The effect of signaling of Elite Education on the long-term performance. Does the signaling of qualification from the Rijksakademie influence the artists’ reputation
and future earnings?
Master of Business Administration
Marketing Track
University of Amsterdam Business School
Georgios Kalemis
10394915
Supervisor:
Monika Kackovic
University of Amsterdam Business School
Plantage Muidergracht 12, 1018 TV, Amsterdam, the Netherlands
Phone: +31.20.525.4106
ABSTRACT
This research examines the effect of the quality signal of the Elite Educational background that has on the long-term performance of the visual artists in the Cultural Industries. The Elite Educational Institution that is chosen is Rijksakademie van Beeldende Kunsten (the Royal Academy of Visual Arts) in Amsterdam, the Netherlands. Furthermore, long-term performance is measured in terms of artists’ Reputation and Earnings from auctions. We developed hypotheses that predict a positive relationship between the two concepts. A quantitative analysis using a linear regression is implemented in order to test the hypotheses. The results suggest that there is no actual association between the visual artists’ Elite Educational background and their long-term performance, implying that the quality signal of Elite Education does not have any influence on the actors’ long-term performance in the Cultural Industries.
Statement of Originality
This document is written by Student Georgios Kalemis who declares to take full responsibility for the contents of this document.
I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it. The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
TABLE OF CONTENTS
Introduction ______________________________________________________3
Review of the Literature_____________________________________________6
Elite Education as a quality signal ________________________________7 Elite Education and future earnings _______________________________8 Reputation __________________________________________________10 Empirical Analysis _________________________________________________13 Results ___________________________________________________________15 Discussion ________________________________________________________19 Conclusions _______________________________________________________20 References ________________________________________________________21
Introduction
It has been commonly accepted that graduating from an Educational Institution which involves great history and prominence promises one’s prospective social and professional success. In that, graduates from prestigious Institutions distinguish themselves from the others by conveying a perceived quality in the job market.
Specifically, Spence (1973) developed the Signaling Theory, using a common human resource example, i.e., when hiring managers are looking for prospective employees for their company, a group of highly-educated individuals will be distinguished under the high-quality prospective employee category compared to low-quality prospects and this is classified due to the signal of higher education.
In organizational studies, it has been found that Educational prestige of organization’s members is related to the organization’s profitability (Hitt et al., 2001) and possibility of success (Philips, 2001). Prestigious Educational Institutions are also called ‘Elite’, since they lead to form the Elites –the people who share distinguished characteristics. In this study, we make use of the term Elite Education to describe qualification from a prestigious Educational Institution.
In the Cultural Industries, which is the context of this study, the path to a successful career could not be different. That is, artists are striving to signal quality, distinguish themselves and become reputed in the art world. Building and establishing Reputation is the major goal of the artists who wish to advance their career. In that, Reputation allows the actors to reduce the uncertainty surrounding them in the market and make their work visible to the interested parties (e.g. clients, galleries, art dealers).
One could assume that artists’ talent is the one and only determinant for their professional success. However, Adler (1985) explains that talent itself fails to predict an artist’s success.
He adds that there must be other factors that distinguish an artist from the crowd and making them ‘stars’, that is, artists that are known by everyone.
In this study, we will examine the qualification from an Elite Educational Institution as a factor of positive long-term performance in the Cultural sector. The Elite Educational Institution that will be used is the Rijksakademie van beeldende kunsten (the Royal Academy of Visual Arts) in the Netherlands, a prestigious residency program for visual artists.
The main subject of this thesis concerns the issue whether an Elite Educational Institution can serve as a quality signal and influence the actors’ career in the cultural sector. Therefore, the research question is formulated as follows:
Does the signaling of qualification from the Rijksakademie influence the artists’ long-term performance?
For the purposes of our study, long term performance is measured in terms of the visual artists’ Reputation along with their Earnings to date. We exploit a rich data set, consisting of 697 artists whose applications to the Institution were either accepted or rejected.
