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In a market where quality is difficult to observe, such as the primary visual art market, publicity is key. Of course, getting attention is important, researcher Monika Kackovic says. However she found that attention garnered from certain signals from certain sources has much more impact on artists’ careers than others.

Monika Kackovic

‘It is said that any publicity is good publicity. And yes, potential buyers and decision-makers need to talk about you, but there’s much more to it than that,’ says Kackovic, a postdoctoral researcher and assistant professor in the Entrepreneurship and Innovation section at UvA Economics and Business. In November, Kackovic defended her thesis, in which she investigated the impact of quality signals – such as reviews, awards, gallery affiliations and past sales - on competitive dynamics in the primary visual art market, where artworks are sold for the first time.

Is it possible to determine in the early stages of an artist’s career if this person will have a career trajectory akin to that of, say, internationally famous contemporary artists like Rineke Dijkstra or Damien Hirst? Is it possible to determine beforehand whether a piece of art is likely to increase in value over time?

Uncertainty prevails

In the absence of objective measures of valuation, the primary contemporary art market is characterised by extreme uncertainty surrounding product quality. ‘In the primary art market, quality is difficult to observe. It may be latent or require specialised knowledge to discern,’ Kackovic says. Even artists with similar training and who were accepted to extremely selective art academies can have totally different career paths.
Quality signals from third parties are critical to artists’ careers, Kackovic found. ‘Even signals that may at first seem inconsequential can have a significant impact because of self-reinforcing feedback mechanisms that ensue later.’

Kackovic, an economist and visual artist, studied the career trajectories of 1,590 artists who graduated from the Gerrit Rietveld Academie, and from the Rijksakademie van Beeldende Kunsten over a twenty-six year period. So far, the art market has predominantly been studied from a qualitative point of view, focusing mostly on successful artists. Kackovic’s quantitative approach, including both artists that were accepted as well as rejected, offers detailed insights into the factors impacting artists’ careers.

Credibility, vested interests and information overload

The higher the credibility of the source transmitting a quality signal, the stronger the impact, she found. Signals about quality sent by the artists themselves, for example education level, have less influence on their career than those that come from third party sources such as critics or galleries. Whether or not the source transmitting the signal has a vested interest in the artist’s success also carries weight: for example, a newspaper critic who writes a review about an unknown artist puts his reputation at stake; a gallery organising an exhibition runs a reputational and a financial risk.

Meanwhile, potential buyers are faced with an overabundance of information. Kackovic: ‘There are a lot of artists and a lot of signals. Information is a double-edged sword: you need it, but too much of it can create confusion.’ As a result, art buyers and decision-makers often resort to heuristics or basic rules of thumb, in which certain sequences and combinations of signals reinforce each other or where observational learning - doing what everyone else is doing - becomes the dominant signal.

Sequence and combination

Besides the credibility level of the sources, the order as well as the combination in which quality signals are being transmitted influence buyers’ purchase decisions, Kackovic’s research shows.
Most often, a beginning artist has an exhibition at a gallery followed by a review. But sometimes, it is the other way around. ‘In that case, the influence of that sequence of signals on the artist’s later career is not as strong.’ A gallery exhibiting an artist who has not had a review yet is taking a bigger risk than one giving space to someone who already has some success, and thus, this sequence has more impact.

The combination of signals also matters. If an artist has three reviews from highly credible sources, such as leading newspapers, this has a significant effect on both his short- and long-term career. Kackovic: ‘But if there’s diversity in the signals originating from highly credible sources – for example a review, a gallery affiliation and a sale - the effect on financial and/or reputational performance is even bigger.’

Self-reinforcing loop and success

In the absence of objective quality standards, once the artist has received signals – individually, in sequences or combinations - self-reinforcing feedback mechanisms kick in, providing some artists with opportunities not given to others. This may result in competitive advantage. If such preferential treatment results in superior performance, than these mechanisms will be strengthened. Even among expert buyers - curators working for organisations with corporate art collections, heuristics such as observational learning are used to overcome quality uncertainty, providing some artists a competitive advantage over others, Kackovic found.

Buyers may agree upon the definition of success, but for many artists selling their work at a high price has no priority. Kackovic stresses: ‘Success in art is a very slippery term. You can be very successful as an artist without financial gain. Success is measured along different dimensions, including appreciation by experts, peers as well as the market.’

Parallels with other markets

Kackovic is continuing her research into art market dynamics at UvA, funded by the Netherlands Organisation for Scientific Research (NWO). Her research could be useful in other markets characterised by extreme uncertainty about quality, she adds. ‘The same process is also going on in other industries. Take a high-risk asset such as derivatives or a high-tech innovation or an entrepreneurial venture : you don’t really know what you’re investing in unless an analyst writes about it or a venture capitalist invests in it and this information becomes public. Quality signals, such as affiliations, reviews, awards and past sales transcend different industries plagued by imperfect or incomplete quality information and substantively influence purchase decisions and success of the producer or product.’

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