international trade in film and the self-sufficiency ratio
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This article was downloaded by: [York University Libraries]On: 20 November 2014, At: 17:37Publisher: RoutledgeInforma Ltd Registered in England and Wales Registered Number: 1072954Registered office: Mortimer House, 37-41 Mortimer Street, London W1T 3JH,UK
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International Trade in Film andthe Self-Sufficiency RatioJeongho OhPublished online: 17 Nov 2009.
To cite this article: Jeongho Oh (2001) International Trade in Film and theSelf-Sufficiency Ratio, Journal of Media Economics, 14:1, 31-44, DOI: 10.1207/S15327736ME1401_03
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International Trade in Film and theSelf-Sufficiency Ratio
Jeongho OhDepartment of Communication Studies
Northwestern University
This study investigates the determinants of the self-sufficiency ratio, defined as theproportion of domestic films’ share in gross box office revenues. The ordinary leastsquares analysis and error components model reveal that gross domestic product, boxoffice revenue, and some measures of cultural distance from the United States primar-ily explain the variations in self-sufficiency ratios across countries. The dummy vari-able for English-speaking countries provides no explanatory power.
Films and television programs share unique characteristics in that they have highfirst copy costs combined with low marginal costs of distribution, are not rival inconsumption, generate externalities, and are affected by a cultural handicap acrossnational boundaries (Hoskins, McFadyen, & Finn, 1997; Wildman & Siwek,1988). These characteristics make the pattern of international trade of media prod-ucts unusual compared to the trade of typical private goods. There are, however,differences between the film and television program trade, including governmentregulations and the magnitude of trade flow.
With respect to the role of government regulation, Wildman and Siwek (1988)stated that “governments play a much larger role in determining trade flows in tele-vision programming than they do in films” (p. 49). For instance, quotas are morewidely used for trade in television programs than for trade in films. Thus marketmechanisms may work better in the film trade than in the television program trade.
In the television program trade flows, U.S. exports accounted for about halfof the foreign programming purchased by Western European countries in 1995,with the remainder of the programming flowing from the United Kingdom toother European countries, France to Belgium, Germany to Switzerland, and be-
THE JOURNAL OF MEDIA ECONOMICS, 14(1), 31–44Copyright © 2001, Lawrence Erlbaum Associates, Inc.
Requests for reprints should be sent to Jeongho Oh, 186 Mill Street, Apartment J–3, Athens,OH 45701. E-mail: [email protected]
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tween Nordic countries (“European TV Programme Budgets,” 1997). These pat-terns of television program trade suggest that television programs flow fromcountries with a large market to those with a small market, and within linguisti-cally and culturally similar countries. In film trade flows, the general patternseems to be similar to that of television program flows with greater dependenceon foreign films, particularly U.S. films. Historically, the U.S. film industry hasdominated the global film trade. For example, U.S. films accounted for 58.8% ofbox office revenues in Norway, 60.0% in France, 76.7% in Turkey, 85.0% inSlovenia, and 95.0% in Portugal in 1994–1995 (Euromonitor, 1998, p. 463). In1995, French films earned greater revenues from small countries such as Bel-gium and Switzerland, where 32% and 19% of the population speak French, re-spectively, than they did from larger countries such as the United Kingdom.Similarly, Italian films earned greater revenues from Switzerland, in which 8%of the population is Italian-speaking (“World Cinema and Market Shares,”1996). These patterns imply the influence of market size and linguistic factorson film trade flows.
The purpose of this study is to shed light on the direction and magnitude of in-fluence that the realized market size, the linguistic factor, and the cultural factorshave on the self-sufficiency ratio. This study defines the self-sufficiency ratio as D/ (D + F), where D is domestic films’ revenues in a given country and F is foreignfilms’ revenues in the same country.