The way in which we determine visual artists’ reputation is their unique ranking, which has been developed by the “ArtFacts.Net™”, one of the largest and most reliable online fine art exhibition databases worldwide.According to this Artist Ranking System, artists are arranged by their exhibition success. A number of factors are taken into account which count in an artist’s career, such as international representation and solo/group exhibitions.
Regarding the visual artists’ earnings, they will be measured through their sales of their works through auctions. Thus, auction sales will help to determine what the effect of Elite Education on earnings is.
This study has a number of contributions to existing research. First, it adds to the existing body of Elite Education literature. The impact of Elite education has been rarely researched so far in the organizational context. To our knowledge, the impact of the quality signal of elite education on the career performance in the cultural sector has not been researched.
Second, this study will contribute in the Cultural Industries literature. That is, little is known regarding the impact of artists’ educational background on their career performance. This study will shed light on this unknown factor.
Third, another contribution that this study makes is the one to the Reputation literature. The literature on Reputation is extensive in organizational studies, where researches focus on organizations’ Reputation. To our knowledge, the relationship between artists’ Reputation and their Elite Education has not been researched before.
The structure of the thesis is organized as follows: first, we provide a literature review where we elaborate on the concepts of quality signaling, elite education and future earnings and reputation. Second, we describe the empirical setting of the paper, with details about the data, variables and analytic technique in the methods section. The next part presents the results of the analyses and discussion of the results. The last part provides the conclusions.
Review of the Literature
In this section, we discuss the concepts that are related to the research question. First, we outline the aspect of Elite Education serving as quality signal. Then, we examine the theoretical framework of the connection between Elite Education and future earnings. Lastly, we elaborate on the concept of Reputation.
Elite education as a quality signal
Spence (1973) was the first to develop the Signaling Theory. The main idea behind Signaling theory is analyzing the types of signals communicated as well as the responses received from them. It provides a practical approach in understanding various processes in marketing and consumer behavior. Spence (1973) applied the labor market to demonstrate the signaling function of education (Connelly et al, 2011).
The concept of Signaling Theory is based on the idea of asymmetric information. What is Information Asymmetry? Information today is easily accessible and when information is communicated in different forms it influences the decision-making process for many businesses, government organizations and households (Connelly et al, 2011). The information asymmetry occurs when one party holds more information than the other, which could have assisted with better decision-making (Stiglitz 2002, Connelly et al, 2011).
Management scholars have identified a variety of signals of quality. For instance, in economic area signals of quality can be products’ warranties (Boulding and Kirmani 1993) and brand names (Wernerfelt, 1988), whilst in the motion picture industry, sequels and advertising expenditure (Basuroy et al, 2006).
Elite Education is considered to be a quality signal, because it is linked with signaling exceptional performance (D’Aveni, 1990), which can be noticed at low cost by the interested
parties (employers, clients etc) (Clotfelter and Rothschild, 1993). Attending an Elite Institution would presumably take one’s career to a whole different level. According to D’Aveni (1990) being connected with Elite Education yields prestige which symbolizes competency and trustworthiness.
There, the visual artists, who are accepted, are given the opportunity to explore more deeply their subject, experiment through the academy’s facilities, study in a more advanced level, produce and present their projects. Rijksakademie is unanimously considered an Elite Institution because of two reasons. First, the Institution is highly selective since every year it accepts only 25 young artists out of more than 1.000 ambitious visual artists to its coveted residency program. Second, the Institution has a long history (founded in 1870) and is considered of high prominence since it gives its students access to unrivalled facilities and a network of internationally known artists and critics, who act as visiting advisers.
Elite Education and future earnings
Elite Educational Institutions base their selection of students on their personal qualities that can predict positive career performance. Brand and Halaby (2006) support that there is a significant advantage for the individuals who attend an Elite Institution at the onset of their career. This is also supported by Thomas (2000) who found the effect that college quality had on graduates’ income one year after graduation to be small, but significant.
James et al (1989) found significant effects of institution quality on future revenues. Particularly, attending an Institution that employs a high degree of selectivity in admission and a private elite college in the northeastern area of the country (USA) has both a positive and statistically significant impact on future revenues.
