Choosing to Co-Finance - An Analysis of Project Specific Alliances in the Film Industry

We use a movie industry project-by-project data set to consider the choice of internal project financing versus financing via through alliances that span the legal boundaries of several business entities. We find that project risk is positively correlated with alliance formation. Studios, which produce a variety of films, tend to develop the safest projects internally. Our findings are consistent with internal-capital-market explanations, in particular, with the theory offered by Robinson (2005). We find mixed evidence regarding "resource pooling," i.e., sharing the cost of large projects. Finally, we find that the ex-post performance of projects developed internally is similar to the performance of projects developed via through alliances.