle, the industry co-opts and denudes the resistance of any symbolic
force, converting revolt into mere style.
Leblebici, Salancik, Copay & King (1991): Institutional Change and the transformation of Inter-Organizational Fields
The research reported here explores how institutional practices change over time in an inter-organizational field, in
the historical context of the U.S. radio broadcasting industry. It identifies three endogenous mechanisms of change:
analogies that are used to make sense of and manage new phenomena, private agreements between parties and
conventions, the practices adopted by some constituents to solve coordination problems. The use of each
mechanism is associated with the nature of the goods transacted within a field. Conventions were introduced by
fringe players to deal with shifting coordination problems and competitive pressures.
The inter-organizational field context is the appropriate level of analysis for understanding the interplay between a
field’s structural evolution and change in its institutional practices. The US radio broadcasting industry could be
studied from its inception and is a combination of competitive private enterprises and government franchise.
Broadcasting evolved uniquely in the US into a privately owned and operated commercial enterprise. The most
significant problem of broadcasting are as follows:
1. Radio signals that carry programmes are public goods. They are prone to free-rider problems. The difficulty
for organizing transactions is that producers of broadcasts may be unable to realize value for their services.
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2. Problems regarding the radio spectrum, or the frequency range of electromagnetic waves that carry radio
signals. The spectrum is a common-property good and if more than one broadcasts on the same frequency,
there is interference. The transaction problem is that those who are capable of transmitting can collectively
overuse a frequency (“problem of the commons”).
3. Problems regarding the apparatus used for transmitting and receiving signals. Because radio components are
technically interdependent, value from any piece of transmission depends on its coherence and integration
with others. The diverse individuals and companies with exclusive rights to different components necessarily
must cooperate to achieve this value.
An inter-organizational field includes actors and their actions. The actors are organizations or agents that interact
directly though exchange or indirectly through competition. Technology refers to those tools, knowledge and
methods that endow capabilities to agents in a field for establishing and maintain their transactions. Property rights
shape social and economic practices by limiting the use actors may make of their capabilities. Practices are agent’s
specific actions within an organizational field. Institutional practices are rationalized standard practices, they are the
commonly selected alternatives. In general, agents invent or modify practices to solve the problems that arise as
they attempt to realize value from their transactions with each other.
As a common-property good, radio frequencies have no value if they are used simultaneously by more than one
broadcaster for carrying signals to the same receivers. The 1920s thought of the questions to whom did airwaves
belong and who should have access. The first analogy was introduced by the US navy, who urged the federal
government to take control. Another analogy used to define the nature of broadcasting as the “magazine of the air”.
A third analogy was the transportation model, it portrayed the radio spectrum as a public conveyance. This view
prevailed and was adopted with the Radio Act of 1924. The analogy helped coordinate the spectrum, but private
agreements were more important for the transaction problems. Broadcasting apparatus was associated with
definable parties through existing institutions that governed property rights in patent laws. Amateur radio operators
were a problem because they pirated innovations and build their own equipment. In 1921 these problems were
addressed by the pooling agreement by major patent holders. They created the Radio Corporation of America and
pooled all the patents together.
Conventions are defined as the recurrent patterns of interactions in an inter-organizational field that are not directly
supported by coercive of normative processes. They originate as practical solutions to coordination problems at the
micro level and gain their force through the expectations participants have for each other’s actions. Conventions
that solve coordination problems thus function as methods of social choice.
1920-1934: Age of manufacturers, from public good to private exchange.
The evolution of broadcasting could not have been accomplished without establishing a successful economic cycle of
transactions between listeners and broadcasters. The idea that radio was an independent, mass-broadcasting media
evolved from the amateur activities in the field. Radio stations were operated either by the radio manufacturers or
retailers to stimulate the sales of receivers or by newspapers and department stores to spotlight their services. To
assure listeners that a radio set was worthwhile owning, broadcasting had to be continuous and regular. Most
dominant players preferred public financing. It promised more stability and least administrative effort. The
prevailing idea was introduced by sellers of questionable commodities who could no longer persuade print media to
advertise for them. They bought radio stations to offer services and showed that radio personality and wavelength
was a winning combination. In 1926 the RCA formed the National Broadcasting Corporation (NBC) as the first
network of broadcasting. The original patent pooling agreement collapsed and three specialized groups emerged:
telephone, manufacturing and broadcasting. Advertisers now supported broadcasting by sponsoring individual
programs. Sponsorship created two new and important players in the industry: advertisers and their agencies.
Sponsors paid for the production of programs and their agencies selected them. The convention that evolved was
the broadcast network: the idea of connecting two or more stations for simultaneous broadcast of programs.
Networks permitted programs to reach large audiences cheaply. Transcribed programs represented a cheaper and
flexible way than live programs. Record producers however, believed that records played on radio would hurt sales.
1935-1950: Age of radio networks, from exchange of programs to exchange of time.
The golden age of radio was dominated by the expansion and influence of national networks. The network was at
first just a transmission hook up, with programs supplied by sponsors. Sustaining program initially were just fillers
aired between commercial programs to keep an audience turned in. Assured of an audience, the networks started to
experiment with producing, scheduling and selling their own programs. They discovered that the sustaining
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programs could be used to experiment with new material. The networks became major producers and replaced
advertising agencies as major players. Independent stations evolved the practice of spot advertising. Spots were
advertising announcement inserted between programs. They offered an alternative to advertisers who could not
afford to sponsor an entire program. Recorded programs and spot advertising became more common because of
their popularity. By 1950, the networks were losing dominance in program production. Independents were forced to
use cheaper music and shows and networks finally broke the old taboo and imitated the independent’s use of
recorded program material.
1950-1965: Age of independent radio stations: from exchange of time to exchange of exposure.
The final period marks the end of the network era. Television became a mass medium and many networks shifted
their attention to the new medium. But the turnover also opened doors on opportunities for a new generation of
broadcasters. Small towns could now have their own radio station and localization became a trend. Innovative and
successful experiments happened at small, independent stations. Local announcers (DJs) were emerging and
localization came with specialization in different genres. Another discovery was that the playing of record music on
radio actually increased record sales. Local station won back both regional and national advertisers.
Storper (1994): The transition to flexible specialisation in the US Film Industry
This article is concerned with the process of transition from mass production methods to a post-Fordist form of
production organisation. Flexibly specialised industries have three defining characteristics:
1. They produce a wide range of products for highly differentiated markets and they constantly alter these
goods in response to changing tastes and in order to expand their markets.
2. Individual firms use flexible and widely applicable technologies: general-purpose machines rather than large,
dedicated machine systems.
3. Flexibly specialised industries balance competition and cooperation among firms. Competition encourages
perpetual innovation, while cooperation is accomplished through learned social practices.
The theory of industrial divides proposes shifts from one hegemonic technological-organisational model of
production to another. The first modern industrial divide was initiated in the 19th century when the USA allowed
capitalists to enlarge and stabilise industrial markets. The American circumstances created an environment
favourable to the standardisation of products, the control of markets and the rationalisation and mechanisation of
production. A second industrial divide was expected because the institutions that held together the Fordist system
where broken down by the economic shocks in the late 1960s. initial technological choices are not necessarily
dictated by relative efficiencies, but once adopted they tend to persist until a major shock makes them inviable. The
first industrial divide was a contingent outcome of particular historical circumstances, the second due to changing
circumstances.
The history of the film industry began as a craft, but with the creation of a large, assured market, the product was
standardised and the production process rationalised. Movies came to be an entertainment product rather than
strictly an art form. Films were sold by the food rather than on the basis of content. Two figures were involved in
building the film industry. Zukor integrated production and distribution through the use of contracted exhibitors
nationwide. Paralleling Zukor, Ince set up the studio to fabricate and assemble batches of a semi-standardised
product. The vehicle for this was the continuity script, which fragmented the story of a motion picture and
reordered it so that each bloc of scene could be filmed at the same time or that a set of actors could film all their
scenes continuously. The production process established in this period consisted of pre-production (selection,
preparation of script), production and post-producing (processing, editing). Each of the three was organised
according to mass production principles. A product would move from department to department in assembly line
fashion. As a result, the organisation became similar to that true mass production, where routinization and task
fragmentation were the guiding principles. The studio system was a concentrated oligopoly: a small number of
producers were responsible for the majority of the industry’s output and they simultaneously controlled distribution
and exhibition.
In the late 1940s, the market for films began to shrink and became unstable. There were two main shocks: the first
was the anti-trust action by the US Supreme Court, forcing the studios to divest their cinema chains. The assured
market was now gone, and the returns declined and began to fluctuate. The second shock was the advent of
television, which altered the market structure. The success of the television was closely tied to the demographic
changes of post-war family suburbanisation. The studios reported to the crisis with two strategies: reducing the
number of films produced and vertical disintegration as a way to cut overheads and increase flexibility. The most
standardised categories of film-making were eliminated. Cinerama, Technicolor and 3d were aimed at constituting
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the films as an event rather than an everyday experience. The strategy of product differentiation increased the need
for specialised inputs and so the studios began to turn to independent producers. This meant the end of the “term
contract” under which writers, actors and skilled production technicians worked exclusively for one studio full-time
for a guaranteed period. This was also the end of the “star system”, where studios could create stars they had under
long term contracts and reaped the benefits of their success. Now stars became increasingly powerful and
demanded higher salaries.
The 1960s opened with studios trying to re-stabilise the market. The major studios bought cinema chains in Europe
and they tried to dominate television markets with made-for-television films (MFTs). The television networks began
to contract smaller studios in order to force the major studios to competitive bidding. The attempt to reassert mass
markets was a failure. Increased filming on location also promoted the reduction in physical scale of the major
studios. Location shooting began as a direct consequence of vertical disintegration. By the 1970s, most studios had
ended their roles as physical movie factories. The studios could no longer compete against the independent
production companies and specialised contractors they had helped to create, in the very market sectors they had
hoped to retain. The studios developed a system of working jointly with independent production companies in order
to share risk. Both the studios and the independent production companies turned to specialised, independent
supplier firms and subcontractors to carry out the whole range of pre-production functions. The process of
reorganisation doesn’t end with the vertical disintegration of film production and creation of a flexibly specialised
production system. Both the major studios and specialised firms have spread the risk by diversifying into related
markets. The entertainment industries are witnessing a wave of horizontal integration as new entertainment
products are created, enjoying overlapping production processes and markets. This re-composition of the
entertainment industry is an attempt to reallocate and collectivise risk in the production process. New interindustrial relations encourage innovational activity within the firm’s specialised product domain.
Once producers begin to adjust to increased inter-temporal uncertainty through vertical disintegration, eternal
economies can have overtaken the industry. The initial shock increased uncertainty and firms turn to subcontracting
or outwork, creating a dualistic production system. The markets still experience periodic shocks and subcontracts
may begin occupying specialised niche markets. Horizontal networks grow more efficient and large firms turn to
them in crises. With each round of crisis, large producers use vertical disintegration as a survival strategy,
empowering the smaller and specialised firms.
Starkley, Barnatt & Tempest (2000): Beyond Networks and Hierarchies: Latent Organizations in the UK TV industry
This paper examines the shift from hierarchy to network in the UK television industry. An important result of this is
the emergence of latent organization: groupings of individuals and teams of individuals that persist through time
and a periodically drawn together for recurrent projects by network brokers. Managers in creative industries are
facing uncertain markets. As a consequence, the shift away from vertical integration towards more flexible networks
of organization. This entails an increased dependence on outsourcing, contracting and licensing. Networks reduce
costs by externalizing in-house activities, but for them to be viable over the longer term, it is necessary that the
volume of transactions is sufficient. Networks can be sustain their effectiveness if they are sustained between
projects by what we call latent organizations: forms of organizations that bind together configuration of key actors in
on-going relationships that manifest with new projects. A dynamic network comprises a central core which draws
upon different specialist agents at the effort of brokers. Networks are the most effective organizational arrangement
to cope with an increasingly turbulent competitive environment. The latent organizations persists through time and
appears periodically, reanimated when an opportunity is present. Latent organizations are clearly distinguished due
to the enduring nature of the connections that exits between their broker and agents over time. They make it
possible to maintain a constant configuration of the same members that can be used intermittently over time.