LITERATURE REVIEW
Theoretical Perspective
In the 1980s several scholars initiated economic approaches to the flow of mediaproducts. Their approaches have emphasized the role of market size in determiningthe pattern of media flow with slightly different focuses. Wildman and Siwek(1987, 1988) regarded the relative sizes of worldwide linguistic markets as a criti-cal variable that influences the media product trade. Waterman (1988) focused ondomestic television infrastructure, which relates to supply side market size.Hoskins and Mirus (1988) emphasized the interaction of demand side market sizeand the cultural discount.
Wildman and Siwek (1988) predicted that if trade between two countries in-creases, the number of films produced in the larger country would increase, thenumber produced in the smaller country would decrease, and the budget per filmwould increase in both countries. Wildman (1995) explained that the trade pat-tern for media products is a one-way flow from large to small markets, unlessdisrupted by trade barriers, because optimal production budgets are greater inlarger markets. He has suggested that differences in market size provide the pri-
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mary explanation for a media product trade pattern, whereas cultural factors pro-vide residual explanatory value.
Waterman (1988, 1993) interpreted the effects of commercial television infra-structure developments as a transient process from a stimulated demand for U.S.programs to a gradually increasing demand for domestic programs. From histwo-country model, Waterman (1993) proposed that an expansion of a home coun-try’s television infrastructures leads to an increase in production investments, au-dience size, revenues, and profits from the programs in both domestic and foreigncountries, with a higher increase in revenues and profits for the domestic supplier.
Hoskins and Mirus (1988) explained the dominance of the United States notonly in terms of domestic market size, but also in terms of cultural discount. One ofthe functions of the cultural discount is that a larger country has access to its ownlarger market without a cultural handicap and has access to smaller ones with a cul-tural handicap, whereas a smaller country has access to its own smaller marketwithout a handicap and has access to larger ones with a handicap (Hoskins &Mirus, 1988, pp. 501–504; Waterman & Rogers, 1994, pp. 96–97). Papandrea(1998) proposed that an increase in cultural differences widens differences be-tween production budgets for small and large countries and increases a largercountry’s comparative advantages. Hoskins et al. (1997) attributed the U.S. domi-nance in media product trade to such factors as the country’s large domestic mar-ket, its production in English, its competitive media industry, and the verticalintegration of the Hollywood studios with distribution stages.
Empirical Perspective
Empirical studies in media product flow can be categorized into two types. Onetype of study has been descriptive but comprehensive in coverage of countries. Theother type has been analytical, focusing on the causal relations among factors re-lated to media flow.
Varis (1985, 1988) showed that the global average of imported television pro-grams is approximately one third of total programming time whereas importedprograms account for approximately 2% of all programming in the United States.After comparing data on television program exports in 1973 and 1983, Varis con-firmed that the basic pattern of television program flow discovered in the 1973data has continued after a decade, with some minor changes. That is, a one-wayflow from the major exporting countries to the rest of the world and a dominance ofentertainment programs in the trade have persisted, with an increased level ofintra-regional flows. Varis identified moderate imbalances in television programflow in the East–West dimension, and extreme imbalances in the North–South di-mension. With respect to the international flow of television fiction programming,Larsen (1990) analyzed data on the amount of foreign versus domestic fiction pro-
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gramming in 1980 and 1984 from more than a dozen countries. The data have re-vealed patterns similar to those documented by Varis (1985), but with moredependence on imports in the television fiction category than in other program cat-egories. For example, the weekly average of imported programs accounted formore than 90% of the total fiction programming time in Chile and Denmark, andslightly more than 50% in the United Kingdom in 1984 (Larsen, 1990, pp. 18, 31,49).
