The countervailing effects of spatial competition in the performing arts: examining local versus traded market performance

Intense competitive pressure in a local geographic market may diminish an organization’s revenues in that market but increase its innovation output and revenue opportunities in other geographic markets. This trade-off between local and traded market performance determines an organization’s combined revenues; yet, it has not been conceptually articulated or empirically examined at the organization level. Using data from the performing arts sector, we isolate the differential effects of local competition on local and traded market revenue. The results offer compelling evidence that competitive density in the local market has a negative effect on local market performance but a positive effect on innovation and traded market performance. The implication is that organizations can overcome the negative effects of local competition through innovation and through the exploration of opportunities for traded revenues. We further find that smaller organizations are more likely to innovate in response to competitive density, but that they lack the resources and capabilities required to translate innovation into increased revenues.