In the UK, television was historically organised in large, vertically integrated organisations. The UK television was
dominated by a few large organizations (BBC, ITV). Since the 80s, the industry contains a complex and diverse array
of both independent production companies and an expanded number of suppliers (new: Channel 4 and 5 became
successful). The 1990 broadcasting Act imposed quotas upon the companies to source at least 25% of their
programming from independent sources. This led to the emergence of the publisher-broadcaster model, wherein
those who provide programmes to viewers increasingly buy in such product from external suppliers. BBC and ITV
franchise holders may now be pictured as brokers of primary programme and amalgamation and supply networks,
with some or all of their production outsourced to independent programme makers who play an increasingly
important role. The existence of latent organizations allows for the leveraging of existing knowledge base and
network of inter-personal relationships. Latent organizations are highly dependent on brokers that connect the
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programme buyers (work for publisher-broadcaster and have responsibility of buying product) with programme
sellers (work for programme maker and promote company ideas). The development of network relationships relies
on knowledge and trust. The persistence of latent organizations is not possible without the interaction and
coevolution of knowledge, trust and organisation. A sense of mutual commitment needs to be created.
Catmull (2008): Collectivty creativity at Pixar
Pixar has never bought scripts or movie ideas from the outside. All of the stories, worlds and characters were
created internally by our community of artists. Pixar continued to push technological boundaries of computer
animation, securing dozens of patents in the process. Pixar has a set of principles for managing creative talent:
lasting relationships matters, talent is rare, management needs to recover from risk instead of prevent it, it must be
safe to tell the truth and assumptions are there to be challenged. Creativity involves a large number of people from
different disciplines working effectively together to solve many problems. It must be present at every level of every
part of the organizations. People are key to the ability to recover. It takes trust and respect to get talented people to
work effectively with one another.
In the early stage of making a movie, Pixar draws storyboards and edit them together with dialogue (story reels) and
tackle many problems at this stage. If you give a mediocre idea to a great team, they will fix it or come up with
something else. Creative power in a film has to reside with the film’s creative leadership. You get creative people,
you bet big on them and give them leeway and support and provide them with the environment in which they can
get honest feedback from everyone. The producer and director are two types of leaders, they need a unifying vision.
Pixar has a great peer culture, consisting of:
- The brain trust: showing the current version of work-in-progress, followed by a two hour discussion of
directors and producers involved. The problem-solving powers of this group are immense, but the group has
no authority, it is only feedback.
- The dailies: daily reviews of work in progress to the whole animation crew. Everyone is encouraged to
comment. People learn from each other and inspire each other, and at the end there are no more surprises.
- Post-mortems: evaluations of completed products.
Pixar beliefs in the interplay between art and technology and follows the following principles:
- Everyone must have the freedom to communicate with everyone. Hierarchy and communications structure
are different things.
- It must be safe for everyone to offer ideas.
- Pixar must stay close to innovations in the academic community.
Successful organizations face two challenges when bringing in new people with fresh perspectives. One is the “notinvented-here syndrome” and the other is the “awe-of-the-institution syndrome”. Getting new hires to have the
confidence to speak up is a challenge.
Voss & Giraud Voss (2000): Strategic orientation and firm performance in an artistic environment
Conventional marketing wisdom holds that a customer orientation provides a firm with a better understanding of its
customers, which subsequently leads to enhanced customer satisfaction and firm performance. Three alternative
strategic orientations: customer orientation, competitor orientation and product orientation. The association
between strategic orientation and performance varies depending on the type of performance measure used.
However, the most unambiguous result is that a customer orientation exhibits a negative associates with subscriber
ticket sales, total income and net surplus.
Marketers generally propose that the marketing concept and customer-orientated behaviours should guide
marketing mix decisions. But being too customer focused can lead to inertia. It may be better to ignore your
customer because they are often resistant to the idea of change, limited in their ability to provide creative input and
unreliable in predicting what will be a success. The non-profit professional theatre industry is used to explore
boundary conditions for one of marketing’s most fundamental premises: that customer orientation provides a firm
with better understanding, which leads to enhanced firm performance. We explore this relation within a
multidimensional conceptualization:
- Customer orientation: an organization’s commitment to integrate customer preference into the product
development and marketing process.
- Competitor orientation: an organization’s commitment to integrate competitor intelligence into the product
development and marketing process.
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Product orientation: an organization’s commitment to integrate innovation into the product development
and marketing process.
Strategic orientation is a multidimensional construct that captures an organization’s relative emphasis in
understanding and managing the environmental forces acting on it. These include upstream suppliers of inputs,
including innovation, downstream customers and current and potential competitors. The literature generally
supports the proposition that market-driven and innovative firms will outperform their competitors. Thus we
hypothesize that firm performance will have a positive association with each of the three strategic orientations.
H1: Firm performance will have a positive association with (a) product orientation, (b) competitor
orientation and (c) customer orientation.
Porter states that an industry is defined by suppliers, customers and current and potential competitors and
substitutes. To control for industry effects, various industry characteristics such as market turbulence, technological
turbulence, competitive intensity are accounted for. Results suggest that (1) industry characteristics may moderate
the market or strategic orientation-performance relationship in innovative environments, (2) a market orientation is
less important when competitive intensity and hostility are low and the industry is mature and (3) customer and
technology orientations are more important and a competitor orientation is less important when demand is
uncertain. Firm performance is determined by industry structure, which is a function of business strategy, which
depends on relative scope, market share, level of resources and the extent of differentiation.
H2: Firm performance will have a positive association with the firm’s relative level of resources.
H3: Firm performance will have a positive association with the firm’s relative level of product quality.
H4: Inter-functional coordination acts as a quasi-moderator, exerting (a) a direct positive on firm
performance and (b) a moderating effect on the association between each strategic orientation and firm
performance.
Sample of non-profit professional theatres to explore the relationship between firm performance and strategic
orientation. These theatres are producing theatres: involved in intensive and on-going new product development
and they are completely responsible for production inputs and processes (as opposed to presenting theatres who
have minimal involvement in the production of plays). Producing theatres operate in a unusual combination of
environmental conditions: high rate of innovation, low level of competition, uncertain demand and stable customer
base. Both objective performance measures (season subscriptions, single tickets and financial performance) as
subjective measures (manager’s perception) were used.
-
Results offer little support for H1a, product orientation might be associated with a stronger subscriber base. There is
equivocal support for H1b, a competitor orientation leads to larger audiences. The most unambiguous result is that
customer orientation has a negative association with subjective and objective measures of subscriber performance.
The level of support for H2 and H3 is dependent on which performance measure is used. It is indicated that interfunctional coordination (1) has a direct, positive effect on all objective performance measures and (2) moderates the
relationship between strategic orientation, but is unclear why not for subjective performance.
Managerial implications: exercise caution in applying the marketing concept in general and a customer orientation in
particular. Arts leaders might better adopt competitor orientation. Challenge customers, focus on promotion, price
packaging and service. Also develop strong relations with loyal customers.
Bhattacharya, Rao & Glynn (1995): Understanding the bond of identification: Art Museum Members
Identification is defined as the "perceived oneness with or belongingness to an organization" of which the person is a
member. Customers, in their role as members, identify with organizations. They use social identity theory to propose
and test a model that relates members' identification with the focal organization to (1) organizational and product
characteristics, (2) members' affiliation characteristics, and (3) members' activity characteristics. Their survey
findings show that members' identification is positively related to perceived organizational prestige, donating
activity, tenure of membership, visiting frequency, and confirmation of member expectations with the organization's
services. Socially responsible buying, corporate alliances with nonprofits, and cause-related marketing an underlying
theme seems to be that these programs enable consumers to identify with the corresponding organizations. By
aligning themselves with worthy causes or implementing policies that are radically different from industry practice,
organizations enable consumers to identify with what the organization represents. When a person identifies with an
organization, he or she perceives a sense of connectedness to an organization and defines him- or herself in terms of
the organization. The identification of members leads to increased member loyalty to the organization and
decreased turnover. The benefits of increased loyalty to the organization and positive word of mouth are well
documented: On average, retaining existing customers is six times less expensive than luring new customers.
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A better understanding of identification can lead to sustainable competitive advantage and improve the
bottom line. Identification differs from the related notions of brand loyalty and organizational commitment Brand
loyalty as a deliberate prior tendency to purchase a brand, often stemming from positive past experiences with its
use. Identification is necessarily tied to the causes or the goals that an organization embodies. All persons who
identify with what an organization represents are likely to be loyal to its products or services, but all brand loyal
customers need not identify with the organization. Identification is necessarily organization specific, whereas
commitment is not. Membership creates a sense of belongingness. By dealing with a gamut of social causes, nonprofits enable consumers to identify with the goals of the organization. Social identity theory maintains that in
addition to a personal identity, the self-concept is also composed of a social identity. Personal identity consists of
idiosyncratic characteristics, such as abilities and interests, whereas social identity consists of salient group
classifications that, in turn, may be based on demographic categories, gender, or race, as well as membership in
central organizations, such as clubs or religious, educational, or cultural institutions. Social identification, then, is the
perception of belonging to a group with the result that a person identifies with that group. Organizational
identification is a specific form of social identification in which the person defines him- or her- self in terms of
membership in a particular organization. He perceives a "oneness with or belongingness to an organization, where
the individual defines him or herself in terms of the organization(s) of which he or she is a member".
Social identification theory asserts that organizational images are systematically linked to members' selfconcepts and maintains that organizational membership can confer positive or negative attributes on a member. The
extent to which a perceived organizational identity influences the level of identification of a member hinges on the
attractiveness of the image. Social identification researchers propose that satisfaction with the organization, the
reputation of the organization, frequency of contact, and the visibility of affiliation influence the members' level of
identification Members’ identification with a focal organization is related to a set of three broad factors: (1)
organizational and product characteristics, (2) affiliation characteristics, and (3) activity characteristics.
- H1: All else being equal, members' perception of the prestige of the focal organization will be positively
related to their identification with the focal organization. (Supported).
- H2: All else being equal, the extent to which the focal organization's offerings confirm member expectations
will be positively related to members' identification with the focal organization. (Supported).
- H3: All else being equal, tenure in the focal organization will be positively related, at a decreasing rate, to
members' identification with the focal organization. (Supported)
- H4: All else being equal, the visibility of membership in the focal organization will be positively related to
members' identification with the focal organization. (Not supported)
- H5: All else being equal, participation in similar organizations will be negatively related to members'
identification with the focal organization. (Supported)
- H6: All else being equal, frequency of contact with the focal organization will be positively related to
members' identification with the focal organization. (Supported)
- H7: All else being equal, donating money to the focal organization will be positively related to members'
identification with the focal organization.
Research: preeminent art museum of a major southeastern city. The museum had a membership base of 18,000.
Questionnaire to 1043 current museum members. Three focus groups to develop questionnaire items. The
dependent variable in our study was the level of members' identification with the focal organization. The
independent variables were members' perceptions of the prestige of the organization, confirmation of members'
expectations with the organization's offerings, length of membership, visibility of membership, members'
participation in other similar organizations, member contact, and member donation. Two control variables:
education and income. Overall, comparison of the respondents with the total member population and
nonrespondents led us to conclude that nonresponse bias is not a problem.
The most direct implication is that members do identify with organizations. one practical implication of the
results is that managers should develop more focused communication strategies. managers may strengthen
identification by providing opportunities for contact. t identification can also be strengthened by enhancing the
prestige of the focal organization and enabling members to fulfill their goals of membership. A strong and often
distinctive customer orientation is a necessary condition for fostering identification. The generalizability of the
findings in this study is limited in two respects. First, our results may be applicable only to members of nonprofit arts
organizations; hence, the findings are not necessarily generalizable to nonmember and for-profit settings. Second,
our results may be further limited because we studied a preeminent urban art museum; our sample was, thus,
drawn primarily from an urban area.
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Zuckerman, Ki, Ukanwa & von Rittmann (2003): Robust identities or nonentities? Typecasting in film labor market.
