Organizational and epistemic change: The growth of the art investment field

Abstract

What can studying the creation of knowledge tell us about how new technical fields emerge and develop? This paper shows how a knowledge community may be necessary to support the legitimacy of new products that undergo performance evaluation before purchase. Using historical and ethnographic data covering half a century, we review the growth of the art investment field through an epistemic cultures lens. Technical knowledge about the financial characteristics of art has been developed alongside practical knowledge about how best to structure investment ventures. Investment venture success has been determined by legitimacy as much as by profitability, given durable expectations about the evaluation and monitoring of investments. The growth of knowledge, practices and tools was thus a necessary condition for the recognition of artwork as an asset class. Crucially, the epistemic cultures approach highlights deepening knowledge, resources and professional expertise, and their development through experimentation, failures and negative knowledge. This shows accounting issues contributing to technical field legitimacy and emergence, such as the role of knowledge production, valuation practices and receptive environments, and the distinction between legitimate investments that can be valued and investment venture profitability.

The economics of aesthetics and record prices for art since 1701

“…For example, they started offering credit to potential buyers in the 1980s-a controversial move at the time (Lacey, 1998;Coslor and Spaenjers, 2013) that may have pushed up prices in some cases by alleviating bidders' credit constraints. More recently, auction houses have also started guaranteeing minimum prices to sellers of high-end works.…”

“…A popular book by Rush (1961) presented indices for different artistic genres and even included a comparison with stocks. Early efforts to estimate the investment performance of art were hindered by difficulties in collecting price data (Coslor and Spaenjers, 2013). Academic interest in the topic grew with a number of contributions (e.g., Anderson, 1974;Baumol, 1986;Goetzmann, 1993) that used historical auction sales data compiled by art historian Reitlinger (1961) in his influential book "The Economics of Taste: The Rise and Fall of Picture Prices, 1760-1960".…”

Uncertainty, strategic sensemaking and organisational failure in the art market: What went wrong with LVMH's investment in Phillips auctioneers?

“…These decisions can be related to selecting and pricing (or evaluating) artworks in gallery exhibitions or auction sales (Velthuis, 2005). Although price transparency in the art market has recently increased due to the existence of art price databases and indices (Coslor & Spaenjers, 2016), available information is incomplete because recorded prices only represent artworks sold publicly through the auction process and exclude private transactions in galleries and auction houses (Coslor, 2016). Therefore, the valuation of an artwork can rarely be based on complete information; instead, available information is complemented by qualitative assessments.…”

Behavioural heterogeneity in wine investments

“…Others have made more direct comparisons with traditional financial assets and examined the risk-return characteristics of a variety of collectibles (e.g. Hiraki, Ito, Spieth and Takezawa, 2009;Dimson and Spaenjers, 2011;Dimson, Rousseau and Spaenjers, 2015;Coslor and Spaenjers, 2016;Martin, 2016). However, collectibles are also known to be affected by emotions, and are thus often referred to as emotional assets.…”