Behind film performance in China’s changing institutional context: The impact of signals

Abstract

Grounded in signaling theory, this paper investigates the signals reflecting product quality, innovativeness, reputation and cultural background which influence film performance, that is, film survival (duration on cinema screen) and box office success, in China’s changing institutional context. This market has grown substantially and still possesses potential for further development. However, China’s unique institutional context presents challenges. By examining an expanded range of potential signals, two of which have not previously been examined in the literature, namely imported films and enhanced format film formats such as 3D and IMAX, we develop a conceptual framework and argue that signaling theory needs to be combined with institutional context. Similar to findings for film industries in other countries, we find quality and reputational signals including budget, star power, sequels, and online consumer reviews to be important in China. However, unique results are also revealed. Chinese consumers react to an innovativeness signal in that they are specifically attracted to enhanced format films. Film award nominations and prizes are insignificant reputational signals. Once other signals are taken into account, imported films on average do not perform as well as domestic films. We link these findings to China’s unique institutional setting and offer important implications for management, recognizing the challenges to film companies of competing in an increasingly globalized market. This paper is also of relevance to policymakers given their continued efforts in shaping the development of China’s film industry.