Review

Reviewed Work(s): Creative Industries: Contracts between Art and Commerce by

Richard E. Caves
Review by: Candace Jones
Source: Administrative Science Quarterly , Sep., 2001, Vol. 46, No. 3 (Sep., 2001), pp.
567-571
Published by: Sage Publications, Inc. on behalf of the Johnson Graduate School of
Management, Cornell University

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 Book Reviews

Part 2, "How Work Really Gets Done," is a tour de force in

documenting the "vicious work time cycle" and the difference
between "real engineering" (technical work) and managing,
helping, and planning-all of which engineers view as impedi-
ments to getting their own (real) work done. No one has all the
technical expertise required for this project; all the engineers
are learning from one another or on the job. There is no organi-
zational recognition of helping others, and some (like Matt,
who can't say "no" to others who need help) are reluctant to
ask for help themselves. By contrast, people like Sarah disrupt
everyone when they face a critical problem, comfortable with
asking others for help but rarely offering it in return.

Crises, in the form of deadlines and postponed task comple-

tion, shape the patterning of resource and time allocation.
Perlow quotes one engineer: "I can hardly get my coat off
before the crises start. Every morning my priorities seem to
shift" (p. 87). Both this crisis mentality and interruptions due
to asking one another for help and having to give help perpet-
uate one another. This creates what Perlow calls the vicious
work time cycle, a cycle disadvantageous for the life quality
of individual employees, but also for the corporation meeting
its business goals.

Finding Time is most innovative in part 3, "The Possibility of

Change," in which Perlow shifts gears from documenting
what is to what could be. She persuades her subjects to initi-
ate two experimental interventions, scheduled "quiet time"
and "interaction time," designed to optimize periods for "real
engineering" and interactions with one another to enhance
product development. She found that blocks of time they
could work alone without interruptions during the normal
work day enabled engineers to be more productive. But
equally important, she found that the engineers reverted to
old work patterns after the interventions because the corpo-
rate reward system remained the same.

Finding Time should be required reading for managers and

human resource professionals, as well as everyone seeking
to understand the interplay among work hours, life quality,
and productivity. The bottom line is that there is a business
case for rethinking and restructuring the temporal organiza-
tion of work, but only if reward systems change as well.

Phyllis Moen
Ferris Family Professor of Life Course Studies
Director, Cornell Careers Institute, a Sloan Center for the
Study of Working Families
Cornell University
Ithaca, NY 14853

Creative Industries: Contracts between Art and

Commerce.
Richard E. Caves. Cambridge, MA: Harvard University Press,
2000. 368 pp. $45.00.

Creative Industries is aimed at scholars interested in the eco-

nomics of culture, cultural industries, and cultural studies and

567/ASQ, September 2001

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 policy. Its purpose is to provide an economic explanation for
why creative industries are organized as they are. Creative
industries are defined as "goods and services" associated
with "cultural, artistic, or simply entertainment value" (p. 1).
Caves synthesizes prior sociological research, historical case
studies, popular press articles, and insider accounts from a
variety of creative industries, including book publishing,
Broadway theater, opera, symphonies, movies, television,
popular music recording, art museums, and games and toys.
He weaves these various sources into a seamless and histor-
ically rich account of why and how a particular industry uses
options contracts or is organized in firms (i.e., a symphony) or
through contracts in a market (i.e., film). The book's exten-
sive citations are a gold mine of information for those study-
ing creative industries.

Caves uses contract theory and industrial organization eco-

nomics to explain why deals and contracts are structured a
particular way and why some activities occur within firms
while others take place in markets. A contract governs the
conduct of those engaged in transactions by specifying who
provides what inputs when and who receives what rewards
when. Options contracts are a vehicle to handle projects with
multiple parties and long duration by allocating decision rights
(i.e., to exercise or sell the option) to parties contributing
funds and by allowing parties to assimilate new information
at each sequence of a project. Industrial organization eco-
nomics focuses on the number and power of firms in an
industry and why transactions occur in firms versus between
independent agents in markets.