This article addresses two seemingly incompatible claims about identity: (a ) complex, multivalent identities are
advantageous because they afford greater flexibility versus (b) simple, focused identities are advantageous because
they facilitate valuation. It is hypothesized that a focused identity is helpful in gaining entry into an arena but
subsequently leads to increasing limitations. Actors who could potentially be associated with multiple roles or
groups retain flexibility in responding to interactants whose more narrowly defined identities induce commitments
to restricted lines of action. By trying to broaden their identity to include multiple and diverse roles, actors thus risk
being devalued and even rejected. , niche width theory suggests that a generalist identity is advantageous in a
volatile environment yet disadvantageous if environmental resources are stably concentrated in a single category.
Labor markets tend to be divided into relatively discrete categories such that competition by sellers (employees) and
selection by consumers (employers) generally occurs within but not across category boundaries. Categories are not
arbitrarily constructed, categorical boundaries reflect the dominant theory of value used by labor-market
participants. Labor-market categories do not necessarily coincide with product- or service-market categories.
Employers’ tendency to sort skills into relatively discrete categories is necessary for (work-based) typecasting to
emerge. s. First, candidates demonstrate that their offerings conform to the basic criteria that render them worthy
of consideration; next, they labor to differentiate their wares from the rival offerings that have been so recognized.
We must ask how employers determine whether a job candidate belongs to a given category. three factors generally
guide such determinations: (a) how that candidate is perceived by others, (b) the identities of the individuals and
institutions that have sponsored, trained, or affiliated themselves with the candidate; and (c) the candidate’s past
track record. The tendency to typecast reflects the general belief that labor-market categories effectively represent
the distribution of skill. In sum, we hypothesize that candidates who are typecast in a single category of work will
generally achieve greater attachment to the labor market than those who have spread their work across multiple
specialties.
- Hypothesis 1a.—Ceteris paribus, candidates who are typecast in a given category of work will be more likely
to obtain future work in that category than are candidates who are not so typecast.
- Hypothesis 1b.—Ceteris paribus, candidates who are typecast in a given category of work will be less likely to
obtain future work in other categories than are candidates who are not so typecast.
- Hypothesis 1c.—Ceteris paribus, the positive effect of typecasting on obtaining work in the original category
will be greater than the negative effect on obtaining work in other categories, which results in typecast
actors obtaining future work at a higher rate than nontypecast actors.
The hypotheses assume that the theory of skill that governs the hiring decision regards skill in one category of work
as useful in that category alone. Typecasting should be especially noticeable in markets where categories are used
by employers to distinguish among different types of skills, but only those categories that are so used. Becoming
typecast is an asset at the beginning of a career because it confers a recognizable, if category-specific, identity and
thus serves as the basis for securing a sustainable line of work. Specialization in a single category of work by the
veteran sends an even stronger signal than when sent by the novice: that one has sufficient skill to perform one type
of work but not others. Thus, robust (simple) identities are more (less) valuable among veteran candidates, because
employers are more likely to interpret participation in multiple categories by such workers as signifying broad skills
rather than a lack of skill; employers are also more likely to interpret a veteran’s specialization in a single category as
indicating a narrow skill set.
- Hypothesis 2a.—Ceteris paribus, the positive effect of typecasting on obtaining work in the original category
is lower (greater) among veteran (novice) candidates.
- Hypothesis 2b.—Ceteris paribus, the negative effect of typecasting on obtaining work in other categories is
greater (lower) among veteran (novice) candidates.
- Hypothesis 2c.—Ceteris paribus, the overall positive effect of typecasting on obtaining future work is lower
(higher) among veteran (novice) candidates.
Several considerations motivate our choice of the feature-film labor market as the setting for our analysis. First, this
labor market falls within the scope conditions: skill is difficult to discern. Another key feature is that it includes a very
large pool of peripheral participants who vie to establish a foothold in the industry. The highly mediated nature of
this labor market, which constitutes a “brokerage system of administration” is bridged by talent agents (or
managers), who represent the seller (actor) and casting directors (CDs), who are retained by the employer. Our
interviews with key informants in the feature-film labor market suggests that typecasting acts as a double-edged
sword here just as it does in the labor market for Hollywood composers and as expected by our theoretical
framework. The advantages of typecasting provides to aspiring actors by giving them a viable, if circumscribed,
identity to assume. We seek to verify whether actors whose past work displays a high level of concentration in a
given genre are (a) more likely to obtain work in that genre in the future; (b) less likely to obtain work in other
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genres; and (c) more likely to obtain work in general because the first effect outweighs the second effect. As
predicted by hypothesis 2c. expectations stated in hypothesis 1a were met for each genre. Hypothesis 1b was
insignificant. Our results reinforce our argument that typecasting processes are stronger where genre boundaries
are sharper. We hope we have shown how structural sociological accounts of labor markets may begin with skill but
emerge with a more complex picture, one in which position cannot be reduced to underlying ability
Gemser, Leenders & Wijnberg (2008): Why some awards are more effective signals of quality than others:
This article provides a conceptual framework that predicts which type of awards have the biggest impact on the
competitive performance of the award winners. Results suggest that awards granted by a jury composed primarily of
end consumers, peers or experts each have a different effect on consumer behaviour, which can be explained in
terms of differences in source credibility and award salience. Awards are an omnipresent phenomenon in modern
economy. An award may function as a signal of quality that helps consumers and other actors in the value system in
their product selection process. The role of awards as a signalling device seems important in the cultural industries,
where the actual quality of products is often difficult to determine prior to consumption. The composition of the jury
selecting the award winners seems an important determinant of an awards effectiveness. Juries can be primarily
composed of consumers, experts and peers and are assumed to be most effective if it represents the way products
are normally chosen. Market/consumer: consumers select among products based on their own judgement. Experts:
based on opinion of experts or by evaluations of competing producers (peers).
Empirical setting: U.S. motion picture industry, consisting of experience products. For mainstream films: word of
mouth and advertising are major factors, for independent movie, decisions are often made based on movie critics.
Attribution theory: consumers do not simply accept signals of quality, but assess if the source is credible. In case of
awards, credibility is high when a jury is composed of the kind of people that are similar to the source on which the
audience normally relies (experts – independent films and consumers – mainstream films). Uncertainty about
demand is the most distinct characteristic of the film industry. Strong social interaction among consumers generates
“herd behaviour” (behaviour influenced by opinions of others) and consequently creates inequality and
unpredictability of market shares. Movies are experience products, consumers look for signals to establish product
quality prior to consumption. Conceptual framework is based on the assumption that an award is the most effective
as a signal if the jury is representative of the kind of signal that consumers normally select among products available.
Salience is the level of activation of a brand in the consumer’s memory. Salience brands are likely to be high up in
consideration. Salient awards are awards that consumers think about first and that are more likely to be persuasive
in purchase decisions than awards that lack salience.
Hypothesis 1: In case of mainstream films, the positive effect of an award on box office revenues and share
of screens will be greater when the award winner is selected by a jury composed of end consumers. (NOT)
Hypothesis 2: In case of independent films, the positive effect of an award on box office revenues and share
of screens will be greater when the winner is selected by a jury composed of experts. (SUPPORTED)
Relevant information was collected about 13 movie awards. Performance indicators are ticket sales and
number of screens. Independent variables are jury composition of the award. Award covariates are award timing,
media power of the award. Film covariates are award categories, wins in major and minor categories, total number
of awards won, film performance prior to announcement, film genre, film type and release date.
The significantly less impact of the Academy Awards on independent film performance may be explained by
the perception that Academy Awards are mainly given to mainstream films. Findings suggests that awards indeed
differ in effectiveness. Only partial support for claim that an award is more effective if it is consistent with normal
buying behaviour. Expert-selected awards are the most effective for independent film segments. With respect to the
mainstream movie segment, the effectiveness of consumer-selected awards was not found to be significantly
different from other types of awards.
Crane (1997): Globalization, organizational size and innovation in the French luxury fashion industry
According to production of culture theory, small organizations are more likely to produce innovative cultural
products than large organizations; large organizations constitute oligopolies that control their markets and remain
innovative by co-opting smaller organizations, along with their creative talent. A study of the French luxury fashion
market shows that a few large companies controlled by conglomerates dominate the market in terms of sales but
have little influence on styles. Large firms use the myth of the designer as artist and connoisseur to enhance the
saleability of products other than clothes. The increased cost of entry for new firms due to globalization of markets,
inhibits their capacity for innovation and survival.
Production theory focuses on the effects of different types of organizational structure and different types of
markets on the diversity and range of cultural products. production of culture theorists have shown that culture
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industries are generally dominated by a few large firms that control a large proportion of the market. there is a high
level of competition but each member has little incentive to innovate. prefer to avoid the risks associated with
stylistic innovation and to capitalize on stylistic innovations developed by small firms. The size of a culture
organization has important implications for the level of innovation. In industries where a high level of investment,
large culture organizations are likely to have an advantage in the development of new and spectacular techniques.
Two factors that affect the behavior of organizations that produce culture have become increasingly important: (1)
ownership of culture organizations by conglomerates, companies whose major activity consists in buying and selling
other companies; and (2) globalization of markets for cultural products. A hypothesis that will he explored in this
article is that globalization greatly increases the costs to new firms of entering markets for cultural products and
decreases their chances of survival. In culture industries in Which new small firms are more likely to have innovative
products than big firms, these changes have implications for the level of innovation.
Brittain and Freeman's interpretation of fashion markets implies a particular type of market for fashion
products in which fashionable items are produced cheaply, sold rapidly, and quickly replaced by new items.
Haute couture: (1) couturiers who designed and made clothes to order which were sold directly to clients and (2)
industrial firms whose products were sold in department stores. Couture firms set the styles which were copied by
the clothing industry. Today, haute couture firms sell both made-to-order and ready-to-wear clothing along with
other luxury products. Luxury ready to wear: expansion in French clothing industry provided opportunities for
designers to found firms to manufacture and sell their designs as ready-to-wear clothing. Youth market: small
entrepreneurs copying designs of couturiers. The French industry is unique in its emphasis placed on couture, madeto-order clothing. The following hypotheses were formulated:
1. Firms in the industry resemble firms in other culture industries in terms of business strategy and attitudes
toward innovation, favoring profits over originality. As firms have been taken over by conglomerates, these
tendencies have accelerated, resulting in a high rate of survival.
2. A few successful conglomerate-owned firms function as oligopolies, as seen in their dominant share of
annual sales.
3. As in other culture industries, large firms attempt to capitalize on the innovative capacities of small and
medium-size firms by hiring their designers who tend to be in closer touch with the market (often referred
to as the 'street' in fashion jargon).
4. Globalization of markets for the French fashion industry has led to enormous increases in the costs of
entering these markets that has in turn affected the capacity of new firms to enter the business.
5. Oligopolization of the industry and globalization of markets have created a situation in which small firms are
less likely to be recognized as innovative by fashion experts while large firms are able to survive with a low
level of product innovation.
Sources of data: biographical directories appearing in French trade papers. Biographical directories of fashion
designers. Measurement of innovation: judgements by fashion experts.
Post-war French haute couture represented a new type of fashion organization that relied on financial expertise.
Pre-war firms selling haute couture had a relatively stable clientele base. Most designers based their reputation on a
specific type of fashion innovation. A third strategy is the use of subsidiary lines of products. The new type of postwar firm (example: Dior): associated with financial partner, not owner. Also product licensing. Clothing styles were
primarily used to create a prestigious image for the company that enhanced the saleability of other types of
products, particularly perfume. Haute couture now represents only 5-10% of annual sales. Couture businesses are
now rarely owned by the founding family. The industry constitutes an oligopoly. That the couture businesses
changed is indicated by the pattern of entries and exits before and after the second World War. After 1970s, costs of
entry escalated due in part to increasing globalization of the fashion industry. Expenses are now higher. To
summarize, in the postwar period, a new mode of fashion organization brought greater profits, due tO exploitation
of licenses and expansion of global markets, as well as increased stability to the luxury fashion industry. At the same
time, globalization of markets greatly increased the costs of entering this market, providing a substantial advantage
for conglomerate ownership and inhibiting the entry of new small firms.