Analyzing television programming in Far Eastern countries, Waterman andRogers (1994) showed that countries with a larger gross domestic product (GDP)or a larger percentage of GDP devoted to broadcast television economic infra-structure (BTEI) have larger percentages of domestically produced television pro-gram hours. Analyzing television programming in Western European countries,Dupagne and Waterman (1998) found that a country with a larger GDP (or BTEI)or a lower percentage of private television stations imports a smaller proportion ofits television programming hours from the United States than does a country with alower GDP (or BTEI) or higher percentage of private stations. Contrary to theirhypothesis, the level of English fluency has been found to be a negative predictorof the proportion of U.S. television programming imports. McFadyen, Hoskins,and Finn (1997) showed that prices of exported U.S. television programs are deter-mined by the linguistic difference and cultural distance of an imported countryfrom the United States. Contrary to previous studies, per capita GNP and numberof television households have been found to be insignificant in their regressionanalysis.
The theoretical studies of media flow usually have addressed both televisionprograms and films. This is understandable because both types of media productshave the same attributes of public goods. The empirical studies, however, havemainly focused on trade in television programs only.
SELF-SUFFICIENCY RATIO
The self-sufficiency ratio can be a more interesting concern than the U.S. import ra-tio from the perspectives of individual countries, even though the two ratios seem tobe highly correlated. U.S. films account for at least 60% of box office revenues inthe countries listed in Figure 1. The data for the self-sufficiency ratios and U.S. im-port ratios were collected from several issues of Screen Digest (April 1992, Sep-tember 1993, September 1996, August 1997). High U.S. import ratios may befound in almost all countries, major exceptions being India, Hong Kong, and Japan.Figure 1 shows that decreases in self-sufficiency ratios are accompanied by an in-crease in U.S. import ratios. One possible reason for the downward shift of self-suf-ficiency ratios and the upward shift of U.S. import ratios is a decrease in the relativesize of European theatrical markets compared to the U.S. theatrical market. This
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implies that the competitive advantages of the U.S. films have been strengthenedduring the period between 1985 and 1994, ceteris paribus.
Countries with a small domestic market may have more incentive to co-producethan do those with a large domestic market. In addition to the market size, linguis-tic and cultural similarities can influence a country’s tendency to seek interna-tional co-production. The trend toward international co-production brings benefitssuch as shared financial resources, “access to partner’s markets,” and “learningfrom partners,” at the expense of such factors as “coordination costs” and culturalidentity (Hoskins & McFadyen, 1993, pp. 227–230; Hoskins et al., 1997, pp.103–105). Because the rise in international co-production implies an increase inthe number of films that are counted multiple times (“Film Production and Distri-bution,” 1997), the co-production overestimates the self-sufficiency ratio. Thehigher the proportion of co-production, the larger the degree of overestimation.
MARKET SIZE AND MARKET MECHANISM
Wildman and Siwek (1987, 1988) proposed that producers in larger and wealth-ier linguistic markets have an incentive to make larger investments in mediaproducts for which public good elements are substantial in both production andconsumption. Consequently, they have suggested that these larger investments
INTERNATIONAL TRADE IN FILM 35
Figure 1 The self-sufficiency ratios versus U.S. import ratios in Western European countries.
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lead to higher quality products, giving their producers competitive advantages intrading media products. Because there is a causal relation between investment ina film’s production and the film’s quality and popularity (Litman, 1982;Wildman & Siwek, 1988), an increase in film production investment shifts thedemand curve for domestic films upward. This shift has the dual effect of in-creasing overall box office revenues and substituting domestic films for foreignfilms, which is likely to lead to an increase in the self-sufficiency ratio, ceterisparibus. Therefore, the domestic market growth results in the higher self-suffi-ciency ratio if the quality of foreign films is unchanged. In reality, the self-suffi-ciency ratio can be influenced by a relative increase in demand for domesticfilms compared to the demand for foreign films. Based on the aforementionedlogic, it is expected that an increase in market size leads to an increase in thequality (expressed in increased budgets per film) and quantity of films produced,which in turn results in an increase in the self-sufficiency ratio.
