The importance of a good start:The effects of signals from high status 3rd

party sources on sales

Monika Kackovic

Empirical Setting Primary

Empirical Setting

Product quality is not readily discernible

Primary

Empirical Setting

Product quality is not readily discernible Widespread use of proxies for quality

Primary

Empirical Setting

Product quality is not readily discernible Widespread use of proxies for quality High failure rates

Primary

A question…

A few hints…

Similar dimensions Made and sold in first 3 years of career

The importance of a good start…In this presentation…

Overview of the paper Theoretical framework Empirical setting – Visual Arts Data set & results Discussion Conclusion

The Importance of a Good Start

Overview of the paper…

Signals & sources of signals 3 years of competitive activity Status & stake of the source Individual, multiples and sequences of signals Different art collectors

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).

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

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).

Primary art market - 3rd party sources

3rd party sources with a financial stake 3rd party sources with a non- financial stake

(e.g. art show, solo exhibition at a gallery) (e.g. reviews and awards)

Primary art market - Signals

Primary art market - Signals

Primary art market - Signals

Primary art market - Signals

Primary art market - Signals

Primary art market - Customers

Dorothy and Herbert and Vogel

Primary art market - Customers

ABNAMRO Bank

Akzo Nobel Dorothy and Herbert and Vogel

ING

Primary art market - Customers

Stedelijk Museum, Amsterdam

ABNAMRO Bank

Akzo Nobel Dorothy and Herbert and Vogel

ING

Primary art market - Customers

Stedelijk Museum, Amsterdam

ABNAMRO Bank

Akzo Nobel Dorothy and Herbert and Vogel

ING

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 beeldende kunsten

Rijksakademie van beeldende kunsten

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The Importance of a Good Start

What does this mean…

Early signal – non-financial stake

The Importance of a Good Start

What does this mean…

Early signal – non-financial stake Early signal – financial stake

The Importance of a Good Start

What does this mean…

Early signal – non-financial stake Early signal – financial stake First career sequence –

financial stake followed by non-financial stake

The Importance of a Good Start

What does this mean…

Early signal – non-financial stake Early signal – financial stake First career sequence –

financial stake followed by non-financial stake Legitimacy

The question…

The answer…

Trash is King (2012) Silver Tree Mother of Pearl (2005)

yarn, found objects ceramic, mother-of-pearl glazing, galvanized iron

90cm x 170 cm x 30cm 150cm x 310cm x 90 cm

Nathan Coley, 2007

Thank you

Private art collectors Contemporary art museums UvA FEB students