1. The Downside of Experimentation: Evidence from Television Shows
- Author
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Ankur Chavda, Ecole des Hautes Etudes Commerciales (HEC Paris), and HEC Paris Research Paper Series
- Subjects
Flexibility (engineering) ,History ,Polymers and Plastics ,JEL: M - Business Administration and Business Economics • Marketing • Accounting • Personnel Economics/M.M1 - Business Administration/M.M1.M11 - Production Management ,JEL: D - Microeconomics/D.D8 - Information, Knowledge, and Uncertainty/D.D8.D81 - Criteria for Decision-Making under Risk and Uncertainty ,JEL: L - Industrial Organization/L.L8 - Industry Studies: Services/L.L8.L82 - Entertainment • Media ,Investment (macroeconomics) ,JEL: L - Industrial Organization/L.L2 - Firm Objectives, Organization, and Behavior/L.L2.L23 - Organization of Production ,Degree (music) ,Industrial and Manufacturing Engineering ,Competition (economics) ,Microeconomics ,Incentive ,Resource allocation ,Position (finance) ,JEL: L - Industrial Organization/L.L2 - Firm Objectives, Organization, and Behavior/L.L2.L26 - Entrepreneurship ,[SHS.GESTION]Humanities and Social Sciences/Business administration ,Business ,Business and International Management ,JEL: O - Economic Development, Innovation, Technological Change, and Growth/O.O3 - Innovation • Research and Development • Technological Change • Intellectual Property Rights/O.O3.O31 - Innovation and Invention: Processes and Incentives ,JEL: D - Microeconomics/D.D2 - Production and Organizations/D.D2.D24 - Production • Cost • Capital • Capital, Total Factor, and Multifactor Productivity • Capacity - Abstract
Firms often partially fund new projects for preliminary development rather than fully fund them to fruition. This staged development yields early feedback which can improve an individual project through learning and a portfolio of projects by the termination of weaker ideas. Although prior empirical studies have found a positive relationship between staged development and outcomes, these studies were limited to settings that only allowed for learning, i.e. projects were never terminated. To capture the full effect, this paper exploits a form staged development in the television show industry where a new show’s first episode is filmed and evaluated before commissioning the full show. Using Netflix’s entry into television show production as a source of randomization, a negative treatment effect of piloting on show ratings is measured for shows that are more likely to survive piloting. Mechanism evidence suggests piloting worsens shows by impeding their ability to attract actors and lowering planning of the full season. Hence, staged development can have a downside: the lack of commitment to projects can prevent them from getting the resources and effort necessary for success.
- Published
- 2020