Increasing Returns and Social Contagion in Cultural Industries

Abstract

A formal definition of cultural industries is developed following four distinct features of cultural goods: (a) oversupply, (b) quality uncertainty, (c) network effects and (d) demand reversal. Drawing on economic and socio‐psychological notions of ‘network’, increasing returns and social contagion effects are distinguished. Increasing returns may govern the adoption of standards when choices are binary, social contagion explains the diffusion of cultural goods when choices are multiple. Together, the four structural features delineating cultural industries account for curious competitive dynamics prevalent in cultural markets, such as the notorious 10 : 90 proportionality (under which 10% of cultural goods account for 90% of the market), causal ambiguity about the reasons for success, and the formation of fashions. Six managerial recommendations are advanced, focusing on a criticial circulation point triggering self‐sustaining diffusion patterns. Finally ‘project‐based enterprises’ and ‘network forms of governance’ are identified as the organizational forms most suited to the dynamics of the cultural markets.

Artists’ earnings and copyright: A review of British and German music industry data in the context of digital technologies

“…The arts show an oversupply of creative ambitions (Hirsch, 1972;Peterson and Berger, 1975) combined with curious 'winner-take-all' demand patterns (Frank and C ook, 1995;Kretschmer, et al, 1999). This has two main effects on copyright contracting.…”

Image differentiation with corporate environmental responsibility

“…These include a mix of instrumental/economic and social considerations. Instrumental considerations include whether it is possible to make a prior estimation as to a practice's value and effect; how visible the benefits are post adoption (Rogers, 2003); and the extent to which considerations of social contagion and network externalities render its value dependent upon aggregate demand (Becker, 1991;Kretschmer et al, 1999). These may determine whether managers emulate practices seen in other organizations in the belief that rivals' adoption of a practice is indicative of private information as to its value (Haunschild, 1993;Strang & Macy, 2001).…”

Music consumption at the dawn of the music industry: the rise of a cultural fad

“…The characteristics which can make a cultural product worth to generate distinction are several such as its rarity, its diversity, its degree of customization (Snyder & Fromkin 1980, Hazlitt 1818. However, in the case of cultural consumption, the extent to which a product can favor processes of distinction depends on the various use made by other consumers (Kretschmer, Klimis & Choi 1999, Holt 1995, a proxy which could be measured by the number of people belonging to the different social fields who have already bought that product. Thus, the larger is the total purchase of a product within a given social field, the higher will be the value of this product for those people willing to imitate that specific social field, the lower for those who seek distinction.…”