The majority of the ready-to-wear designer firms are smaller than the haute couture firms. Aspiring
designers (créateurs) began to create ready-to-wear clothing in the sixties and moved to higher priced market niches
with higher profits. In the 60s and 70s, createurs were able to start businesses with small investments from personal
funds, but this is unusual today. Generally, firms are unable to expand unless they sign license agreements with
industrial clothing firms or find sponsors willing to invest in them. The rate of growth of createurs has decreased,
reflecting higher entry costs.
The size of a designer firm is an indication of business strategy; the larger firms are more likely to be owned
by conglomerates and to have diversified their activities, with licenses and perfume. The activities of the smaller
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firms are more likely to be focused on clothing design itself; their designers tend to be in closer touch with younger
age groups in the public and therefore more innovative. The haute couture firms had expanded and diversified their
activities to the extent that haute couture had become a minor aspect of their activities. That new firms faced
increasing difficulty in achieving recognition by fashion experts. The relationship between age of firm and innovation
also changed.
This study shows that there is not one but several types of fashion markets, each of which provides different
levels of opportunity. The classic fashion market is characterized by: (1) small firms; (2) local markets; (3) low costs of
entry; (4) a high level of demand for low-priced clothing items. A second type of fashion market, haute couture is
characterized by: (1) primarily local markets; (2) low to moderate costs of entry; and (3) moderate to high priced
goods. Today's luxury fashion market is characterized by: (1) global markets; (2) high costs of entry necessitated by
creating and sustaining an 'image' in the global marketplace; (3) high priced items of clothing for which the level of
demand is very small; and (4) additional products. The globalization of the luxury fashion market that has led to high
entry costs for both couturiers and createurs has created a situation that amounts to restricted entry in the French
luxury fashion industry. The same conditions that have led to restricted entry of new firms have created a situation
in which it is very difficult for new, small firms to receive recognition for their innovations by fashion experts. Small
firms may actually be less innovative, since their precarious financial situation precludes experimentation. Since new
small firms are often an important source of innovation in culture industries, factors that impede the recognition and
dissemination of their innovations are likely to have serious consequences for the health of the industry.
Franssen & Kuipers (2013): Coping with uncertainty, abundance and strife: Dutch book editors
This article analyzes the decision-making processes of Dutch editors involved in the acquisition of translation rights.
In their decision-making, editors face three problems as the result of increasing globalization: an excess of new titles;
uncertainty over the nature and quality of new titles; and strong competition for new titles. Editors cope with these
challenges through a decentralized network that is transnational. This leads to increasing isomorphism between
literary fields in different nations. Those primarily charged with selecting books and authors to publish confront an
excess of new titles and authors that are available; an uncertainty about the nature, quality and marketability of
these books; a ferocious and the reality that only a small fraction of published books prove to be successful. The
uncertainty has grown because of increasing globalization. Translations make up a growing share of all published
books, as a result, editors are increasingly concerned with the acquisition of translation rights—the right to publish a
book in a particular language area.
This article analyzes the decision-making processes of editors operating in the transnational literary field.
Acquisition editors occupy a ‘‘boundary spanning’’ position. They mediate between producers and consumers.
Editors also struggle with another boundary: that between the national and transnational literary fields. Gatekeeping
derives from the production of culture approach. Two theories: neo-institutional theory and Bourdieusian field
theory. In both perspectives, actors and practices are seen as embedded in and constrained by the organizational
field, the logics of the field constrain and guide their thoughts and practices (worldview/habitus). Organizations in
cultural fields are held together by conventions, routines and procedures. The value or quality of cultural products is
hard to gauge or foretell, because the objects have to be ‘‘produced’’ or created in a collective process that unfolds
well before the final audience encounters such products. Gatekeepers are needed to help establish a cultural
product’s worth and potential. An important strategy for reducing uncertainty, neo-institutionalists argue, is the
imitation of organizational practices and routines. Actors in the same organizational field look to others for
confirmation and inspiration. Successful strategies are often copied, leading to increasing ‘‘institutional
isomorphism”. In Bourdieusian field theory, competition emerges as the central problem of cultural production.
Decision-making in cultural production can be guided by the ‘‘highbrow’’ cultural logic (e.g., art for art’s sake) of the
‘‘field of restricted production’’ or the ‘‘popular’’ commercial logic.
This article analyzes the acquisition process of translation rights for adult fiction in the Dutch literary field.
Quantitative data, 24 Dutch editors. Data from Nederlandse Bibliografie Online, collecting various characteristics of
each book. We distinguish three groups of publishers: Prestigious-Local Cluster (more symbolic than economic
capital), Anglo-American Genre Cluster (fiction translated from English) and Exotic-Languages Cluster (translations
other than Dutch or English). Editors are the main gatekeepers in the acquisition process and the only ones involved
in all stages of the decision-making. Their boundary-spanning function—between managerial and creative branches
in their publishing house, and between the house and transnational field—gives them a great deal of autonomy. The
first problem editors face is an oversupply of manuscripts. Editors try to control the amount of information by
decentralizing decision-making. There are three types of people to which editors outsource their work—agents,
friends within the industry and scouts. Literary agents represent authors or publishers and, in the process, help
editors navigate the abundance of possibilities. Scouts send daily or weekly reports listing all rights that are ‘‘on the
market,’’ with comments on books of interest for a publishing house. Dutch editors use their networks of agents,
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friends and scouts to deal with the problem of abundance. The editors now have a manageable amount of
information that is sorted, classified and annotated by people in their respective networks.
Editors try to make sense of the manuscript by positioning it in the literary field. This learning process
involves both cultural and social capital. When editors have decided which manuscripts might be interesting, they
then start reading. They rely heavily on their “gut feeling”. Editors thus ‘‘feel’’ that a book is good. In judging a book,
editors primarily draw on embodied reading experiences. Through these accumulated reading experiences, they
have acquired knowledge and develop their literary taste. Our interviewees draw on distinct aesthetic repertoires to
assess a book’s quality. These aesthetic repertoires reproduce the highbrow–lowbrow division in the field. In the
conservation repertoire, an object is judged on the basis of an ideal version. The repertoire of conservation is a
business strategy of risk avoidance. Through these combined and opposing aesthetic repertoires, Dutch editors
reproduce a division between art and entertainment, between literary and genre fiction. The insistence on
emotional judgment does not necessarily stand in the way of the obvious commercial interests that editors also have
and that drives their search for bestsellers. their evaluative choices result from personal taste and
Fingerspitzengefühl—the expertise built up from their lifelong experiences as readers and over the course of their
professional careers.
The next stage of the acquisition process is the editorial board meeting. Editors use various rhetorical
strategies to construct a story for the editorial meeting that legitimates their decision to publish a book. Finally,
when the decision is made to try and buy the rights to a book, the publisher calls the rights holder to make an offer.
Competition comes to the fore as the main challenge. Publishers enter into what can become a ferocious bidding
war. Competition in the national field is predominantly niche-based. In the board meetings, the ‘‘fit’’ with the
catalogue is an important argument because a coherent catalogue safeguards the company’s identity and image. A
coherent catalogue is necessary to create trust in the taste of an editor and to work in the field. The push towards
transnational isomorphism is set in motion in the earliest stages of the acquisition process. In these first stages,
acquiring editors look to colleagues in foreign companies—colleagues they believe to have the same taste in books
as theirs. Resulting from the problem of uncertainty in global publishing, it leads to increasing isomorphism, creating
growing homologies between national fields. The boards of Dutch publishers look abroad for inspiration and
confirmation.
A more far-reaching form of isomorphism. Not only are conventions and cultural products moving from one
literary field to another, the structure of the field itself—including entire catalogues and taste-repertoires—is
becoming increasingly similar between nations. Publisher catalogues involve more than isomorphism, they also
provide symbolic capital in national and transnational fields. The catalogue allows foreign colleagues to understand a
publishing house’s taste and signature, so they can send the ‘‘right’’ manuscripts. A coherent catalogue is important
for sales agents to understand the identity of the publishing house and explain this to bookstores. Amidst the
isomorphism of national and transnational fields, distinction remains crucial when competing for a place in the
bookstore. Three main problems: an excess of new titles; uncertainty over the nature and quality of new titles; and
strong competition. They cope with these challenges through decentralized networks; trust in their (increasingly
transnational) networks and their own expertise; and the accumulation of symbolic capital, in particular through
their publishers’ respective catalogues. Bourdieusian field theory, on the other hand, directed our gaze towards the
status dynamics of the field and the central importance of editors’ and publishing houses’ cultural and symbolic
capital in the acquisition of translation rights.
Franck & Nüesch (2007): Avoiding Star Wars: Celebrity creation as media strategy
In the advertiser-supported media sector media content are sold to media consumers and the attracted audiences
can be packaged, priced and sold to advertisers. Therefore, audiences are the main currency for media firms. In
general the profits of media companies increase with the number of viewers per program. The audience attracting
capability of stars is one of the traditional instruments employed to increase the number of viewers. Two different
types of stars: highly talented and therefore ‘self-made’ superstars and ‘manufactured’ and thus rather trivial
celebrities. Both kinds of stars increase audience interest and draw attention. ‘Self-made’ superstars attract
audiences based on their perceived excellence in the provision of a certain service. Recently broadcasted reality tv
shows create stars. Mass media allow stardom to be artificially created by media publicity and promotion. People
are just known for being well-known.
Pop Idol originated in 2001 in the UK as a public singing contest, founded by Simon Fuller. Today, annual
global advertising revenues of the format exceed 1 billion. Another significant revenue stream derives form
merchandising. The winners of Pop Idol don’t profit likewise. 19 Entertainment controls all aspects of the singers
under contract. Pop Idol takes ambitious young individuals with little bargaining power. The big profiteers are both
production companies and TV broadcasters. Experience shows that the manufactured celebrities in general could
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not sustain audience interest in their work when they lost the publicity generated by appearing weekly on prime
time television.
A media enterprise has a competitive advantage if it is able to create and obtain more economic value
than the marginal (breakeven) competitor in its product market. In order to prosper, a firm must not only be able to
create value, but to capture the value it creates. Referring to stars this means that the profits of media firms are
positively related to the viewer drawing capability of stars and negatively to their bargaining power as external
resource suppliers. Once the first copy of the program is made, cost of reproducing it to extra customers is little or
nothing. The larger the audience, the more profitable it will become for the producer. The viewer drawing capability
is crucial. Superstars are providers of media content with high viewer drawing capability.
Rosen defines superstars as ‘relatively small numbers of people who earn enormous amounts of money and
dominate the activities in which they engage’. superstar theory is based on two basic premises: Firstly, lower quality
is an imperfect substitute of higher quality. Second, talent or quality is costlessly observable by all potential
consumers. Adler explains the phenomenon of superstars as a learning process that occurs if consumption requires
knowledge. Appreciation of a star’s performance increases with knowledge. Star specific consumption capital is not
only accumulated by past consumption activities, but also by discussing the star’s performance with other people
who know about it. The more popular the superstar in question is, the lower the searching costs to find competent
discussants will consequently be. In Rosen’s theory superstars have a certain degree of monopolistic power due to
their exceptional talent. In Adler’s star theory, superstars enjoy high bargaining power due to the star specific
consumption capital. Self-made superstars are excellent in value creation and value capture.
The created star is known for being known. Celebrity is artificially producible by media publicity. The
pleasure of gossip lies in the exchange of news. The interaction benefit of gossip increases with the number of
people knowing the tidings of a particular celebrity. The more popular a celebrity is, the easier gossip circulation
becomes. The bandwagon effect emerges if people’s valuations of a commodity (and thus demand for this good)
increase when they observe others consuming the same commodity. star attraction of celebrities is not linked to the
consumption benefit of the performance but rather to the subsequent interaction benefit. Since celebrity gossip
does neither rely on extraordinary talent nor on specific consumption capital, celebrities are easy to replace and,
therefore, have low bargaining power. these celebrities are particularly dependent upon the program that made
them visible.
As long as audiences are interested in the talent superiority of performers, ‘self-made’ superstars will not
disappear from the media despite their ability to capture large parts of the generated economic value. Capturing a
rent in a competitive environment depends on the relative bargaining powers of the stars. the creation and
exploitation of celebrities has become a large business in the media sector. But the market potential of
‘manufactured’ celebrities is limited because they typically prevail only in ‘talent free’ entertainment.
