Audience success or art for art's sake? Efficiency evaluation of dance companies in the United States

• Published date: 01 September 2020
• Date: 01 September 2020
• Author: Clare Murray,María José del Barrio‐Tellado,Luis César Herrero‐Prieto
• DOI: http://doi.org/10.1002/nml.21411

RESEARCH ARTICLE

Audience success or art for art's sake?

Efficiency evaluation of dance companies

in the United States

María José del Barrio-Tellado

1

| Luis César Herrero-Prieto

2

|

Clare Murray

3

1

Department of Accounting and Finance,

University of Valladolid, Valladolid,

Spain

2

Department of Applied Economics,

University of Valladolid, Valladolid,

Spain

3

Fulbright-Spain Programme and the

University of Valladolid, Recognized

Research Group on Cultural Economics,

Valladolid, Spain

Correspondence

María José del Barrio-Tellado,

Department of Accounting and Finance,

University of Valladolid, Plaza del

Campus Universitario, 1;

47001-Valladolid, Spain.

Email: mjose@emp.uva.es

Abstract

Our aim is to evaluate the performance of American

dance companies, considering that the production pro-

cess may be subdivided into consecutive stages con-

sisting of fundraising, artistic production, and social

impact. A three-stage network-Data Envelopment

Analysis model is applied which takes account of the

links between stages in the form of intermediate

inputs/outputs and provides an overall indicator of effi-

ciency together with partial performance indicators in

the stages. Given the lack of information for some vari-

ables, we previously undertook a process to impute

missing values following MICE (multiple imputation

by chained equations) procedures. Results show that

the highest levels of efficiency are achieved during the

cultural creation stage, whereas the lowest correspond

to social impact, indicating that dance companies pur-

sue artistic excellence in their cultural programming,

irrespective of their activity's commercial outcomes.

Moreover, public and private funds are seen to be

channeled following this guideline, thereby justifying

the non-profit status of these entities.

KEYWORDS

dance companies, efficiency evaluation, network-DEA, performing

arts management

Received: 12 June 2019 Revised: 13 March 2020 Accepted: 17 March 2020

DOI: 10.1002/nml.21411

Nonprofit Management and Leadership. 2020;31:129–152. wileyonlinelibrary.com/journal/nml © 2020 Wiley Periodicals, Inc. 129

1|INTRODUCTION

Since the twentieth century, economists have associated financial vulnerability with performing

arts companies, which of course includes large American not-for-profit dance ensembles, such

that they were proclaimed to lack immunity from Baumol and Bowen's (1966) cost disease. The

principal argument concerning this malady is that dance companies, as for the whole per-

forming arts sector, are eminently labor-intensive with almost stagnant productivity. It is not

possible to speed up production or to reduce the amount of labor involved. This means that

labor costs per product unit continue to rise over time, leading to an inevitable gap with poten-

tial revenue and, therefore, to the possible financial collapse of arts companies (Brooks, 2000).

Whereas in other activities of the same production type in the economy this endemic disease is

dealt with through price increases, in the performing arts and particularly in dance spectacles,

this is not a very operative solution given the policy of setting prices for long periods (seasons)

coupled with the possible danger of losing spectators in the medium and long term

(Smith, 2003b). This is partly why most initiatives in this field are ultimately geared toward

non-profit organizations, particularly in the U.S. market, as an institutional form which benefits

to a greater or lesser degree from public and private subsidies.

Although there is room for for-profit activities in the performing arts sector, certain circum-

stances justify the substantial presence of non-profit entities. Such factors are related to the cost

structure of producing performing arts and to the problem of contract failure

(Hansmann, 1980, 1981). This type of performance attracts a very limited audience and entails

high fixed costs in terms of staging, although once performances are underway the cost of

attracting new spectators is low. Companies thus face the dilemma of either setting a price that

is high enough to cover all the production costs for only a small number of performances or of

maintaining a price close to marginal costs in order to ensure larger audiences and so increase

the number of performances.

1

Hansmann (1981) states that the solution to this problem

involves price discrimination, whether through objective reasons, where it is possible to charge

higher prices for seats with a better view, sound, or offering preferential treatment to certain

spectators, etc.; or through the possibility of securing additional contributions when the work's

perceived value exceeds the entrance price (Heilbrun & Gray, 1997). This would be the case

when staging performances with a guaranteed quality standard. Here is where non-profit orga-

nizations are more trusted because their corporate structures offer no incentive to cheat, thus

overcoming the contract failure problem (Hansmann, 1980). Adopting the non-profit institu-

tional form is therefore justified because it is a way of channeling the provision of a public ser-

vice, particularly one of a cultural and artistic nature, so that it ensures the affinity and

independence of its mission and helps to secure public and private funding to make its activities

viable or to carry them out in accordance with higher quality standards. Nonetheless, many

non-profit organizations are also beginning to recognize that a successful market orientation

involves successful stakeholder management, and now accept the paradigm of pursuing inter-

nal efficiencies or even focusing on the marketplace (Shoichet, 2003).

Whatever the case, the artistic production side of the dance market in the United States is

mainly organized through non-profit dance companies which, according to Toepler and

Wyszomirski (2012), account for 75% of all existing entities and 85% of the income generated by

the dance sector. The non-profit model for developing the dance company sector implies that,

although the principal mission is artistic, in other words, to produce a dance spectacle, this

must be combined with management obligations aimed at securing resources and adopting a

strategy geared toward audience success and social impact, as this will ultimately determine

130 del BARRIO-TELLADO ET AL.