It might be useful to distinguish between potential versus realized marketsize. For television programs, the level of GDP or population size can be consid-ered an indicator of a potential market size whereas the number of television setsor BTEI can be considered an indicator of a realized market size. For film, alevel of GDP or population size can be considered an indicator of a potentialmarket size whereas box office revenue can be considered an indicator of a real-ized market size. Thus, it is expected that
H1: The level of GDP will be positively related to the self-sufficiency ratio.Box office revenue depends on the number of admissions and ticket prices.
Box office revenue, rather than GDP, is a more relevant variable in explainingthe self-sufficiency ratio, because it reflects different frequencies of cinema at-tendance and different ticket prices across countries. Therefore, it is expectedthat
H2: The level of box office revenue will be positively related to the self-suffi-ciency ratio.
CULTURAL/LINGUISTIC FACTORS AND CULTURALDISCOUNT MECHANISM
The concept of a “linguistic and cultural handicap” (Wildman, 1995; Wildman &Siwek, 1988) and the concept of “cultural discount”(Hoskins & Mirus, 1988) arebased on the same logic. The greater the distance between the cultures of two coun-tries, the less the willingness to pay for foreign films. The higher quality offsets thelarger cultural discount. The demand curve for foreign films is adjusted for the cul-tural discounts, whereas the demand curve for domestic films is not.
Suppose that a given country shifts the majority of its film imports from a cul-turally different country to a culturally similar one. In this case the demand for for-
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eign films is adjusted from high to low cultural discounts. The shift to importingfilms from more culturally similar countries shifts the discounted demand curvefor foreign films upward. This has the dual effect of increasing box office revenueand substituting foreign films for domestic films, which is likely to lead to a de-crease in the self-sufficiency ratio, ceteris paribus. This suggests that the optimallevels of domestic films’ quality and quantity also depend on the degree of culturaldiscounts attached to imported films. When a country shifts to importing foreignfilms from more culturally dissimilar countries, the reverse may be true. This cul-tural discount mechanism can be applied to both linguistic and cultural distancefactors, because both factors affect the degree of cultural discount.
The Cultural Distance
Hofstede (1980) identified that national cultures vary along four dimensions. Thesedimensions are power distance, individualism, masculinity, and uncertainty avoid-ance. He creates ordinal scales for each of these dimensions based on a factor analy-sis of survey results collected from a major multinational corporation. Hofstede andBond (1988) add another dimension, Confucian dynamism, in an effort to includethe Eastern mentality. Hofstede’s cultural framework has been widely accepted fordescribing cultural differences among countries.
Power distance is defined as “the extent to which the less powerful members oforganizations … accept and expect that power is distributed unequally” (Hofstede& Bond, 1988, p. 10). Nordic countries and English-speaking countries scorelower on the power distance index than do Latin American and Arab countries. In-dividualism is defined as the degree to which “ties between individuals are loose”(Hofstede, 1991, p. 51). English-speaking countries score highest and Latin Amer-ican and Asian countries score relatively low on the individualism index. Mascu-linity is defined as the degree to which social gender roles differ (Hofstede &Bond, 1988, p. 11). In masculine cultures men are supposed to be “assertive” andvalue “material success,” whereas women are supposed to be “modest.” In con-trast, in feminine cultures both men and women are supposed to be modest andvalue affiliation (Hofstede, 1991, pp. 81–83; Hofstede & Bond, 1988, p. 11).Nordic countries have low scores on the masculinity index, whereas Eng-lish-speaking countries have relatively high scores. Uncertainty avoidance is de-fined as the degree to which “the members of a culture feel threatened by uncertainor unknown situations” (Hofstede, 1991, p. 113). Confucian dynamism can be in-terpreted as dealing with “a choice from Confucius’ ideas” (Hofstede & Bond,1988, p. 16). One side reflects a “long-term orientation” such as “persistence” and“thrift;” whereas the opposite side reflects a “short-term orientation” such as “per-sonal steadiness” and “respect for tradition” (Hofstede, 1991, pp. 164–166). Be-cause there are only 20 observations of countries in the Confucian dynamismindex, this study does not include this dimension in measuring cultural distance.