Djelic & Ainamo: The coevolution of new organizational forms in the fashion industry.
In direct response to environmental challenges, companies are experimenting with new organizational solutions. To
explore the connection between environmental dislocation and organizational transformations, we adopt a historical
and comparative perspective. Increasing environmental turbulence has brought about a redefinition of the rules of
the game. A common response has been for organizations to move towards greater flexibility. We identify in fact
three different network forms in that industry, which represent national ideal types—the “umbrella holding”
company in France, the “flexible embedded network” in Italy, and the “virtual organization” in the United States.
Globalization, competition, technology revolution and customer sophistication are showing the limits of traditional
organizational recipes. For many years, luxury fashion companies operated within a relatively stable environment,
and the “craft” model of organization. In the face of global environmental challenges, luxury fashion companies have
tended to move towards greater organizational flexibility. We find support for a coevolution perspective where
environmental transformation and organizational change interplay through time. In relatively simple and stable
preindustrial times, small and craftlike organization forms were dominant. Industrial revolutions created the
conditions for mass production and economies of scale, this lead to standardization of organizational routines. This
bureaucratic paradigm, was gradually established throughout the first part of the twentieth century as a “one best
way”. There was increasing evidence that the bureaucratic paradigm was not efficient and this lead to the idea of
contingent fit between organizations and their environment. Some have argued that environmental characteristics
essentially determine and shape organizational forms. Others have put forward an entirely different claim. Strategic
choice and resource dependency theories suggest that organizations choose and shape their own environments. A
third framework, coevolution theorists suggests that environmental transformation and organizational change
interplay and feed upon each other through time. The end of the twentieth century is a period of significant
environmental dislocation.
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Many industries and companies are having to face increasingly turbulent, ambiguous, and hypercompetitive
environmental conditions. Design theory suggests —a redefinition of the organization as a “nearly decomposable
system”. The potential for rapid evolution exists in any complex system that consists of a set of stable subsystems,
each operating nearly independently of the processes going on within other subsystems. A key defining
characteristic of luxury fashion companies is that they do not deliver only products but diverse sets of
representations as well. Luxury fashion products are generally intended for use, but they are also associated with
some intangible dimensions that pertain to the realm of meanings or aesthetics and give these goods their marginal
value. The object of that project has been to identify and describe evolutions through time and tendencies in the
luxury goods industry with regard to environmental trends, organizational forms.
The luxury fashion industry originated in France in the middle of the nineteenth century. Organized through
a professional association—the Chambre Syndicale de la Haute Couture—French traditional players were for a long
period of time able to control entry into the luxury fashion industry by institutionalizing a set of strict rules.
- Employing at least 20 persons in the production of clothes in the company’s studios,
- Presenting for each season—spring and fall—a collection of at least 75 designs
- Presenting these collections with the help of at least three live models, and
- Doing so in the house itself, in special areas designed for this purpose.
It made it nearly impossible for foreign competitors to obtain the label haute couture and thus, at least until the
1960s, to gain the legitimacy that was required to impose themselves within the industry. However, over the past 30
years, the predominance of French haute couture houses has come to be contested. An evolution of the customer
base and of its lifestyle has combined with technological transformations and a globalization of markets. These
global trends have been further reinforced by an increasing competition and by the emergence, in particular, of
companies challenging the predominance of traditional French haute couture houses. Traditional markets have
become mature. A growing mass of middle- and uppermiddle class customers, with rising buying power, was looking
for signs of “distinction”. Expectations have also grown. While markets have radically changed in nature, they have
also expanded in geographic scope. Managing the integration and striking a balance between tradition and
innovation, mass production and customization, have thus become key challenges in the luxury fashion industry.
Competition to traditional haute couture houses originally emerged from within France as early as in the
1960s. A number of small companies were then set up that did not fit the requirements for getting the haute
couture label. These createur companies thus remained at the margins of the industry. French createur companies
remained relatively small in size and never became a significant threat to the haute couture community. Starting in
the late 1970s and early 1980s, new players originating mostly from Italy and from the United States imposed
themselves at the luxury end of the fashion market. Defining customers as coconstructors or cocreators and not
merely passive consumers, Italian and American challengers have brought about a redefinition of the relationship
between fashion companies and their markets. The challenge here thus becomes to accept and integrate different
symbolic needs and expectations without losing control of the identity of the brand.
Facing radical market transformation, increasing technological complexity, and heightened competition,
luxury fashion companies have had to react and adapt. In the context of significant environmental dislocation, many
have felt the need for greater organizational flexibility. Until World War II, French haute couture was a highly stable
industry where made-to-order clothes for women were the principal source of revenue. Clientele small,
homogenous and loyal. a couturier or artistic designer typically owned each house. The image and success of each
house was closely dependent upon the unique creative power of its designer, who was also often in charge of
running the business. As an artist he ensured the process was fully integrated, this step-by-step monitoring was
essentially achieved through a reliance on traditional savoir faires—or traditional craft techniques— inherited from
the past. The very identity of French haute couture houses has appeared to lie in their reliance upon traditional
practices at all stages of the integrated production process. The predominance of French haute couture houses
system emphasized stability and conformity preventing radical breaks and rejuvenation. They had to consider how
they might integrate a degree of organizational flexibility. They came up with essentially two kinds of answers—
outsourcing and what we call here the “umbrella holding.” Breaking up the integrated, in-house process and
outsourcing or licensing parts of it represented an obvious way to secure advantages of scale and scope while still
integrating a degree of organizational flexibility. . In the craft-based and tradition-grounded French luxury fashion
industry, stable organizational solutions were more than a virtue. They were part and parcel of the product and of
the brand image. Outsourcing parts of the process and Some of the activities of the organization—has appeared to
threaten the very identity of these companies. some French luxury fashion houses appear to follow their own, quite
unique path to organizational flexibility. This is labeled the umbrella holding. A diversification of the product range
and in particular to add subsidiary lines of products to clothing. The main subsidiary product was perfume, but many
haute couture houses also diversified into cosmetics, accessories and clothing for others. Some companies
subcontracted parts of the production for subsidiary lines. The diversification strategy in the French luxury industry
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has thus traditionally amounted to creating, under a single brand name, several relatively autonomous
organizational entities, each being fully in charge of a given product line and only controlled from the core. The idea
is that each brand is valuable on its own and that more harm than synergy could result from too close an integration.
Most French haute couture houses have thus been finding it hard, outside or within LVMH, to strike a
balance between their traditional identity and the changes required by evolving markets and market demand. In the
meantime, new entrants from Italy and the United States have seized upon these trends. They systematically turned
subsidiary lines—luxury ready-towear, perfume, cosmetics, or accessories—into the core of their business. In the
Italian case, the networks of partners and subcontractors tend to have a smaller and much more stable membership
than in the American case. The extent of outsourcing is much more significant in the American case than in the
Italian case.
The Italian Model: The Flexible Embedded Network. A peculiarity of the Italian economy has been the
survival and dynamism of traditional industrial districts. These industrial districts are made up of large numbers of
small entities, whether craft workshops or small industrial firms. These entities have traditionally created dense
networks. The Italian fashion industry has emerged as a set of flexible and relatively stable networks, tightly
embedded in local or regional industrial communities. Italian fashion companies have subcontracted a large share of
their manufacturing activity, keeping in-house only a few key product lines. Their networks of industrial partners
have typically been small and stable, allowing them to keep tight but still informal control. By setting up networks,
Italian fashion companies have kept the advantages of small size and flexibility—creativity, adaptability, and speed of
reaction to market changes. The foundation of trust has been the most powerful coupling mechanism. Italian fashion
companies have decoupled somewhat their brand name from the product and the production process, in striking
contrast to French haute couture houses. Italian fashion companies thus pay close attention to brand management
in itself.
The American Model: Towards the Virtual Organization. A specific feature of the American economy is the
sheer size and buying power of its national market. American companies have for some time viewed specialization
and subcontracting as possible and efficient strategies. Interfirm networks have always included a majority of armslength ties regulated by spot contracts. American fashion companies are new entrants at the luxury end of the
fashion industry. American fashion companies originally started from mass production at a lower end of the industry.
Today, still no haute couture activity. Brand management has emerged, in this context, as the core or strategic
competence of the organization. When design and creation are still at the heart of the French luxury fashion industry
and manufacturing is key to Italian fashion, one could easily argue that, for American players, the source of
competitive advantage has been brand management. The radical decoupling of the brand name from product and
production has made possible and even triggered organizational modularity. The emerging network form is close to
the virtual organization. the value of the brand name is naturally related to the quality of products and processes.
The legitimacy and
the value of products and product lines stem from the sets of symbolic representations that are associated with the
brand name. Managing the brand means ensuring the overall coherence of the script, articulating a series of
interdependent sequences of events, selecting some, dropping others, arranging and rearranging them according to
changing conditions and needs. American fashion companies have entirely licensed off or subcontracted
manufacturing. The Americans have also outsourced, at least in part, design, creation, or brand management to
freelance designers, communication and advertising agencies, or consultants. they have created networks their own
way. They have mostly relied on arm’s-length ties and spot contracts and they have built in flexible membership so
as to follow organizational needs and market transformations. American fashion companies have had to foster and
bring about a degree of standardization of these interfaces. They have done so by setting clear and detailed sets of
instructions to map out the work of subcontractors and partners, but also by defining strict quality standards,
deadlines, and control procedures.
Italian and American companies. Without an haute couture tradition, these companies have successfully
managed to scale up their product lines and to reposition themselves at the high or luxury end of the fashion
industry. Organizational flexibility is the response to environmental turbulences. In France, the weight of
organizational legacies and institutionalized practices turned out to create significant constraints for haute couture
houses. The umbrella holding brings together existing organizational entities and brand names. It becomes in the
process an internal network that can rationalize a number of shared competences while respecting the autonomy
and integrity of each component module. In the Italian case, as a consequence, networks of partners and
subcontractors have tended to be tight and strictly embedded within the local or regional community. The
foundation of trust stemming from a common institutional and cultural background has made the management of
interfaces fairly easy and not too costly. The American case, points to a more open network form. In this case, the
extent of outsourcing has been much more significant and only a minimal range of activities has been kept in-house.
The American or “virtual” model gives a lot of weight to an organizational pilot or manager, in contrast to the key
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role of the product designer in the French tradition of haute couture or to the collective responsibility characteristic
of the Italian flexible and embedded network. We have thus found strong support, in the case of the luxury fashion
industry, for a coevolution perspective where environmental transformation and organizational change interplay
through time, feeding upon each other. Sample: France (LVMH, Hermes, Pierre Cardin), Italy (Armani, Gucci, Prada)
and US (Ralph Lauren, Calvin Klein, Donna Karan).
Footer & Graber: Trade liberalization and cultural policy
This article examines the tension between global trade liberalisation and the pursuit of cultural policies by national
governments. It reviews the background to the discourse over trade and culture and a range of domestic cultural
policy measures. As the pace of trade liberalisation proceeds unabated many countries have expressed an increasing
desire to protect national identity, values and beliefs through a range of policies on culture. The first manifestations
of the industrialisation of cultural production were in the printed media. Early film production and distribution in the
1920’s soon revealed the potential of film to reach a wider audience beyond national boundaries, thereby
highlighting its tradeability. Tension: US vs. protective European screen quotas. Solution: General Agreement on
Tariffs and Trade. Cultural industries” to describe “those institutions in our society which employ the characteristic
modes of production and organisation of industrial corporations to produce and disseminate symbols in the forms of
cultural goods and services, generally, although not exclusively, as commodities. The discourse over trade and
culture began to be formulated about the erosion of “standards of quality”, due to the commercialisation of culture.
The trade and culture debate gave way to outright conflict between the US and the European Communities, the
conflict centred on “cultural identity”. The European Communities and some other countries wish to preserve
cultural identity. The underlying tension between these two opposing views led to the introduction of a “cultural
exception”. Two options were discussed: The introduction of a “cultural exception” to trade, within the scope of GAT
and the adoption of a “cultural specificity” approach. Neither of these two approaches succeeded. Most countries
feel the necessity to refrain from GATS obligations in the audiovisual sector in order to be able to continue to pursue
their cultural policies.
