When to Sell Your Idea: Theory and Evidence from the Movie Industry

38 Pages Posted: 30 Nov 2011 Last revised: 16 Apr 2014

Hong Luo

Harvard Business School - Strategy Unit

Date Written: April 11, 2014

Abstract

I study a model of investment and sale of ideas and test its empirical implications using a novel data set from the market for original movie ideas. Consistent with the theoretical results, I find that buyers are reluctant to meet unproven sellers for early-stage ideas, which restricts sellers to either developing the ideas fully (to sell them later) or abandoning them. In contrast, experienced sellers can attract buyers at any stage and they sell worse ideas sooner and better ideas later. These results have important managerial implications for buyers and sellers and show that, in such contexts, policy interventions that discourage buyer participation — such as stronger intellectual-property protection — may diminish the market for ideas and hurt inexperienced sellers.

Suggested Citation

Luo, Hong, When to Sell Your Idea: Theory and Evidence from the Movie Industry (April 11, 2014). Management Science, Forthcoming; Harvard Business School Strategy Unit Working Paper No. 12-039. Available at SSRN: https://ssrn.com/abstract=1966530 or http://dx.doi.org/10.2139/ssrn.1966530

Hong Luo (Contact Author)

Harvard Business School - Strategy Unit ( email )

Harvard Business School
Soldiers Field Road
Boston, MA 02163
United States

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