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Kogut and Singh (1988) originally developed the Culture Distance Index to re-flect the difference between the cultures. For almost all countries, the majority ofimported films come from the United States; therefore, the cultural factor could bemeasured as a cultural distance between a country and the United States eventhough a more accurate measure would include all trading countries. The four dif-ferent dimensions of cultural distance between a given country (j) and the UnitedStates (u) were calculated using Kogut and Singh’s equation: CDju = (Iij – Iiu)² / Vi
where CDju = the cultural distance between country j and the United States, Iij = theindex for country j on cultural dimension i, Iiu = the index for the United States oncultural dimension i, and Vi = the variance of the index for cultural dimension i.Based on the cultural discount mechanism (Hoskins & Mirus, 1988) and four di-mensions of cultural distance, it is expected that:
H3 – H6: Cultural distance of power distance (individualism, masculinity, or un-certainty avoidance) between a country and the United States will be positively re-lated to the self-sufficiency ratio.
The Linguistic Factor
Because English-speaking countries have a language and cultural background thatare similar to the dominant film supplier (the United States), English-speakingcountries are expected to have a higher budget per film and a smaller number offilms than non-English-speaking countries with equivalent levels of film produc-tion investment. In 1997, the highest average budgets per film were found in theUnited States, the United Kingdom, Germany, France, and Ireland, and five of thetop 12 countries were English-speaking, demonstrating the impact of the linguisticfactor on a film’s budget size (“World Film Production/Distribution,” 1998).
Even with a low budget per film, the non-English speaking countries, orcountries having strong cultural resistance to foreign films, can sustain theirself-sufficiency ratios comparable to those for English-speaking countries withlarger realized market size. English-speaking countries can have relatively lowself-sufficiency ratios because of big-budget U.S. films that have little linguistichandicap in other English-speaking countries. Thus it is expected that:
H7: An English-speaking country, excluding the United States, will be nega-tively related to the self-sufficiency ratio.
METHOD
Model Building
This study investigates two data sets, panel data (14 countries over a 7-year period)and cross-sectional data (with a slightly greater number of countries). Ordinaryleast squares (OLS) regressions are used to examine the determinants of the
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self-sufficiency ratio for each year from 1988 to 1994, inclusive. Because GDP andbox office revenue represents the same dimension, each variable is regressed onseparate equations.
Two primary ways of pooling time-series and cross-sectional data are acovariance model (fixed effect model) and an error components model (ECM; ran-dom effect model). The covariance model introduces cross-sectional andtime-specific dummy variables and estimates the parameters by OLS. However,the ECM assumes a random intercept and estimates the model by generalized leastsquares. The covariance model cannot be applied for the given data set, becausethis model uses cross-sectional dummy variables that have a perfectmulticollinearity with the English dummy variable and cultural distance variables.There are two kinds of ECM; the two-error components model (2ECM) and thethree-error components model (3ECM). Both kinds of ECM avoid the perfectmulticollinearity problems. This study employed the 2ECM discussed by Judge,Hill, Griffiths, Lütkepohl, and Lee (1988). Compared with the covariance model,ECM has the relative advantage of efficiency because the model does not requirecross-sectional and time-specific dummy variables. The 2ECM assumes that theregression disturbance is composed of two independent components—one compo-nent associated with cross-sectional units, and another associated with both timeand cross-sectional dimensions.
Data Collection
The sampled countries for the ECM were Australia, Belgium, Finland, France, Ger-many, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden,Switzerland, and the United Kingdom. The sampled countries for the OLS analysiswere Austria, Canada, Denmark, Hong Kong, India, Japan, Turkey, and the afore-mentioned 14 countries.