Domestic cultural policy measures include: subsidies, domestic content (measures regulating radio and
television broadcasting content), Market Access Restrictions (measures that control access to film markets),
Regulatory/Licensing Restrictions: (measures that control access to radio or television broadcasting through
regulatory or licensing restrictions), Tax Measures, Intellectual Property Protection, Foreign Investment and
Ownership, Border Measures and Film Co-production Agreements. Rules pertaining to intellectual property
protection reflect cultural values, which are connected to national, and hence cultural, identity. Copyright
distinguishes between the “idea” which remains a common good and accessible to all in the public domain (public
sphere) and its “expression” which is susceptible to a property claim (private sphere). It is due to this public/private
dichotomy to which cultural works give rise that they may be equated both “with a notion of the public good and
with an intensification of cultural commodification” and hence, the market retains an ambivalent position with
respect to these public/private spheres. Copyright laws in several European countries guarantee secondary use
rights such as a private copying right73 or a re-transmission right. The revenues administered by one collecting
society. Consequently, foreign right holders are forced to have their secondary use rights administrated by these
collecting societies and to pay the relevant administration fee. In the view of the US, these schemes for mandatory
collective administration violate the national treatment obligation contained. European countries usually defend
themselves on the grounds of cultural policy. It is clear that domestic policy, national laws and regulations as well as
WTO and other international obligations in the field of intellectual property protection, trade and culture are leading
to increased friction in the international community. One reason is the incomplete commodification of intellectual
property products, due in part to the lack of substantial national and regional harmonisation of intellectual property
laws. Another is the increased blurring between the private/public spheres of cultural works and their attendant
rights. A third reason is the encroachment of international rulemaking upon the domestic policy sphere.
Globalisation “signals the growing interdependence and interpenetration of human relations alongside the
increasing integration of the world’s socio-economic life. The ongoing technological revolution is leading to the
establishment of a global digital environment. Digital transmission technology allows for an enormous extension of
capacities to deliver data by many different networks. The Internet provides a new platform for multimedia services
where the traditional systems. Technological developments, coupled with increased deregulation and privatization,
have changed market structures. this has led to keener competition in the broadcasting and telecommunications
sector. Europe is the principal export market for the US entertainment industry. As a consequence of digitisation, an
explosion in demand for audiovisual content is expected. the print and electronic media has also been revolutionised
by technological developments that have led to the merger and convergence of previously separate sectors such as
broadcasting, cable satellite and telecommunications, with the subsequent development of new products and
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services. The new links that are being forged between cultural content, telecommunications, business and industry
applications could make it more difficult to define cultural products as goods, services, or a mixture of both.
Globalisation is a process that produces new differentiation linked less to territories and more to market
distribution. From a psychological point of view, globalisation leads to a slackening of strong, integrated forces
replaced by a more open society with greater uncertainties. The world-wide diffusion and dissemination of the
standard products of mass culture has led to the suffocation of indigenous forms of expression. In 1995 the UNESCO
World Commission on Culture and Development forecast a global loss of cultural diversity, due to the
homogenisation of traditional cultures, as a result of the pressure of global markets. Certain forms of media like art
films and public service television programmes create “positive externalities” because they take up difficult topics, or
choose new means of aesthetic expression, and can create positive values that are useful for exploring alternative
action and the process of identification within society as a whole.
There is ongoing tension in the audiovisual sector. How would WTO panels deal with the issues in the
agreements? Distribution services are likely to remain fertile ground for conflict between trade and culture, both in
the audiovisual and print and media sectors, since control over distribution129 of cultural goods and services is
increasingly concentrated in the hands of a small group of film and media producing companies, capable of
controlling both geographically and temporally all the processes of production and distribution of a film, television
programme or book and magazine publication. The issue is most critical in Europe. The issue of subsidies of cultural
industries by WTO members, in the form of one support programme or another, is bound to arise. The promotion of
domestic content takes many forms with national public broadcasters promoting and carrying certain quantities of
domestically produced audiovisual content. The other means of government support is through the application of
direct grants,tax writeoffs and low-interest loans for film, or book production. It cannot be ruled out that
antidumping actions will arise in the field of cultural goods and services. The production and sale of cultural goods
are all characterized by high fixed and low marginal costs with frequent price discrimination between markets. The
case for dumping is therefore based on the incremental cost of supplying the additional market (usually an export
market) at prices below those charged in the domestic market rather than simply selling below cost. The original
safeguards clause of Article XIX GATT as well as the Agreement on Safeguards, could be invoked as a means of
helping WTO Members with strong cultural industries to protect themselves when seriously injured by the
importation of like, or directly competing, products.
This article has reviewed the current state of the debate between trade liberalisation and cultural policy. It is
uncertain the extent to which WTO Members outside of the European Communities, the United States, Japan,
Canada and Australia, are concerned about the preservation of their cultural identity in the face of trade
liberalisation and the globalisation process. The GATS rules that are likely to come under closest scrutiny are those
governing domestic regulation (Article VI), safeguards (Article X) and subsidies (Article XV) as well as government
procurement of services. We recommend that all WTO Members balance their market access openings with their
need to preserve cultural policies by developing specific disciplines.
Yin (2007): Reinterpretation of cultural imperialism: emerging domestic market vs. continuing US dominance
Korean popular culture has become dominant in East and Southeast Asia over the last decade. the rapid growth of
Korean popular culture in Asia has raised the issue of whether cultural imperialism, symbolizing a one-way flow of
cultural products from Western countries to developing countries, is a reliable thesis to explain the Korean cultural
market in the globalization era. Several scholars argued that the international communication system was
characterized by imbalances and inequalities between rich and poor nations, and that these imbalances were
deepening the already existing economic and technological gaps between countries The powerful US communication
industry forced global commercialization on the international communication system. The cultural imperialism
theory has claimed that authentic, traditional and local culture in many parts of the world is being overwhelmed by
the indiscriminate dumping of large quantities of slick commercial media products, mainly from the US. Since the
early 1990s, however, the cultural imperialism thesis has come under increasing criticism from diverse perspectives.
Some media scholars have argued that, in the current global media environment, which is characterized by a
plurality of actors and media flows, it is no longer possible to sustain the notion of Western media domination.
national cultures can now defend their ways of life and even share their images with the rest of the world.
Traditionally culture-weak Third World producers have now strengthened their national cultural industries.
Developing nations represent immensely growing markets that provide television program content and services
across borders and regions due to their great diasporas in the world During 1950s-1990s Korea had cultural
imperialism. Korean TV programming relied enormously on imports from the US during the 1950s and 1960s. The
one-way flow of cultural production from the developed countries, in particular the US, to the developing countries,
was apparent in Korea until the mid-1990s. After the mid-1990s, Korea reduced foreign audiovisual products in the
national cultural market, while increasing its production and exports of domestic cultural products. There are several
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significant causes for the decrease in television program imports, including the 1997 economic crisis and the increase
in the number of domestic program producers. The economic crisis because the broadcasting industry needed to cut
down on foreign television programs due to budget cuts. The amount of audiovisual products produced domestically
has rapidly grown with the development of the Korean media industry in the post- 1997 economic crisis era. The
total amount of television program exports increased nearly nine-fold between 1997 and 2004. The popularity of
Korea’s television programs in Asia also functioned to expedite exports of other audiovisual products, such as films
and music.
There are several dimensions to the rise in the exports of Korean audiovisual products in Asia: diverse
product sourcing; the cultural proximity of East and Southeast Asia; economic and technological development of the
region; changes in media policies in the region; and political and historical considerations. To begin with, Korea has
developed new local producers, and they have produced better programs because of strong competition among
them over the last several years. In Korea, the three network broadcasters dominated television program production
and their exports. KBS, MBC, SBS these network broadcasters have the corporate stability and experience to produce
diverse programs and to set up region-wide marketing strategies. Many independent producers also played key roles
in producing television programs for network or cable channels. The rapid growth in the number of independent
producers has contributed to an increase in the quality of programs and exports of television programs. Coproduction strategies between Korean broadcasters and broadcasters in other East Asian countries have also been a
new way of sourcing product, because joint productions appear to have real profit potential for those broadcasters.
Meanwhile, cultural elements have emerged as factors of comparative advantage in building up the Asian markets
for audiovisual products. one of the primary causes of the increase in sales of Korean television programs in the
region is the strong demand for products in the rapidly growing audiovisual sectors in these countries. Growing
media industries need content to broadcast on their new channels. With the rapid growth in production of domestic
television programs, Korea seems to have escaped from the dominance of the cultural imperialism. Arguably, Korea
is becoming an emerging television program market that provides television programs, services and films across
borders and regions. Several events, however, demonstrate that cultural imperialism has not disappeared from
Korea. First,Western dominance in the global cultural market, including in Korea, has not decreased at all. The US
has maintained its global cultural domination. Although Europe was the largest audiovisual market for the US,
accounting for 62.8 percent of US audiovisual exports in 2001, the Asian audiovisual market gradually increased to
17%. The cultural market in Korea: the import of television programs from the US accounted for 77.8 percent of all
imported foreign programs. The US media desire deregulation, privatization and commercialization of the media
industry in developing countries for easy penetration. The US media giants have adopted a strategy known as ‘think
globally, act locally’ to maintain and/or expand their dominance effectively. The US also uses indirect means to
penetrate the world. the transnational corporations have gradually become highly influential institutions in the
Korean cultural industry have been able to invest in the Korean broadcasting sector in the forms of (1) direct
investment, (2) joint ventures and (3) programming affiliation. several global mega-communication companies
invested in the Korean broadcasting market in the form of joint ventures with domestic media industries or direct
investment. Program cooperation became another form of investment in the Korean media industry. the Korean
cultural market is not safe from the US media giants.
Korea has become an emerging market with its diverse product sourcing and growing exports. Above all, the
US dominates the Korean cultural market through both cultural products and capital. The transnationalization of
domestic cultural industries is nothing but another form of intensified cultural imperialism.. In summary, the cultural
imperialism thesis still plays an important role in interpreting the world cultural and/or media system because
cultural imperialism has resulted in a situation whereby the media of advanced capitalist economies have been able
to substantially influence the nature of cultural production and consumption of Third World countries. Cultural
imperialism acts as a means of cultural transformation in the form of flows of cultural products, capital and
industries in the globalization era.
Moran (2008): Makeover on the move: Global TV and programme formats
Contemporary international television is involved in the complex task of transformation. Presents the possibility of
an international transformation of the form of scripted drama. This essay is concerned with understanding the
institutional framework of global television, which offers broad homologies of makeover that anticipate and
contextualize subjects and themes occurring at more micro levels in specific programmes. Since the late 1980s,
television in many parts of the world has found itself in a new era. This is brought about by a unique intersection of
modern technologies of transmission and reception, innovative forms of financing, fresh ways of imagining the
audience, novel forms of content, and new constructions of the television commodity. Alongside the move to
privatize many television broadcasting services, there has been a parallel shift towards the use of independent
production companies. Increasing uniformity as evidence of an evolving global order in television. Four
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interconnected components of a planetary system that are complexly interrelated and changing: 1) media industry
component, 2) technological infrastructure, 3) news and entertainment content and 4) global regulator regime.
Canned, or finished, television programmes had previously been the form in which television shows travelled
around the world. A more recent form is the television format. The latter is a kind of recipe or guide to the remaking
of a programme adaptation in another territory. With a television format, what the trade seeks to export is the
successful commercial knowledge and know-how bound up in a programme that will help ensure its adaptation and
remaking in another territory. The core notion is that a good creative idea in one place can be successfully
established elsewhere, especially if suitable care is taken with the adaptation. Knowledge exchange’ as ‘the transfer
of economically useful practices, routines and conventions, which are complex and coherent assemblages of
different kinds of information’. The format programme, the devising and development of the programme can occur
in one location before a body of know-how is assembled so that the programme can be made over in another
territory for an audience that may be linguistically, ethnically, historically, geographically, and culturally different
from that of the programme’s original broadcast audience. Elements of a format package are scripts, running-order
sheets, studio floor plans and set designs, accumulated schedule and ratings data, marketing and promotion
information, and sample press releases and programme synopses. A television programme format, then, refers to
that set of industry know-how and resources that allows the development and production of a television programme
in another place and time. Another reason for taking on an active advisory role in the production of one’s format is
the fact that there is a good deal of plagiarism and piracy across the industry.
