Strategic alliances and networks of financial relationships in Hollywood

It is well known that filmmaking is a very risky activity. This dissertation investigates the risk management strategies implemented by the Hollywood movie studios to share the risks of film financing. The study analyzes the patterns of co-financing partnerships formed by the Hollywood "Majors" from 1999 to 2002. By doing so, this dissertation incorporates the concept of risk into the study of strategic alliances and defines some theoretical foundations regarding the mechanisms through which risk affects the processes of alliance formation and partner selection. Two main questions are investigated. The first is how risk affects the decision to enter an alliance. The second is how organizations choose their risk-sharing partners.; Results show that risk positively affects the decision to enter co-financing alliances. However, this risk minimization strategy does not fully explain studios' behavior. Budget, one of the main components of a film risk, is found to have a curvilinear relationship with co-financing. In other words, studios accept the risks of big-budget movies in exchange for the possibility of a greater upside potential. This result casts some doubt on the widespread applicability of theories based on the assumption of risk minimization and opens the way to the introduction of theoretical frameworks that emphasize value maximization. The study also found that studios tend to establish co-financing relationships with a small number of preferred partners and recurrently ally with them. This result reinforces the idea that economic action is embedded in social networks.