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The Downside of Staged Development: Evidence from Television Shows

Author

Listed:
  • Chavda, Ankur

    (HEC Paris)

Abstract

Firms can choose to make investments while retaining the option to terminate them prior to completion. This flexibility can mitigate uncertainty about the investment that is present at the time of its initial funding. However, this flexibility can also detrimentally alter actions within the firm that are necessary for the investment’s success, such as whether scarce firm resources are allocated to the investment. This paper develops a set of hypotheses which predicts flexibility may not improve investment performance when the investment generates limited early-stage learning and requires certain types of resources. These hypotheses are empirically tested in a data set of new U.S. television programs, comparing programs that receive commitment in the form of a straight-to-series order with programs that are flexibly developed through a piloting process. This paper contributes to the literatures on innovation, entrepreneurship, and real options by identifying which investment types will benefit most from flexibility.

Suggested Citation

  • Chavda, Ankur, 2020. "The Downside of Staged Development: Evidence from Television Shows," HEC Research Papers Series 1357, HEC Paris.
    • Handle: RePEc:ebg:heccah:1357
    DOI: 10.2139/ssrn.3477199
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    More about this item

    Keywords

    commitment; experimentation; new product development; television industry;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • M11 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Production Management
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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