The emergence of a format-based television programme trade came about in three stages. The first phase of
international programme exchange occurred in radio and started at least as early as the late 1930s. Radio industry
connections allowed for the flow of radio formats. A new element was added in 1951. Owners licensed the format to
a string of local television stations across the country (Hyatt 1987, 364). Those that signed up to produce their own
version of the programme received the rights to select and employ their own hostess and to obtain merchandise and
materials representing the programme. , International exchanges of programme formats, sanctioned by the shows’
owners, were beginning to take place in many markets, although they were still limited by the then relative scarcity
of broadcasting channels. Another phase of the television format business runs from 1990 to the present. Television
programme producers began moving towards a more careful and systematic distribution of the knowledge, skills,
and resources involved in reworking programme formulas for different audiences and markets. Developers and
owners now attempt to ensure the simultaneous remaking of their formats on a world scale. Format trading has
become serious business at the international round of television trade fairs.
A semiotic model of exchange in which he outlines five stages of the adaptation of cultural imports, stages
which are potentially useful in conceptualizing the cultural processes involved in format remaking on television The
first phase of Lotman’s dialogic process is one described as involving a retention of ‘strangeness’. In this kind of
remaking, the imported texts or formats ‘hold a high position in the scale of values, and are considered to be true,
beautiful, of divine origin’. Second stage can be labelled as one of ‘indigenization’. At this point, the ‘imported texts
and the home culture restructure each other’. The third stage of Lotman’s model might be termed nationalinternationalism. There is a mutual accommodation between the ‘imported’ text and the ‘home’ culture wherein the
two reorganize one another. The fourth stage is an in between stage of intensification of the previous stage. The
fifth stage exemplary texts are produced by the receiving culture. The process might be labelled commendation. The
latter culture ‘becomes ... a transmitting culture and issues forth a flood of texts directed to other, peripheral areas.
The process of cultural adaptation is a complex one that involves many elements negotiated between a visiting
consultant and a local production team. In sum, the international television format trade is an important component
of the global television industry. , the format programme has the capacity to be customized or indigenized to help
meet local tastes and expectation.
Aoyama & Izushi: Hardware gimmick or cultural innovation? Japanese video game industry.
This paper examines the role of creative resources in the emergence of the Japanese video game industry. We argue
that creative resources nurtured by popular cartoons and animation sector, combined with technological knowledge
accumulated in the consumer electronics industry, facilitated the emergence of successful video game industry in
Japan. The video game industry is a sizeable one with pervasive influences on popular culture. The industry’s
developmental trajectory, which incorporated multiple aspects of emerging technologies in computers, multimedia
and the Internet, represents a contemporary synergy of digital technologies, artistic creativity, and multimedia
entertainment. Broadly speaking, there is an increasing domination of US and English language-based exportable
cultural products. Japan’s video games therefore represent an exception to this trend in the western world. 1983:
Famous video game crash, Nintendo played an important role in re-establishing it after the crash. New technologies
deeply influence art form of the period. Video games emerged out of older interactive entertainment such as toys
and arcade games. video games occupy an important position in the already fledging creative industries in advanced
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economies. With the current world market of US$ 18 billion, big industry. But relatively little is known about the
evolutionary path.
First, there is a general consensus that Japan’s competitive strengths in international trade lie in
manufacturing industries but not in creative, knowledge-based industries. The country’s weakness in the latter is
evident particularly in its uncompetitive software industry. Game software is distinctive from other software. Game
software is part of a new industry with lower barriers to entry, does not suffer from language-based disadvantages,
and escaped the negative aspects of state-led industrialization. Creative industries have traditionally been regarded
as craft-based, low-tech-oriented, and therefore labor-intensive. Links to technology intensive have become an
integral aspect of creative industries, and video games are the prime example. Video games represent interactions
between hardware manufacturing and software publishing. Industry is linked to socially and historically embedded
foundation of creative imaginary based on vibrant cartoons (manga) and animation films.
The first computer game, “SpaceWar”, was developed by Steve Russell at MIT lab in 1961. Atari developed
the new game Pong in 1972, it was a hit. Industry grew to a US 200 million business. 1983: Sudden market rash by
over-supply. Nintendo began experimenting in 1983 with Flamicon. 1985: Super Mario hit and position was solidified
with the introduction of the Gameboy. Nintendo offered non-risk packages to gain support of retailers. Nintendo
nurtured both in-house and external development of software. Nintendo successfully averted competition by: (1)
monopolizing popular game titles, (2) having an in-depth knowledge of the toys and entertainment market, (3)
upgrading technologies through alliances with hardware firms, such as Silicon Graphics and Philips, and (4) in case of
the Japanese market, controlling the distribution channel, and in the US market, aggressively going after piracy in
courts. Technological development has, however, altered the logic of competition in the video game industry in the
1990s, undermining the monopoly of Nintendo, and increasing the share for SCE’s PlayStation that used CD-ROM.
The major reason cited for the failure of most consumer electronics firms is the lack of market knowledge in video
games. SCE success lies in ensuring the firm capitalized on all its assets. In-house manufacturing, but also ability to
forge alliances with major software developers. Soldified position by introducing PlayStation in 2000. The evolution
of the industry has been influenced by a variety of actors from broad sectoral backgrounds. The battle over
platforms has been waged increasingly based on the access to hit game software. In Japan, the two major platform
developers, Nintendo and SCE, forged an indirect link between manufacturing expertise in consumer electronics and
software publishers.
Technical capability and expertise in consumer electronics have served as a critical foundation for the early
development of platforms in Japan. Nintendo’s initial shift to technology-intensive video game business was made
possible through collaborations with consumer electronics firms, and the sharing of engineering skills with them. The
collaboration with Mitshubishi resulted in Nintendo’s successful launch of the first color home-based video game
console. SCE uses Sony’s in-house plants known for quality in design and performance.
In sum, Japan’s video game industry benefited from technical knowledge and engineering skills nurtured by
its globally competitive consumer electronics industry. A combination of knowledge about hardware and software
allows systematic development of games at all levels within his teams. Yet, the Japanese video game industry
consists of a plethora of independent software publishers as well as the two platform developers, forming a web of
links that transfer expertise. In the market for video game software, there are big hits: 14% generates 70% of sales
volume. Nintendo has 355 third party developers, SCE 540. Software publishers can be 1) in-house publishers of
platform developers, 2) comprehensive software publishers in-house capability in most aspects of software and (3)
publishers that act as producer/coordinator and outsource most functions. and (3) publishers that act as
producer/coordinator and outsource most functions.
Platform developers facilitate the entry and growth of new, independent software publishers by taking the
lead in information exchange with them. Three stages: (1) initial guidance on software formats, quality and ethics
standards, (2) provision of new versions of operating systems and (3) final quality inspection on software and
documentation. Evidence shows a presence of cultural proximity between platform developers and third-party
software publishers. The first aspect of cultural proximity refers to the ease of communications, represented by the
presence of face-to-face personal networks that allow for informal, word-of-mouth information transfer through the
use of common language. The second aspect of cultural proximity refers to the presence of common operational
procedures. Finally, the third form of cultural proximity may be observed between software publishers and the
market in terms of demand-responsiveness. An increasing proportion of profits is being made in game software.
Platform developers sell their consoles at a razor-thin margin and make a greater part of their profits from in-house
software publishing or licensing fees from third-party software publishers.
The production of game software requires a variety of technical skills and artistic creativity. The video game
industry offered employment opportunities for artists and programmers who prefer to work in the alternative-tothe-
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mainstream environment. Production of game software: planning, design, programming – content production, test
versions, debugging, golden master. Two fundamental changes: Nintendo introduced storylines, consequently game
design became the taks of specialized designers with artistic talent. and optimizes them to a specific platform. The
second change took place with the shift from ROM cartridges to CD-ROM as the primary storage media. This
development accelerated the already on-going shift in emphasis toward talented artists with superior graphics
capability. To respond to these changing skills requirements, Japan’s video game industry drew artistic creativity
from its already well-developed cartoons and animation film industry. Japanese cartoons, known as manga comprise
over one-third of all books/magazines sold in 1999 . Manga has a distinctive style, which is owed to the famous
cartoonist known as the “god of manga”, late Osamu Tezuka. The importance of manga in Japan’s popular culture
meant high social status for cartoonists. Skill transfer from manga to animation films happened when these
emerged. Important foundation for the emergence of Japan’s video game industry. The core of game software
production involves scenario writing and drawing, and cartoons and animation films provided the necessary skills
and expertise for character production and graphic design. The overlap in required skills between
cartoons/animation films and video games can also be observed through programs in vocational schools. The sharing
of creative resources in Japan was in part possible due to the contemporaneous and overlapping development of
cartoons, animation films, and video game industries. The three media, video games, cartoons and animation films
are increasingly linked with one another in their marketing to boost sales of one another.
The developmental trajectory of the video games industry revealed a complex interplay between hardware
and software technologies from its origin, and more recent trends represent a transition from hardware,
engineering-driven to increasingly software-centered industry supported by artistic creativity drawn from cartoon
and animation film industries. To signify this shift, the battle over platforms today to a large extent hinges upon the
coordination with software publishers that provide hit game titles.
Schilling (2003): Technological leapfrogging
In industries characterized by strong network externality effects, the value a good offers to customers is a direct and
positive function of how many other users there are of the same good. Network externalities can also arise in
markets that do not have physical networks. A large installed base may extend the range of the user’s network. In
such industries, technology standards can become locked in as the dominant design through the self-reinforcing
effects of installed base and complementary goods. Eventually, however, a new technological generation that offers
a radical improvement in technological functionality may render the standard obsolete and may eliminate the
advantage of the existing installed base and complementary goods. The first video game system in the US was
Odyssey (1972). In 1972, foundation of Pong which dominated the market until Atari’s introduction of its video game
system. In 1983, Coleco Vision games outsold Atari. In the mid 80s, profit began to decline and the video game
industry slowly died. In 1985: new entrants from Japan: Nintendo (NES 8 bit) and Sega (8 bit system). Sega
technological superior, but Nintendo spent more on advertising and won the battle. Nintendo held a near monopoly
of the U.S. video game industry. Nintendo both made games for its system in-house and licensed third-party
developers to produce games through very strict licensing policies. In 1989: Sega introduced 16-bit Genesis and
made it backward compatible. Though Nintendo had its own 16-bit system in the works, it delayed introducing it to
the U.S., fearing that it would cannibalize its 8-bit system sales. Sega won this battle Like Nintendo, Sega made little
profit on the consoles, and focused instead on increasing unit sales to drive game sales and software developer
royalties. This battle also attracted other competitors (Philips introduced 32-bit disc interactive). Atari had also made
a surprising re-entrance to the video game market in 1993 with the technologically advanced Jaguar, but it did not
inspire confidence. In 1995, Sega introduced its 32-bit Saturn system; and in September 1995, Sony introduced its
32-bit Playstation. Both the Sony and Sega platforms were based on compact discs and offered a tremendous
performance advantage over 16-bit systems. Sony entered with tremendous brand image in consumer electronics,
access to (and leverage in) very extensive distribution channels in electronics and media. It signed a deal with
Electronic Arts. Sega shipped only to four retailers because of lack of supply, and the Sony Playstation took over. In
1996, Nintendo game with 64-bit, but did not reclaim dominance. In 1999: 128-bit Dreamcast by Sega. Sony
introduced playstation 2, Dreamcast was crushed. Sega announced that it would cease making consoles and
transform itself into a third-party developer of games for other consoles. Playstation 2 was a success, it PS2 was
backward compatible, enabling gamers to play their Playstation games on the console until they amassed new game
libraries. Nintendo had just postponed the launch of its new 128-bit system, the GameCube. The real threat to
Sony’s PlayStation2 came in the form of a new entrant to the video console industry: Microsoft’s Xbox. Microsoft
had previously produced PC-based computer games and since the video consoles had access to the internet, they
were now a threat to Microsoft. Microsoft was counting on the technological advantages offered by the Xbox to tip
consumer preferences. To rapidly deploy the console and build installed base, it leveraged its existing relationships
with distributors that carried its software. Microsoft’s biggest brand disadvantage was its lack of a big hit game that
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carried the sales of the console. Microsoft both utilized in-house development and aggressively pursued licensing
arrangements with third-party developers. Playstation 2 still continued to win in 2002.
