The importance of a good start: The effects of signals from high status 3 rd party sources on sales

1. The importance of a good start: The effects of signals from high status 3rd party sources on sales Monika Kackovic

2. Primary Empirical Setting

3. Primary Empirical Setting • Product quality is not readily discernible

4. Primary Empirical Setting • Product quality is not readily discernible • Widespread use of proxies for quality

5. Primary Empirical Setting • Product quality is not readily discernible • Widespread use of proxies for quality • High failure rates

6. A question…

7. A few hints… Similar dimensions Made and sold in first 3 years of career

8. The importance of a good start… • In this presentation… • Overview of the paper • Theoretical framework • Empirical setting – Visual Arts • Data set & results • Discussion • Conclusion

9. Overview of the paper… The Importance of a Good Start • Signals & sources of signals • 3 years of competitive activity • Status & stake of the source • Individual, multiples and sequences of signals • Different art collectors

10. Theoretical framework • Liability of newness (Stinchcombe, 1965) is a concept to help explain why new market entrants have higher rates of failure than established actors. • Legitimacy helps mitigate liability of newness (Hannan and Freeman, 1984; Shepherd et al., 2000). • One way to establish legitimacy is to gain signals and/or affiliations with high status 3rd parties (Stinchcombe. 1965; Stuart et al., 1999, Aldrich and Fiol, 1994).

11. Theoretical framework • Signals that are exclusive and carry a penalty or bond are strong proxies for quality (Akerlof, 1970, Ippolito, 1990) • Different types signals and sources of signals • , 1990) • Different types signals and sources of s

12. Theoretical framework • The source of the signal and the type of stake is important because the higher the perceived credibility of the source the greater the positive impact on consumers’ behaviors (Levin et al., 1997; West and Broniarczyk, 1998). • Status can be seen as the prime cause of source credibility exactly because high status actors reflect and influence the ideas of the group in which they operate (Homans, 1950, Washington and Zajac, 2005).

13. Primary art market - 3rd party sources 3rdparty sources with a financial stake 3rdparty sources with a non- financial stake (e.g. art show, solo exhibition at a gallery) (e.g. reviews and awards)

14. Primary art market - Signals

15. Primary art market - Signals

16. Primary art market - Signals

17. Primary art market - Signals

18. Primary art market - Signals

19. Primary art market - Customers Dorothy and Herbert and Vogel

20. Primary art market - Customers ING ABNAMRO Bank Dorothy and Herbert and Vogel Akzo Nobel

21. Primary art market - Customers ING ABNAMRO Bank Stedelijk Museum, Amsterdam Dorothy and Herbert and Vogel Akzo Nobel

22. Primary art market - Customers ING ABNAMRO Bank Stedelijk Museum, Amsterdam Dorothy and Herbert and Vogel Akzo Nobel

23. Rijksakademie van beeldende kunsten • est. 1870 • 1990 post art school residency • artistic research, networking • 2,000 applications/ 25 admitted/ 2 yrs. (new situation in 2014/ 1 year program) • 522 artists • 1990 – 2008 • 5,000 signals • 1,100 sales events Rijksakademie van beeldendekunsten

28. What does this mean… The Importance of a Good Start • Early signal – non-financial stake

29. What does this mean… The Importance of a Good Start • Early signal – non-financial stake • Early signal – financial stake

30. What does this mean… The Importance of a Good Start • Early signal – non-financial stake • Early signal – financial stake • First career sequence – • financial stake followed by non-financial stake

31. What does this mean… The Importance of a Good Start • Early signal – non-financial stake • Early signal – financial stake • First career sequence – • financial stake followed by non-financial stake • Legitimacy

32. The question…

33. The answer… Trash is King (2012) Silver Tree Mother of Pearl (2005) yarn, found objectsceramic, mother-of-pearl glazing, galvanized iron 90cm x 170 cm x 30cm 150cm x 310cm x 90 cm

34. Nathan Coley, 2007

35. Thank you Private art collectors Contemporary art museums UvA FEB students