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Financial Slack, Strategy, and Competition in Movie Distribution

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  • Gabriel Natividad

    (Leonard N. Stern School of Business, New York University, New York, New York 10012)

Abstract

Organizations that enjoy some slack are believed to make good use of it in their strategic decisions. Using panel data on firms in the U.S. film distribution industry between 1985 and 2007, this article examines how financial slack affects the volume of new product introductions, the competitive strategies for those releases, and their economic performance. Unexpectedly successful “sleeper” films are exploited as a source of exogenous financial slack in the econometric analysis. The results suggest that unexpected financial slack leads to more product introductions, less marketing support for the new products, and no improvement in performance. These findings are consistent with an attribution process in which managers attempt to replicate extraordinary success even if it is largely random, providing real-world evidence of a mechanism recently developed in theory and laboratory research.

Suggested Citation

  • Gabriel Natividad, 2013. "Financial Slack, Strategy, and Competition in Movie Distribution," Organization Science, INFORMS, vol. 24(3), pages 846-864, June.
    • Handle: RePEc:inm:ororsc:v:24:y:2013:i:3:p:846-864
    DOI: 10.1287/orsc.1120.0765
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    4. Yinbo Feng & Ming Hu, 2017. "Blockbuster or Niche? Competitive Strategy under Network Effects," Working Papers 17-13, NET Institute.
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    8. Jordi McKenzie, 2023. "The economics of movies (revisited): A survey of recent literature," Journal of Economic Surveys, Wiley Blackwell, vol. 37(2), pages 480-525, April.
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