Abstract

A formal definition of cultural industries is developed following four distinct features of cultural goods: (a) oversupply, (b) quality uncertainty, (c) network effects and (d) demand reversal. Drawing on economic and socio-psychological notions of ‘network’, increasing returns and social contagion effects are distinguished. Increasing returns may govern the adoption of standards when choices are binary, social contagion explains the diffusion of cultural goods when choices are multiple. Together, the four structural features delineating cultural industries account for curious competitive dynamics prevalent in cultural markets, such as the notorious 10 : 90 proportionality (under which 10% of cultural goods account for 90% of the market), causal ambiguity about the reasons for success, and the formation of fashions. Six managerial recommendations are advanced, focusing on a criticial circulation point triggering self-sustaining diffusion patterns. Finally ‘project-based enterprises’ and ‘network forms of governance’ are identified as the organizational forms most suited to the dynamics of the cultural markets