The value to consumers of technologies characterized by network externality effects can be divided into
three primary components: technological functionality, size of the installed base, and availability of complementary
goods. Thus for a new entrant to successfully enter, it must find a way to yield more total value than that yielded by
the incumbent technology. When customers are comparing the value of a new technology to an existing technology,
they are weighing a combination of objective information, subjective information and expectations for the future.
New technologies must typically offer a functionality advantage over the existing standard, and this advantage must
be particularly large if the technology is incompatible with the existing installed base or complementary goods. An
incumbent’s best defensive strategy, in turn, is to invest in continuous innovation in the standard, thus making it
difficult for a potential entrant to create a significant technological gap.
Technological leapfrogging requires more than a significant technological advantage; it requires managing a
whole system of value components such that the new product can offer value (real, perceived, or anticipated) that
significantly exceeds the value offered by the entrenched standard, even when externality sources are taken into
account. The cases and framework presented here suggest specific strategies both for the new entrant to
successfully leapfrog the entrenched incumbent, and for the incumbent to defend its market position:
New Entrant
- Create a technological gap that is significant, and ensure that the technological advantages offered by
the new offering are well understood by customers.
- Build installed base and availability of complementary goods through strategies such as: making the
new technology compatible with the incumbent’s installed base and complementary goods, forming
alliances with manufacturers of complementary goods and distributors, using attractive licensing and
distribution policies to attract thirdparty developers and distributors, sponsoring production of
complementary goods or producing them in-house, using aggressive discounting to promote rapid
adoption by consumers, and reducing resistance by offering guarantees to distributors and customers.
- Shape perceptions and expectations through signaling through strategies such as: advertising and
vaporware to inflate “mindshare” and promote an impression that the installed base is (or very soon will
be) very large, leveraging the firm’s reputation for success in prior markets to the current market, and
using credible commitments to signal the market that this is a battle the entrant intends to win.
Incumbent
- Prevent the technological gap by investing in continuous innovation, willingly cannibalizing existing
platforms with more advanced platforms, and offering incentives for existing customers to upgrade to
the newest platform.
- Protecting installed base and complementary goods advantages through such strategies as: preventing
compatibility of the existing platform and complementary goods with the offerings of a new entrant,
making each generation of the incumbent’s platform backward compatible so that installed base and
complementary goods advantages from previous generations are leveraged into the new generation,
using attractive licensing and distribution policies to ensure that complementary goods providers and
distributors are not lured away by the new entrant, and, increasing the switching costs of customers by
encouraging them to upgrade to new platforms, and through providing additional services or peripherals
that tie the customer to the incumbent’s technology.
- Shape perceptions and expectations through signaling by investing heavily in advertising that both
emphasizes the incumbent’s actual installed base and complementary goods advantage, while also
building the perceived or expected installed base in the incumbent’s future platforms.
The preceding also yields implications for firm characteristics and resources that will benefit a potential entrant.
Clearly a reputation for technological expertise, brand image, and a network of existing relationships with
complementary goods providers and distributors will improve a new entrant’s chances for success. Another
characteristic of note is firm size. It is often argued that large firms have greater inertia, or are more conservative,
and are thusunlikely to usher radical new innovations into an industry. However, it is precisely such large firms that
have the deep pockets required to pay for scientific research, that may have extensive access to and leverage over
distributors, and that have the reputation to signal the market that this is a fight they can win.
Salganik & Watts (2009): Web-based experiments for the study of collective social dynamics.
Social scientists are often interested in understanding how the dynamics of social systems are driven by the behavior
of individuals that make up those systems. However, this process is hindered by the difficulty of experimentally
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studying how individual behavioral tendencies lead to collective social dynamics in large groups of people interacting
over time. Using a ‘‘multiple-worlds’’ experimental design, we are able to isolate the causal effect of an individuallevel mechanism on collective social outcomes. Individuals have been found to anchor their valuation of objects
based on irrelevant and even false information. Individual psychology offers the wrong prediction of collective social
dynamics. The challenge for studying collective behavior is therefore in understanding how the actions and
interactions of individuals aggregate to produce collective patterns. Cultural markets are often characterized as
‘‘superstar’’ or ‘‘winner-take-all’ markets. Yet along with inequality of success, a second stylized feature of cultural
markets is that they appear to be highly unpredictable. If hits are different in some way, why do experts have such
difficulty in identifying these products ahead of time? We will argue that the inequality and unpredictability of
success, both group-level properties, arise from a process of social influence at the individual level. Expressed
preferences are influenced by the observed actions of others, as well as by psychological features of the decision
context, such as framing, anchoring, and availability.
In cultural markets, there are simply too many products for individuals to consider. A natural heuristic for
dealing with this choice overload is to assume that the popularity of products is somehow a signal of their quality, a
phenomena sometimes called observation learning. People may benefit from coordinating their choices with others .
That is, by listening to, reading, or watching the same things, friends, and even strangers, construct common points
of interest around which they can interact, thereby fostering notions of commonality and community. Popular
products will tend to become more popular, leading to ‘‘cumulative advantage’’ or ‘‘rich-gets-richer’’ dynamics.
The basic framework for our experiment was an artificial cultural ‘‘market’’ created in the form of a website
where participants could listen to, rate, and download 48 songs by unknown bands. They represent multiple parallel
realization of the same process. Participants were American teenagers. Experiment 1: songs not sorted by
popularity. Experiment 2: sorted by popularity. In 1, 20% chance of listening to most popular song, in experiment 2,
50% chance. These results therefore confirm that the popularity of the songs affected participants’ choices and
generally led them to listen to the more popular songs. Success of a song based on share of downloads. In
experiment 1, success was more unequal in the social influence worlds than the independent world. Observed
differences were statistically significant. every social influence world in Experiment 2 was more unequal than the
most unequal in Experiment 1 (significant). We define the unpredictability of specific song, ui, to be the average
difference in market share between two randomly chosen success outcomes. The unpredictability of success was
greater in the social influence condition than the independent condition. The difference in unpredictability across
the conditions is statistically significant. Increasing the amount of social influence increased the unpredictability of
success by about 50%. One feature that our measure of unpredictability obscures is that the success of the songs
was not completely random, but rather, that some songs consistently did better than others. Outcomes were more
unpredictable for higher appeal songs than for lower appeal songs, suggesting that it is easier to predict failure than
to predict success. Overall, the results from Experiments 1 and 2 provided strong support for the argument that
social influence at the individual level is simultaneously responsible for increased inequality and unpredictability in
collective outcomes. by revealing the existing popularity of songs to individuals, the market provides them with real,
and often useful, information; but on the other hand, if they actually use this information, the market inevitably
aggregates less useful information. This result, which is analogous to ‘‘information cascades” .
Risks, so a new pool of participants was used in experiment 3 (older, more male, more international).
Listened 2times more to songs. Participants from Experiment 3 were influenced by the behavior of others in a similar
way to participants in Experiment 2. Results at the collective level were also qualitatively similar. the unpredictability
of success was greater in social influence condition than the independent condition (p < .01). A comparison across
experiments, however, shows that the unpredictability in the social influence condition seems to have decreased
from Experiments 2 to 3 (because listened to more songs?). When considering interventions to a social system, it is
important to distinguish between changes that will affect the distribution of outcomes while preserving relative
positions, and changes that, by contrast, will affect relative positions while keeping the distribution of outcomes
unchanged. these experiments show that one of our interventions, increasing the salience of the popularity of the
songs (Experiments 1 and 2), led to stability in the ordering of the songs coupled with changes in the aggregate
features of the market; whereas our other intervention, changing the pool of participants (Experiments 2 and 3), led
to stability in the aggregate features of the market coupled with changes in the ordering of the songs. Predicting
outcomes, therefore, requires one to understand not only the distribution of individual preferences in the target
population but also to intuit how all those preferences will aggregate when everyone is also paying attention to what
other people are doing.
The experiments presented here provide additional support, suggesting that both inequality and
unpredictability in cultural markets inevitably arise from an individual-level process of social influence. However, a
comparison of the two experiments also reveals that our qualitative understanding of the process is insufficient to
explain the differences between Experiments 2 and 3.
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Elberse (2008): Should you invest in the long tail?
A blockbuster strategy producers have tended to focus their marketing resources on a small number of likely best
sellers. Although such an approach involves substantial risk, they expect that the occasional hit’s huge pay-off will
cover the losses of many misses. Today we live in a world of ubiquitous information and communication technology.
Are blockbuster strategy’s still affective? One school of thought argues that broad, fast communication and easy
replication create dynamics whereby popular products become disproportionately profitable for suppliers. Three
reasons for their view: First and foremost, lesser talent is a poor substitute for greater talent. Second, people are
inherently social, and therefore find value in listening to the same music and watching the same movies that others
do. Third, when the marginal cost of reproducing and distributing products is low—as it certainly is with goods that
can be digitized—the cost advantage of a brisk seller is huge. The long tail theory proposed the opposite. Now that
consumers can find and afford products more closely tailored to their individual tastes, they will migrate away from
homogenized hits.
Investigated: sales patterns in the music and home-video Industries. The charts provide a snapshot of the
value of niche products. As demand shifts from off-line retailers with limited shelf space to online channels with
much larger assortments, is the tail of the sales distribution getting longer and fatter? We found that sales did shift
measurably into the tail. Meanwhile, our research also showed that success is concentrated in ever fewer bestselling
titles at the head of the distribution curve. The importance of individual best sellers is not diminishing over time. It is
growing. Thus digital channels may be further strengthening the position of a select group of winners. It’s vital for
marketers to understand who is responsible for the growing volume of business we see in the tail. Theory of
exposure: First, that a disproportionately large share of the audience for popular products consists of relatively light
consumers, whereas a disproportionately large share of the audience for obscure products consists of relatively
heavy consumers; and second, that consumers of obscure products generally appreciate them less than they do
popular products.
Long tail theory: merchandise assortments are growing because when goods don’t have to be displayed on
store shelves, physical and cost constraints on selection disappear. Online channels actually change the shape of the
demand curve, because consumers value niche products geared to their particular interests more than they value
products designed for mass appeal. The shaded area under the curve will become bigger than the white area over
time. A large number of customers occasionally select obscure offerings that are probably not available in brick-andmortar stores. Meanwhile, consumers of the most obscure content are also buying the hits.
Theory of exposure: two phenomena of distribution: natural monopoly and double jeopardy. Natural
monopoly: light users of a product category are a relatively large proportion of those customers interested in the
popular products. Because it seems that hit products “monopolize” light consumers, he called the phenomenon a
natural monopoly. Double jeopardy: The people who choose obscure products tend to be familiar with many
alternatives; those who know of few alternatives tend to stick with popular products..
Consumption of long-tail offerings is more prevalent among people who tend to stick to a genre. Customers
give lower ratings to obscure titles. A balanced picture emerges of the impact of online channels on market demand:
Hit products remain dominant, even among consumers who venture deep into the tail. It is undeniable that online
commerce has significantly broadened customers’ access’.
Advice to producers:
- Don’t radically alter blockbuster resource allocation or product-portfolio management strategies. A few
winners will still go a long way—probably even further than before.
- When producing niche goods for the tail end of the distribution, keep costs as low as possible. Your odds
of success aren’t favorable here either, and they will probably become less so. 3. When trying to
strengthen your presence in digital channels, focus on marketing your most popular products.
- Leverage your scale to improve online exposure and demand for products across your product portfolio.
Advice to retailers:
- If the goal is to cater to your heavy customers, broaden your assortment with more niche products.
Strictly manage the costs of offering products that will rarely sell. If possible, use online networks to
construct creative models in which you incur no costs unless the customer actually initiates a
transaction.
- Acquire and manage customers by using your most popular products.
- Even though obscure products may have a higher profit margin, resist the temptation to direct
customers to the tail too often, or you’ll risk their dissatisfaction.
Downloaded by David Kwon (rnjs5863@gmail.com)