The data for the self-sufficiency ratios and box office revenues were collectedfrom various issues of Screen Digest (April 1992, September 1993, December1993, June 1995, September 1995, September 1996, August 1997). When discrep-ancies were detected, this study used data from later issues of Screen Digest, ratherthan those from earlier issues. The data for GDP were collected from the Interna-tional Monetary Fund (1998) and the Euromonitor (1999a, 1999b). The culturaldistance indexes were calculated from data reported by Hofstede and Bond (1988).Among the sample, Australia, Canada, Ireland, and the United Kingdom werecoded as English-speaking countries.
This study used 1-year previous box office revenue, rather than current box of-fice revenue, as a more relevant determinant of the self-sufficiency ratio. Previous,but relatively recent, box office revenue functions as a signal for investment deci-sions in film production that affect the self-sufficiency ratio. One-year previousGDP was also used.
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40O
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TABLE 1Ordinary Least Squares Results for the Self-Sufficiency Ratio
1988a 1989a 1990b 1991c 1992d 1993d 1994d
Model 1LNBOX 12.22** 11.29** 8.91** 9.77** 10.18** 8.40** 8.78**ENGLS 5.60 5.94 –5.46 –3.38 –5.79 –3.47 –0.90CDPOW 8.52** 12.52** 11.63** 11.23** 5.60* 8.50** 5.74*CDIND 1.96 0.34 2.68** 3.03** 2.25* 3.39** 3.48**CDMAS 2.10 3.19 0.41 1.27 2.95 2.08 1.95CDUNC – 3.71 –0.03 –6.78** –7.79** –3.32 –5.74** –4.97*Const. –222.92** –213.76** –160.93** –179.43** –188.43** –158.13** –163.11**Adjusted R² .66 .57 .84 .81 .55 .79 .65
Model 2LNGDP 11.34** 9.14* 7.51** 8.56** 9.85** 7.23* 8.09**ENGLS 5.73 8.69 –4.89 –1.35 –1.78 –0.87 2.57CDPOW 10.71** 14.35** 13.01** 12.71** 4.38 10.02** 7.45*CDIND 2.34 0.32 3.18** 3.01* 1.10 3.69** 3.84**CDMAS 1.65 3.27 0.12 0.72 3.30* 1.18 1.61CDUNC –4.67 –1.17 –8.02** –8.30** –1.19 –7.43** –6.58**Const. –293.23** –243.95* –190.69* –221.80** –258.22** –190.09* –211.35*Adjusted R² .55 .41 .80 .73 .52 .71 .59
Note. LNBOX = logarithm of box office revenue; LNGDP = logarithm of GDP; ENGLS = dummy variable for English-speakingcountries; CDPOW = cultural distance of power distance; CDIND = cultural distance of individualism; CDMAS = cultural distance ofmasculinity; CDUNC = cultural distance of uncertainty.
an = 19. bn = 20. cn = 18. dn = 16.*p < .05, one-tailed. **p < .01, one-tailed.
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RESULTS
This study examined the variance inflation factors in year-by-year regression equa-tions and found no severe multicollinearity problems. Table 1 shows that each ofthe regression equations was significant with the percentage of variance explainedfrom 41% to 84%. The beta coefficients were examined to determine the relativeimportance of each explanatory variable. Box office revenue, GDP, and culturaldifference of power distance (CDPOW) were found to be of primary importance.The values of adjusted R2 for Model 1 are higher than those of adjusted R2 for Model2, suggesting that box office revenue is the better measure in explaining the varia-tion of self-sufficiency ratios as opposed to the potential market size indicated byGDP.
The results of ECM estimates, computed by the SHAZAM program, are pre-sented in Table 2. Box office revenue and cultural difference of power distancewere found to be significant predictors for the self-sufficiency ratio. Against ex-pectation, GDP was found to be insignificant. In the ECM, the traditional R2, oradjusted R2, is not well defined. In this case the raw moment R2 may be used asan alternative measure of goodness of fit.
