Does Vertical Integration Spur Investment? Casting Actors to Discover Stars During the Hollywood Studio Era

57 Pages Posted: 27 Feb 2021

See all articles by F. Andrew Hanssen

F. Andrew Hanssen

Clemson University - John E. Walker Department of Economics

Alexander Raskovich

U.S. Department of Justice - Economic Analysis Group

Date Written: May 18, 2020

Abstract

The Hollywood studio era of the 1930s and 1940s was remarkable for its abundance of glamorous stars. In this paper, we investigate whether the vertical structure of the Hollywood studios, by ensuring studio claims to “star capital,” spurred higher levels of investment in discovering stars than was (or is) achievable under alternate regimes (such as today’s film-by-film contracting). The vertical structure consisted of backward integration into “talent” through long-term contracts and forward integration into exhibition through ownership of theater chains. The investment involved the experimental casting of novice actors to gauge audience appeal. Collecting data on thousands of actors whose careers span nearly three-quarters of a century and conducting several different sets of tests, we find evidence of higher levels of investment in actors working under the vertical structure of the studio era than in actors working under alternate regimes.

Keywords: vertical integration, motion pictures, investment

JEL Classification: D21, D22, D23, J41, K12, L14

Suggested Citation

Hanssen, F. and Raskovich, Alexander, Does Vertical Integration Spur Investment? Casting Actors to Discover Stars During the Hollywood Studio Era (May 18, 2020). Available at SSRN: https://ssrn.com/abstract=3756536 or http://dx.doi.org/10.2139/ssrn.3756536

F. Hanssen (Contact Author)

Clemson University - John E. Walker Department of Economics ( email )

Clemson, SC 29634
United States

Alexander Raskovich

U.S. Department of Justice - Economic Analysis Group ( email )

450 Fifth St. NW
Room 9418
Washington, DC 20530
United States
202-307-6606 (Phone)
202-514-5847 (Fax)

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