Various other researches in USA indicate that prestige or ‘quality’ of institutions have significant effects on graduates’ earnings (Kingston & Smart, 1990; Trusheim & Crouse, 1981; Karabel & McClelland, 1987; Solomon, 1975). Ishida (1993) suggests that university prestige has a deep impact on earnings and status attainment in Japan and Korea (Lee and Brinton, 1996). The most prevalent reason was that Elite Institutions have strong ties with big companies, which makes their graduates’ introduction to the job market way easier. In that, the graduates from Elite Institutions have more chances to be hired by large organizations with good salaries.
This is also supported by Brewer et al. (1999) whose study found that attending an Elite Institution increases the amount of money that an individual earns. In that, graduates from highly selective Institutions enjoy greater benefits (higher salaries) than the graduates from less selective Institutions (Loury and Garman, 1995; Chevalier and Conlon, 2003; Black and Smith, 2005).
Interestingly enough, the study by Dale and Krueger (2002) found a non-significant or even negative relationship between college prestige and earnings. In particular, they found the earnings of students who attended less selective colleges to be comparable to the ones generated by elite colleges’ graduates. Additionally, in a research to predict the PhD completion and the research productivity of PhD students, Grove and Wu (2007) found that the prestige of their undergraduate Institutions fails as a principal indicator. Consequently, ‘the more selective Institutions always lead to higher revenues’ rule is put into question.
Therefore, there is the argument whether the value added of Elite Institutions is greater than the one of the other schools with regards to subsequent earnings and career achievements (Cook & Frank, 1993).
Adding to that, there is much speculation whether attending a prestigious Educational Institution does contribute to the future career success of the students (Chevalier & Conlon, 2003). According to an article in Business Week (April 19, 2004) regarding the Educational backgrounds of the most highly paid CEOs, it was found that most of them studied their MBA from “lesser” schools.
Applying these findings to the Cultural Industries, would suggest that qualification from an Elite Art Institution, such as Rijksakademie, can also be connected with generating a high income for the artist. In other words, the visual artists who have been qualified from Rijksakademie are expected to show higher earnings than the ones who did not attend this Institution.
The first hypothesis, which is formulated to help answering the Research Question, is the following:
Hypothesis 1: Qualification from Rijksakademie is positively related to higher auction sales than the non-qualification.
Reputation
In management research, it has been found that the concept of Reputation is made up of two dimensions (Rindova, Williamson, Petkova & Sever, 2005). First, Reputation is defined to be the expectation that stakeholders have about the ability of an organization to produce goods of quality. Second, Reputation is the prominence with which the organization establishes itself in the minds of stakeholders.
The first dimension of Reputation, stakeholders’ expectation of quality, is based on theories developed from an economics perspective. This argument is based on the assumption that
information asymmetries about the products exist between producers and consumers. Podolny (2001) called this type of uncertainty an ‘altercentric uncertainty”. By giving information about the “true” attributes of their products, companies send signals about the quality of their products (Rindova et al., 2005). These signals serve to lower the information asymmetries. In addition, based on their previous experiences about the quality of products, consumers make choices about whether or not to purchase the product again. If they are satisfied with the product, they will buy it again. Consumers are willing to pay a premium for a product that satisfies their expectations of quality. They are willing to pay for a ‘brand name’ that ensures the quality consumers expect. Premium price and consumer recognition is a result of incorporating brand names (Hayes, 2002). This premium compensates companies for the investments they make to produce high-quality goods. As a result, the companies are able to maintain the production of high-quality goods and to keep their good Reputation (Shapiro, 1983).
From the economics perspective, Reputation can be regarded as an intangible asset that can be built by making investments in product quality (Shapiro, 1983). Moreover, Reputations can be sticky and resemble status since even when an organization’s performance is not that good anymore, it might still be perceived as more reputable than its competitors despite the recent poor performance (Schultz, Mouritsen and Gabrielsen, 2001).
The second dimension is derived from an institutional perspective on Reputation where the focus lies on the institutional context in which Reputations are built (Fombrun & Shanley, 1990; Rao, 1994). This means that Reputation is not simply a reflection of product quality, but it also reflects and is the consequence of complex processes, in which companies interact and influence each other’s actions.
