Market Entry Mode: Evidence From the Golden Age of Hollywood

Abstract

I examine international market entry modal choice using novel data sources on the early years of the U.S. motion picture industry. These data detail how studios built out their international distribution networks and give unusual access to revenues generated across modes. Motion picture exporters used a variety of entry modes: exports, licensed agents, and offices. Studios opened offices in distant, large markets first and used these markets as platforms to build out their distribution network. This pattern indicates that directed search for export customers is important. Offices generated more total revenue than licensed agents. They allowed headquarters to monitor employees through strict control of financial assets, limiting the diversion of intellectual property. (JEL F14, F21, L22, L24, L82)

Business Cycle Implications of Firm Market Power in Labor and Product Markets

“…As Manning (2003) and Hirsch et al (2010) indicate, monopsony power may arise even when there are many firms competing for workers due to the presence of search frictions, heterogeneous preferences among workers, and mobility costs or barriers. 14 An increase in industry concentration could thus enhance firms' market power in wage setting, especially when labor markets are characterized more in line with oligopsonistic competition.…”

“…Price-and wage-stickiness are introduced through quadratic adjustment costs in the price-and wage-setting decisions of firms similar to Rotemberg (1982), while monetary policy is conducted via a Taylor rule on the policy rate. 14 For labor markets with search and matching frictions where firms enjoy some bargaining power, see for example Walsh (2005), Ravenna and Walsh (2012), Colciago and Rossi (2015), and Christiano et al (2016). Bhaskar and To (1999) develop a model of monopsonistic competition in which workers have heterogeneous preferences over a non-wage characteristic of jobs, such as the distance from home to work.…”

“…where Ω t denotes the Lagrange multiplier with respect to the production function in (14), and captures the firm's real marginal cost of production. Here, θ p,t denotes the firms' gross markup of price over marginal cost in the absence of price rigidities:…”

“…Using the National Establishment Time Series (NETS) dataset, Rossi-Hansberg et al (2018) find that, although product market concentration has increased at the national level, it has indeed declined at the local level, with an overall fewer number of national firms competing in more local markets. Karabarbounis and Neiman (2018) andBridgman (2019), who use Compustat and National Accounts data, respectively, find only a modest increase in firm markups in the last few decades.…”