Caves argues that creative industries are fundamentally dif-

ferent from "humdrum" industries on seven fundamental
properties. He describes these properties, gives each a
catchy label that is used throughout the book, and explains
how they create organizational and contracting challenges
that must be resolved. I briefly summarize them, with Caves'
labels in italics: (1) Demand uncertainty exists because con-
sumer reactions to a product are neither known beforehand
nor easily understood afterwards. Thus, nobody knows what
will happen. The challenges for transacting parties are to
share high risk and incorporate new information as it
becomes available. (2) Workers care about originality, techni-
cal prowess, harmony, etc. of creative goods. Thus, workers
value and care about art for art's sake, in contrast to workers
in humdrum industries who, Caves assumes, only care about
wages and work conditions. Workers' involvement with cre-
ative goods alters how work is organized because artists
rarely can explain, let alone stipulate, how the muse guides
their choices. This creates contracting and incentive chal-
lenges. (3) Some creative products are complex, requiring
diversely skilled inputs. Each skilled input must be present
and perform at some minimum level to produce a valuable
outcome, creating the motley crew property. The challenge is
to select appropriate team members, coordinate and
sequence their activities, and maintain their cooperation. (4)
Products are differentiated by quality and by uniqueness
(each product is a distinct combination of inputs), leading to
infinite variety-more products for artists to create, gatekeep-

568/ASQ, September 2001

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 Book Reviews

ers to select, and consumers to experience than there is

time or resources to do so. Resources and choices may not
align, and in some creative industries this creates excessive
fixed and/or sunk costs that cannot be recovered through a
ticket price (i.e., buying, storing, and cleaning paintings for a
museum). (5) Skills are vertically differentiated. Artists are
ranked on their skills, originality, and/or proficiency in creative
processes and/or products, resulting in an A list/B list. The
challenge is when B may serve as a viable and less costly
substitute for A. (6) When coordinating complex projects with
diversely skilled inputs, time is of the essence (time flies),
especially since time is literally money once the project is
underway. Challenges include selecting both qualified and
available inputs, avoiding holdup when an indispensable input
demands better terms by threatening to withhold services,
and coordinating inputs temporally to avoid transaction and
contracting costs. (7) Creative products have durability
aspects that invoke copyright protection, allowing a creator or
performer to collect rents (ars Ionga). Challenges include col-
lecting rents, especially if they occur in small and numerous
lumps (i.e., royalties on songs played as elevator music), and
contracting future rents (who shares in residuals and how
much).

Organized into five parts, the book explores these seven

properties through in-depth case studies that best illustrate a
specific organizational and contracting challenge and how it
was handled. Part 1 focuses on simple creative goods. It
examines artists' training, values and objectives gained
through apprenticeship systems, artists' relationships with
gatekeepers who select creative products or services for
development or promotion, how options contracts are used
to share risk and incorporate new information, and how
superstar effects generate highly skewed income distribu-
tions within a creative industry.

Part 2 focuses on complex creative goods that require teams

with diversely skilled members. Caves examines how
demand uncertainty shifted Hollywood studios from organiz-
ing teams under long-term contracts within a firm to per-
project contracts in markets. In markets, contracts are used
to harmonize team members' interests, given uncertainty,
coordinate team members temporally (i.e., pay or play claus-
es), and sequence product stages. He argues that rankings (A
list/B list) lower transaction and contracting costs by match-
ing A- and B-list players to one another and setting bound-
aries for rents that each may demand. Guilds, which arose
due to earlier contract failures, provide contract frameworks
for A- and B-list participants and supply B-list participants
when A-list participants are unavailable (time flies). Because
nobody knows what will succeed, participants need to signal
quality and often do so by sinking more costs into a project.
Ironically, options contracts may facilitate "nurturing ten-ton
turkeys." When deteriorating returns still exceed the costs
remaining to be incurred, investors are likely to exercise their
option. When the various options are totaled, they may great-
ly exceed expected returns. A challenge of complex creative
goods is that infinite variety results in many creative goods
being produced (i.e., CDs, books, movies) of which con-

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 sumers purchase only a few (nobody knows). Thus, large
supplies of goods are inventoried and shipped, creating scale
economies and high concentration in distribution.

Part 3 discusses demand for creative goods, particularly the

role of consumers and certifiers. Caves explores how dedi-
cated consumers create product "buzz," enhancing demand
through word-of-mouth recommendations. Certifiers' (i.e.,
critics, appraisers) advice on what creative goods merit con-
sumers' attention resolves the problem of infinite variety for
consumers and allows them to economize on time and
resource investments. Consumers also play a role in the
innovation process of creative industries by their willingness
to pay for a new style, which feeds back to influence produc-
tion and distribution structures.

