Managerial strategy and organization: A theoretical and empirical investigation of the tapered integration of American film production

This study examines the partial vertical disintegration of American film production in the period following the second World War. During the 1950's and 1960's, the major studios shifted from a system based on internal production of feature films to one in which a large fraction of releases were the work of independent producers who received funding from the studios. The research reported in this dissertation examines ways that this reorganization of production may have served the career interests of studio managers.; The research uses concepts from agency theory to explore differences between the incentives associated with internal and independent production and to form hypotheses about the types of financial performance that might be expected from studio and independent films. The proposition that investment in a mix of independent and studio productions may have helped to shield managers from career hazards associated with inadequate financial performance is explored using a variety of measures of possible managerial career hazards. Measures based on the variances and semivariances of returns to investment in films and measures based on the probability of specified numbers of unsuccessful films were used to examine potential hazards to which managers might be averse.; These hypotheses were tested using data on the financial performance of releases of Warner Brothers Pictures Corporation between 1946 and 1965. These data were collected from the Warner Archives at Princeton University and the University of Southern California. The data represent a census of all releases that were funded and distributed by Warner Brothers during the period.; The study found significant differences between studio and independent production in financial performance. Independent films were characterized by higher average rates of return and higher variability in returns than studio productions. Continuing investment in studio films could be explained as a response to managerial career hazards primarily if managers were averse to the prospect of investing in several unsuccessful films in a given year, regardless of the average performance of their production investments during that period.