Applying these findings to the art world, we could say that Reputation of an artist is the expectation that his crucial audience has about his ability to produce notable works of art and it is the prominence with which the artist establishes himself in the minds of the audience. According to Becker (1988) the artists’ Reputation is related to the esteem of others in the same art world, who base their opinion on artistic signals.
In arts, reputation is often established and built up by the critics and is a form of capital accumulated by past criticism. In their study on the Dutch film industry Ebbers & Wijnberg (2009) distinguished between commercial reputation based on financial performance at the box office, and artistic reputation based on critics’ reviews in the media.
As it was already stated, attending an Elite Institution signals quality, which is interpreted with higher future earnings. We also assume that Elite Education will also help building the artists’ Reputation in the art market. Indeed, (Graffin & Ward, 2010) have asserted that quality signals can reduce the ambiguity in the information, developing the signaler’s Reputation and thus enhancing their emission of quality.
Put it differently, visual artists’ Elite Educational background will help them to be perceived as competent individuals with high skills, and allow them to achieve Reputation among their peers; that is, visual artists having graduated from Rijksakademie will enjoy higher Reputation than the ones who never attended this Institution.
Consequently, the following hypothesis can be formulated:
Hypothesis 2: Qualification from the Rijksakademie is positively related to higher Reputation than the non-qualification.
As it was mentioned before, in this study visual artists’ Reputation will be measured with the Artist Ranking Tool developed by “ArtFacts.Net™”. The Artist Ranking Tool works by ordering artists according to the professional attention that is invested in them, which is translated either to international representation and/or solo/group exhibitions.
Methodology
The following chapter outlines the research design for this study. First, we present the overall design. Second, we describe the sample from which we collected our data. Last, the chapter provides a detailed overview about the variables used, and their measurements.
Research design and Data
This study is explanatory in nature. Explanatory research is “looking for an explanation behind a particular occurrence through the discovery of causal relationships between key variables” (Saunders et al., 2009, p. 113). Explanatory research can follow both quantitative and qualitative methods, and data collection is typically conducted by case studies, observation and surveys (Saunders et al., 2009).
This research follows a quantitative approach, partly because it enables the researcher to quantify the significance of independent variables. Additionally, we compare the graduates’ financial performance with that of non-graduates.
The review of the literature already projects the deductive approach of the research. Along the deductive approach, the theory underlying the research is clarified at the beginning of the study, and the theoretical propositions are tested by using a research strategy specifically designed to effectively test the propositions (Saunders et al, 2009). The time dimension of the study is cross-sectional.
For the purpose of this research, secondary data was used from two difeerent sources. First, in order to collect the sample, data was collected from Rijksakademie’s archives. Second, the “ArtFacts.Net™” score was gathered from the most comprehensive online database “ArtFacts.Net™” while the auction sales data was purchased from “ArtFacts.Net™”. According to “ArtFacts.Net™” all the provided information is unbiased, verified and up-to-date.
Independent Variable
The independent variable is qualification from Rijksakademie. The applicants are divided in two categories. The ones who were accepted to Rijksakademie and the ones who were only interviewed and thus got rejected.
Dependent Variables
Two depedent variables were included in this research. The first is Reputation measured by “ArtFacts.Net™” score which as mentioned before it is a rating of the visual artists taking into account factors such as exhibitions. It has to be mentioned that the “ArtFacts.Net™” ranking for each artist might change from year to year since it is influenced by the artists’ activities. In this research, we used the artists’ ranking of 2015. The scale of the “ArtFacts.Net™” ranking ranges from 1 (highest score) to 147006 (lowest score) for 2015. That means for instance a visual artist with score of 1250 is considered to be in a higher position that a visual artist with a score of 3320.
The second dependent variable in our research is the artists’ auction sales. This variable has a monetary form and is specifically measured in Euros.
Results
The following chapter discusses the results of data collection and the statistical analysis procedures. The chapter elaborates demographics and descriptive statistics, then correlations will be presented and simple linear regression analyses will be used to test our hypotheses.