DISCUSSION
This study shows that variations in the self-sufficiency ratios across countriescan be explained primarily by box office revenue (or GDP) and some measureof cultural distance from the United States (particularly CDPOW). The insignifi-cant coefficient for the English dummy variable might imply that two contrast-ing effects are cancelled out. One possible effect, a basis for making H7, is thatbig-budget U.S. films have little linguistic handicap in other English-speakingcountries and thus negatively affect their self-sufficiency ratios. The other po-tential effect is that English-speaking countries face less of a handicap in export-ing their films to the wealthiest English linguistic markets including the UnitedStates, which provides them with a more lucrative foreign market than othercountries have.
An understanding of demand for foreign films and demand for domestic filmsis useful in grasping the relations between the self-sufficiency ratio and explana-tory variables. An increase in box office revenue increases film production invest-ment, likely leading to an increase in the self-sufficiency ratio, ceteris paribus. Anincrease in cultural discounts attached to imported films, through a larger culturaldistance or linguistic handicap, decreases the demand for foreign films, likelyleading to an increase in the self-sufficiency ratio, ceteris paribus.
The relation between the market size and co-production is worth noting. Be-cause the advantages of international co-production include shared financial re-
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sources and access to partners’ markets, suppliers in countries that suffer from adearth of film production financing and a small domestic market would be morelikely to pursue co-production. From the perspective of small countries, one of thestrategies to increase their self-sufficiency ratios could be to enhance internationalco-production activities.
This study estimated Pearson correlation coefficients between the market size(logarithm of GDP) and “co-production as the proportion of total production”(co-production ratio) for European countries, based on a data set reported byScreen Digest (June, 1999, p. 133). The results show that the correlation coeffi-cients were negative at the significance level of .05, ranging from –.442 to–.712, for the 1995–1998 years. The result based on the data for 1994, however,shows an insignificant coefficient. These overall negative correlation coeffi-cients between market size (GDP) and co-production ratio imply that smallcountries have relied more on co-production than have large countries.
The level of cultural distances could explain why some countries have a rela-tively high self-sufficiency ratio despite their small domestic markets. In mostcountries, U.S. films have achieved higher box office shares than one might ex-pect, based on their proportion of release. This was not the case, however, inNordic countries, possibly because of the large cultural distances between thesecountries and the United States. Nordic countries also enjoyed a rather highlevel of intra-group co-production (“Film Production,” 1994). This might be anadditional reason for their relatively high self-sufficiency ratios, compared toother countries with a similar realized market size.
The cultural discount mechanism also explains the concentration of trade ingenres exhibiting lower degrees of cultural resistance, such as action movies(Hoskins & Mirus, 1988; Varis, 1985). With the increasing importance of foreignmarkets as a source of revenue, international feedback on optimal content deci-sions in U.S. films has resulted in a movement toward more universal content(Noam, 1993). That is, the greater the dependence on overseas box office reve-nues, the greater the incentive to focus on less culturally resistant genres and moreinternationally appealing content in order to diminish the cultural discount effect.
This study is limited in three ways. First, the sample size is limited and thesampled countries are skewed toward western European countries. This bias im-plies an underrepresentation of developing countries and limited coverage ofother regions. A larger sample of countries would provide more accurate direc-tions and magnitudes of the influence of the explanatory factors. Second, the in-dependent variables used in this study are not exhaustive. Potential determinantsof the self-sufficiency ratio would include regulatory factors such as quota pol-icy and regulation of the media industry. These additional explanatory variableswould result in more comprehensive findings. Finally, the importance of the lin-guistic factor might be more evident if we focus on a ratio of export revenueover import revenue rather than the self-sufficiency ratio. In this respect, the
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analysis of the self-sufficiency ratio represents only one approach to understand-ing the one-way flow model. The results of this study, however, might be addedto the small body of empirical evidence supporting the one-way flow model.
ACKNOWLEDGMENTS
I thank Steven S. Wildman, James G. Webster, Chulho Jung, and two anonymousreviewers for their invaluable comments on earlier drafts of this article.
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