TY  - JOUR
AU  - Gil,Ricard
AU  - Spiller,Pablo T.
TI  - The Organizational Implications of Creativity: The US Film Industry in Mid-XXth Century
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13253
PY  - 2007
Y2  - July 2007
UR  - http://www.nber.org/papers/w13253
L1  - http://www.nber.org/papers/w13253.pdf
N1  - Author contact info:
Ricard Gil
Johns Hopkins Carey Business School
E-Mail: ricard.gil@jhu.edu

Pablo T. Spiller
University of California
Walter A. Haas School of Business
Faculty Bldg. 593
Berkeley, CA 94720
Tel: 510/642-1502
Fax: 510/642-2826
E-Mail: spiller@haas.berkeley.edu
AB  - We develop a basic framework to understand the organization of highly creative activities.  Management faces a fundamental tradeoff in organizing such activities.  On the one hand, since creativity cannot be achieved by command and control or by monetary incentives, internal/contractual production of creative products is plagued by hazards arising from their fundamental characteristics: extremely high input, output and market uncertainty, and the inherent informational advantages of creative talent.  Procuring highly creative products in the market place, though, exposes the distributor to a fundamental risk: independently produced creative goods are generic distribution-wise.  Thus, in procuring creative products in the marketplace, distributors face the unavoidable winner's curse risk.  Since this risk is, to a large extent, independent of the creative nature of the product, the higher the creative content, the higher the relative hazards associated with internal or contractual production.  Thus, internal/contractual production of creative goods will tend to be less prevalent the higher the creative content associated with its production. We apply this insight to the evolution of the U.S. film industry in the mid-XXth century.  We exploit two simultaneous natural experiments -- the diffusion of TV and the Paramount antitrust decision forcing the separation of exhibitors from distributors and prohibiting the use of block-booking.  Both events increased the demand for creative content in movies.  We develop empirical implications which we test by analyzing in detail the decision by distributors to produce films internally or to procure then in the market place, in the face of an increase in the demand for creative content.
ER  -