Part 4 explores cost conundrums and cost disease. Cost

conundrums occur when suppliers of a single creative good
cannot charge admissions that cover fixed costs. A nonprofit
(or donor-supported) organization is used to resolve this prob-
lem. Case studies on art museums, symphonies, and opera
companies show how pursuit of quality or elaborateness
incurs high fixed costs. For example, symphonies enhanced
music quality by having full-time, dedicated musicians rather
than musicians on spot contracts, incurring high fixed salary
costs. To cover these fixed costs in the U.S., donors formed
boards of directors and used their personal networks to gov-
ern symphony obligations and opportunities. Consumers pro-
vide feedback, via donations, on managers' selection of
plays, art exhibits, or musical programs. Some industries
have "cost disease," an inability to gain productivity with
each performance. Broadway theaters use two coping strate-
gies: reducing the number of plays while running hits longer
to recoup costs or engaging in blockbuster plays.

Part 5 examines how durability aspects of creative goods (ars

Ionga) influence how rents are pursued through time and
space. For example, painters cannot collect rents from those
who view their paintings in galleries or museums, whereas
songwriters or performers can collect rents from those who
play their music. Artists and publishers have incentives to
engage in payola (i.e., paying disc jockeys to play their songs)
because copyrights allow them to collect rent on each song
played or record sold. The costs of increased exposure are
low (i.e., only marginal costs need to be covered) compared
with the benefits that an enlarged demand has for generating
additional rents. Many creative goods generate small, numer-
ous rents, and it is more efficient for collectives-such as
ASCAP and BMI for artists and publishers in music-to moni-
tor, gather, and distribute rents for copyright holders. Gate-
keepers, who filter what products to keep or throw out, play
a central role in managing the costs of storing goods for and
arranging trades or rentals to eager owners and users. Finally,
both new and accumulated creative goods compete for con-
sumers' attention, and the mix of stocks and flows in cre-
ative products is important for understanding industry
change.

Caves has written a book that translates economic ideas into

everyday language with an engaging, even amusing tongue-

570/ASQ, September 2001

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 Book Reviews

in-cheek style. Although the book is aimed at those with only

an introductory familiarity with economics, it is most useful
for readers who are conversant in and comfortable with eco-
nomic theories. For example, in the later chapters, he dis-
cusses at length how marginal cost drives particular kinds of
contracts and governance forms. For those with an economic
bent, this book provides a solid foundation upon which to
build their own research in creative industries. Even those
doing research in the industries Caves characterizes as
"humdrum" may find the seven fundamental properties of
creative industries applicable to understanding the effects of
creativity on contracting. For those studying knowledge-inten-
sive industries, such as professional services, biotechnology,
or real-time computing, Creative Industries could offer some
interesting research possibilities.

Candace Jones
Organization Studies Department
Boston College
Chestnut Hill, MA 02467

Management and Cultural Values: The Indigenization of

Organizations in Asia.
Henry S. R. Kao, Durangand Sinha, and Bernhard Wilpert,
eds. New Delhi: Sage, 1999. 332 pp. $49.95.

Here we are in the twenty-first century and we are still grap-

pling with many unanswered questions from the past. For
example, as we have moved increasingly toward a "global vil-
lage," have cultural differences around the world become
less important to managers? Even if Western management
theories might not have fit the rest of the world in the past,
are Western ways more likely now to be applicable globally?
Management and Cultural Values can definitely be of value to
academics interested in these issues. The book comes down
hard on the side of indigenization (not defined in the book, by
the way), as opposed to universalization. There may indeed
be more contact and communication across cultures now,
resulting in some "individual cultural proclivities" being
"whittled down and rounded off" (p. 23). But the theme of
this collection of papers is that the globalization glass is not
half full, it is still half empty, or more than half empty. The
tone of this volume is consistent with the oft-repeated quote
from Honda co-founder Takeo Fujisawa, suggesting that
Western and Asian management ideas may be "95 percent
the same but differ on all important aspects" (p. 21; empha-
sis added).

Except for chapter 1, an essay on leadership by Wilpert, the

book sticks more or less to this one theme: it is not one
world, it is many worlds. The lone moderate in the group of
21 contributors is Wilpert, who concludes that "leadership
and management are both culture-specific and tending
towards universally valid characteristics" (p. 41). Other selec-
tions in the book focus squarely on the culture-specific
aspects. In fact, much of the book leaves the impression that
comments like Wilpert's are incomplete or wrong. Those

571/ASQ, September 2001

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