Demographics and descriptive statistics
Stutely’s (2003) advice of a minimum number of 30 is a useful indicator in determining the minimum number of respondents for statistical analysis. Data collection from the Rijksakademie archives has resulted in 697 unique cases, providing us with the required number of respondents. The sample consists of applicants who were invited for interview and were either accepted or rejected in the last 15 years.
The number of respondents was almost evenly distributed by gender, with 52.77% male and 47.23% female. There were in total 91 nationalities included in the database. The youngest applicant was 28, while the oldest one was 77 years old.
With regards to qualification from the Rijksakademie, 42.9% of the cases had favorable outcomes during the admission procedure; other applicants were also invited to interviews, but were rejected.
In regards to auction sales there was wide dispersion. Values spread from 0 to 7.762.842 euros, but the majority, 87.3% of people had auction sales of 0 during their career.
“ArtFacts.Net™” scores spread from 1 to 99764 with a mean score of 16230. However, 201 applicants did not have “ArtFacts.Net™” score, which can be explained by various reasons.
First, there are applicants who might have changed vocational direction. Second, there are applicants who while they have been qualified from Rijksakademie, did not manage to establish their career in the arts world.
Regression analysis
The following chapter reports on testing our hypotheses regarding relationship between the independent variable, qualification of Rijksakademie and the dependent variables auction sales and “ArtFacts.Net™ scores.
The uniform approach to test the study hypotheses will be executed with linear regression analyses, because this analytical strategy explain the relationship between one dependent variable and one or more independent variables (Saunders et al., 2009).
Due to the fact that in our sample there were applicants with no “ArtFacts.Net™” score, we gave the value 0 in order to proceed with the analysis.
After performing the correlations test (Table 1), results show a Pearson's r value is negative and very close to 0 (-0,09), which indicates a non-existent association between the indepedent variable (qualification from Rijksakademie) and depedent variable (“ArtFacts.Net™”). The same exact inference can be made for the association between the indepedent variable (qualification from Rijksakademie) and dependent variable (Auction Sales), since the Pearson's r value was found to be negative and very close to 0 (-0,07), too.
Table 1 shows the results from the matrix correlation. There is a very small negative correlation between qualification from Rijksakademie and “ArtFacts.Net™” score suggesting that an increase in qualification (i.e. 1 – as it was given the higher value dummy variable) leads to a decrease in Reputation. Furthermore, the same exact inference can be made for the
correlation between qualification from Rijksakademie and Auction Sales, since it is found to be very small and negative too. In each cases, it can be inferred that there is no statistical relationship among the variables at p<0.05.
Table 1 _ Correlations
2015Artfacts_score Residency Auction_Sales_EUR
2015Artfacts_score Pearson Correlation 1 -,009 -,031 Sig. (2-tailed) ,813 ,421 N 697 697 697 Residency Pearson Correlation -,009 1 -,007 Sig. (2-tailed) ,813 ,847 N 697 697 697 Auction_Sales_EUR Pearson Correlation -,031 -,007 1 Sig. (2-tailed) ,421 ,847 N 697 697 697
During the analysis, we calculated the Durbin-Watson indicator in order to see if the assumption of independent errors is tenable. Field (2009) suggested that values under 1 and over 3 should raise alarm-bells, and the indicator’s desired value is around 2. Our model scores 2,007 (Table 2), which is very close to 2. That implies that there is no auto-correlation in the residuals. Furthermore, the R squared is 0 (Table 2), implying that qualification from Elite Educational Institution is not a good predictor of the visual artists’ auction sales.
Table 2_Model Summaryb
Model R R Square Adjusted R Square Std. Error of the Estimate
Change Statistics
Durbin-Watson R Square Change F Change df1 df2 Sig. F Change 1 ,007 a ,000 -,001 306808,8319 ,000 ,037 1 695 ,847 2,007
a. Predictors: (Constant), Residency1 b. Dependent Variable: AuctionSales_EUR
Table 3_ANOVAa
Model Sum of Squares df Mean Square F Sig.
