Does star power mitigate the negative effect of cultural distance on box office revenue? Evidence from Taiwan

ABSTRACT

This paper examines the effects of star power and cultural distance on box office revenue. Movies released in Taiwan from 2015 to 2019 are collected as the sample. Combined it with the data of movies which were not imported in Taiwan, we propose the Heckit model to cope with the endogeneity decision for distributors as the empirical methodology for the sample selection problem. The results indicate that cultural differences have a negative and significant impact on box office performance. In addition, a U-shape relationship between box office revenue and cultural distance is observed, which improves the cultural discount theory. Star power is measured in several different ways and consistently shows a positive and significant effect on box office revenue. Finally, our results further indicate that with the same cultural distance, the movies with distinguished cast can generate higher box office revenue than the movies without distinguished cast. Star power is sufficient to mitigate the negative effect resulting from cultural differences.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ In 2018, USD 1 = NTD 30.16.

² In stage one, we established a selection criterion that the box office revenue of a movie is eligible to be imported to Taiwan and used the data with the movies released in Taiwan and those non-imported foreign movies in Taiwan. More details will be provided in the Empirical model section.

³ According to Hong Kong Film Development Council, in 2020, Hong Kong’s top two importers of movies were the United States (31%) and Japan (19%). 11% of the movies were produced domestically in Hong Kong. This distribution of movie imports by country of origin is similar to that in Taiwan https://www.fdc.gov.hk/en/index.html.

⁴ From 2002 to 2004, 62.8 and 11.8% of box office revenue came from the United States and Hong Kong, respectively, the two largest movie-exporting countries in Singapore.

⁵ Taiwan Film and Audiovisual Institute: https://www.tfi.org.tw/BoxOfficeBulletin/weekly, Hofstede Insights: https://www.hofstede-insights.com/, @movies: http://www.atmovies.com.tw/home/, Internet Movie Database (IMDb): https://www.imdb.com/, Yahoo! movies: https://movies.yahoo.com.tw/, Academy Awards (aka the Oscars): https://www.oscars.org/, The Numbers: https://www.the-numbers.com.

⁶ Power Distance Index (PDI) is designed to measure how much a society or organization accepts the uneven distribution of power. In a society with a large PDI, titles, identification and positions are extremely important and people take privileges for granted. In a society with a small PDI, however, people treat each other equally and respect each other. Individualism versus Collectivism (IDV): If a social organization is dominated by collectivism, people will stress the importance of group relation and loyalty to the groups. In the organization dominated by collectivism, the priority is the groups’ interest and all decisions are made for the groups’ interest. Higher score means this country’s preference over individualism while lower score means the country’s preference over collectivism. Masculine versus Femininity (MAS): Male socialism stresses achievements and success, and treats positions and material achievements as the symbol of success while female socialism emphasizes caring for others, stressing life quality, modesty and peace. Higher index number means higher tendency of male socialism while lower index number means higher tendency of female socialism. Uncertainty Avoidance Index (UAI) refers to the level of society’s tolerance of uncertainty. If a country has a high level of UAI, people will feel anxious or intolerable for uncertainty or ambiguity and thus construct all kinds of rules and systems in order to mitigate their pressure and to create a mechanism to enhance the predictability of all situations. Long versus Short-Term Orientation (LTO) refers to how important the society perceives the future. If society stresses the importance of long-term oriented culture, its people will treat their future as an important matter, deal with their daily affairs from a dynamic standpoint, and stress the importance of saving, frugality and reserve. If a society stresses short-term oriented culture, people will focus on the immediate benefits. Administrators tend to stress the importance of immediate benefits. Most supervisors evaluate staffs’ performance based on their short-term achievements, asking for quick success with no delay whatsoever. Indulgence versus Restriction (IVR) refers to how much social members control their desire. Indulgence means a carefree and enjoyable daily life within a loose social culture whereas restriction reflects a belief that a joyful life has to be controlled and administered by strict disciplines within a tense social culture.

⁷ The literature on cultural events (in particular on international contests like the Eurovision Song Contest) found that geographical proximity sometimes is a better explanation than cultural distance. For example, Fenn et al. (2006) analyzed the historical voting data in the Eurovision Song Contest and found that there existed some patterns between countries’ voting behaviors based on geographical proximity. Similarly, Spierdijk and Vellekoop (2009) pointed out that geographical factors significantly affect voting bias in the Eurovision Song Contest, even after correction for culture, language, religion and ethnicity. Therefore, we used the GeoDist data from CEPII http://www.cepii.fr/CEPII/en/bdd_modele/presentation.asp?id=6 to specify an indicator of geographical proximity, measured by the great-circle distance between the most populous city in Taiwan and the most populous city in the movie-exporting country. The great-circle distance was added to the analysis for the purpose of comparison and was still consistently found to have a negative effect on box office revenue. (Results are available upon request.) We thank an anonymous reviewer for this observation.

⁸ The list of highest grossing stars shows the highest 100 grossing Star Scores based on the worldwide box office. The Star Scores in the list represent points assigned to each of the leading stars of top 100 movies in the current year and two preceding years. For appearing in the number one movie in a year a star gets 100 points, the number two movie 99 points and so on. This rewards actors for appearing in a number of hit films over the course of three years more than starring in just one monster hit over the same time period https://www.the-numbers.com/box-office-star-records/worldwide/yearly-acting/.

⁹ The authors thank an anonymous reviewer for this insightful suggestion.

¹⁰ In the period of 2015–2019, the average exchange rate: USD 1 = NTD 31.15.

¹¹ This study employed the first-order condition of cultural distance function to find out the extreme value and then discussed what cultural distance between movie-exporting country and Taiwan would produce the lowest box office revenue.

Additional information

Funding

This study was funded by Ministry of Science and Technology, Taiwan (MOST103-2410-H-128-002).

Notes on contributors

Pei-An Liao

Pei-An Liao, PhD., is a professor in the English Taught Program in International Business. His research focus is in the area of applied econometrics, agribusiness, and international trade.

Min-Xue Zhuang

Min-Xue Zhuang is a research assistant in the Department of Economics. Her research interests include socioeconomics and micro-econometrics.

Wen-Jhan Jane

Wen-Jhan Jane, PhD., is a professor in the Department of Economics. His recent research focuses on industrial organization, labor economics, and economics of sport and recreation.

Yuan-Lin Hsu

Yuan-Lin Hsu, PhD., is a professor in the Department of Finance. Her research focuses on behavioral finance, investment psychology, text mining, and asset pricing.