Effects of economic incentives on creative project-based networks: communication, collaboration and change in the American film industry, 1998-2010

Traditional theories of economic development suggest that industry-specific tax rebates, credits and other incentives will promote sector-specific industrial activity, employment, and establishments in the jurisdictions where they are applied. However, project-based industries, which assemble for the completion of a specific task, are both temporary and highly mobile, presenting a challenge for jurisdictions seeking to draw these kinds of industries through incentive programs. This dissertation employs insights from the theories of organizational ecology and interorganizational networks to explain the uneven success of tax incentive programs targeting the film industry in the United States. ❧ Film production is a project-based industry that is characterized by the interaction of specialized firms in a dynamic interorganizational network. This study examines the relationships among organizations which collaborate in the production of feature films to determine whether incentives targeting this industry produce development outcomes like increased in-state filming, film-sector employment and an increase in film-sector establishments in the states that offer them. The dissertation explores ecological and social network predictors of economic development, and tests the hypotheses that states which have more diverse organizational networks, and a larger number of dominant firms enjoy higher rates of filming, employment and establishment. States whose networks demonstrate specific structures associated with successful collaboration, including the balance of ties the state's firms have with others within and beyond the state, the networks' small-worldness and the degree of network coreness relative to other states, are also predicted to result in more significant and stable development outcomes. ❧ This study uses mixed-effects models to examine the effects of incentive programs, organizational diversity, the presence of dominant firms, and networks of communication and collaboration on economic development outcomes in the contemporary American film industry between 1998 and 2010. The results of the study show that states offering an incentive program increase the amount of filming in their state significantly. States offering an incentive program also increase film-industry employment and establishment, but the size of the effect is more modest for employment and establishment than it is for filming. The amount of money a state offers does not appear in these analyses to make a statistically significant difference, suggesting that states do not need to outspend one another to achieve positive development outcomes. However, post-hoc analysis reveals collinearity among the variables which measure incentives, and suggests that the claim that the presence of incentives is more important for outcomes than the dollar value of those incentives cannot be fully supported until the question of collinearity is resolved. ❧ An even more significant predictor of positive outcomes for incentivizing states is their organizational diversity: having a more diverse organizational community is associated with gains in in-state filming, employment and establishment. The presence of industrially dominant firms, including those engaged in development, marketing and sales activities is related to employment and establishment, suggesting that having indigenous firms of this type promotes industrial stability. The interorganizational network characteristics for states did not significantly predict development outcomes, in part because of the enduring concentration of so much of the national production network in California and New York, and the persistence of these states as dominant centers of production. This persistence suggests that rumors of the demise of these states' film industries have been greatly exaggerated. Implications for theory and policy are discussed.