1
Regression 3492046363 1 3492046363 ,037 ,847b
Residual 6542E+13 695 94131659334
Total 6542E+13 696
a. Dependent Variable: AuctionSales_EUR b. Predictors: (Constant), Residency
In testing the second hypothesis, the results are surprisingly similar with the previous ones. The Durbin-Watson indicator is 1,970 (table 4), which is very close to 2. Thus, there is no auto-correlation in the residuals. What is more, the R squared is 0 (table 4) once again. This infers that qualification from Elite Educational Institution is not a good predictor of the visual artists’ “ArtFacts.Net™” score.
Table 5_ANOVAa
Model Sum of Squares df Mean Square F Sig.
1
Regression 64603792,38 1 64603792,38 ,056 ,813b
Residual 8050E+11 695 1158313308
Total 8051E+11 696
a. Dependent Variable: 2015Artfacts_score b. Predictors: (Constant), Residency
Table 4_Model Summaryb
Model R R Square Adjusted R Square Std. Error of the Estimate
Change Statistics
Durbin-Watson R Square Change F Change df1 df2 Sig. F Change 1 ,009a ,000 -,001 34034,0022 ,000 ,056 1 695 ,813 1,970
a. Predictors: (Constant), Residency b. Dependent Variable: 2015Artfacts_score
Discussion
In this study, we analyzed the influence that the signaling of qualification from an Elite Educational Institution has on the long-term performance of the visual artists. There have been various streams of researches that argue the attendance at an Elite Educational Institution to be related to high performers (Useem and Karabel, 1986; Griffiths et al., 2014; Ashley, 2010; Lariviere et al., 2010), In general, it was interesting to research the quality signal of Elite Education, whether it would have the same influence in the Cultural Industries as in organizations. We used two variables in order to define the long-term performance of the visual artists. The first one was the artists’ Reputation and the second one was Auction Sales.
The results of our analysis indicated that basically there is no relationship at all between the Elite Educational background of the visual artists and their long-term performance. Thus, our model failed to confirm our hypotheses. Our research supports the outcome of the study by Dale and Krueger (2002), which indicated that the relationship between prestige of Educational Institutions and future earnings of the graduates was no-significant or negative.
Our findings add to the speculation surrounding the ‘the more selective Institutions always lead to higher revenues’ rule that has been raised by Chevalier and Conlon (2003). Furthermore, according to an article in Business Week (April 19, 2004) regarding the Educational backgrounds of the most highly paid CEOs, it was found that most of them studied their MBA from less selective schools.
Nevertheless, it has to be taken into account that our research was carried out within the Cultural Industries context. This means that the quality signal of Elite Education might not have the same influence in the entire spectrum of industries. Moreover, in measuring the Reputation, as it has been stated before, we used the “ArtFacts.Net™” scores given to the
visual artists. However, the “ArtFacts.Net™” ranking system evaluates exhibitions held on an international level since 1996. Thus, the artist ranking tool does not take into consideration exhibitions that were held prior to this year; a fact that implies visual artists, who might have had some respected work done before 1996, would have had a different ranking.
What is more, regarding the effect of Elite Education on earnings that was investigated, only the visual artists’ auctions sales data was used. There is possibility that artists through their career have generated bigger income from their work indirectly (e.g. copy rights); a fact that have been missed out by “ArtFacts.Net™”. Therefore, earnings from other sources could add to the visual artists’ income and could influence the outcome of this research in a different way.
Further research on Elite Education as a quality signal should be carried out in more other disciplines and Industries, so as to support or reject the well-known perception that attending an Elite Educational Institution leads to a successful career. Attention has to be paid, however, to the way that the long-term performance is estimated so long as significant factors not to be missed out.
Conclusions
In this study we examined the effect that the signaling of qualification from an Elite Educational Institution on the visual artists’ long-term performance. According the arguments expressed as well as the relevant theories, Elite Education was projected to be positively related to better long-term performance. Whatsoever, the results rejected the hypotheses and thus our initial arguments, since it was found that in essence Elite Educational background of the visual artists has no-significant or even a small negative association with better long-term performance.
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