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  • December 2014
  • Article
  • Management Science

When to Sell Your Idea: Theory and Evidence from the Movie Industry

By: Hong Luo
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Abstract

I study a model of investment and sale of ideas and test its empirical implications using a novel data set from the market for original movie ideas. Consistent with the theoretical results, I find that buyers are reluctant to meet unproven sellers for early-stage ideas, which restricts sellers to either developing the ideas fully (to sell them later) or abandoning them. In contrast, experienced sellers can attract buyers at any stage and they sell worse ideas sooner and better ideas later. These results have important managerial implications for buyers and sellers and show that, in such contexts, policy interventions that discourage buyer participation—such as stronger intellectual-property protection—may diminish the market for ideas and hurt inexperienced sellers.

Keywords

Market For Ideas; Information Asymmetry; Expropriation Risk; Intermediary; Intellectual Property Protection; Strategy; Intellectual Property; Film Entertainment; Sales; Entertainment and Recreation Industry

Citation

Luo, Hong. "When to Sell Your Idea: Theory and Evidence from the Movie Industry." Management Science 60, no. 12 (December 2014): 3067–3086.
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About The Author

Hong Luo

Strategy
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More from the Author
  • Laboratory Safety and Research Productivity By: Alberto Galasso, Hong Luo and Brooklynn Zhu
  • Infringing Use as a Path to Legal Consumption: Evidence from a Field Experiment By: Hong Luo and Julie Holland Mortimer
  • Managing Medical Device Liability Through Innovation: A Strategic Approach By: Alberto Galasso and Hong Luo
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