What Drives Performance? A Look into Community Characteristics

Arts and cultural organizations don’t operate in a vacuum. They operate in communities. So to consider what drives the performance of these organizations, it is important to consider all factors in the arts and culture ecosystem. Our previous blog post explored the organizational charactheristics that affect performance. In this post we will explore how community characteristics impact performance, with specific attention paid to socio-demographic characterisics and the number of competitors, complements, and substitutes in a community.

In order to provide findings in manageable chunks, we will focus on the community highlights as they relate to two performance indices: Contributed Revenue and Total Expenses.

Community Highlights for Contributed Revenue

How do socio-demographic characteristics of the community affect Contributed Revenue?

There are some traits that we look at on an individual level:

The higher presence of children under 18 in the market the lower unrestricted contributed revenue
The larger the percentage of the population with a bachelor’s degree or higher, the lower unrestricted contributed revenue.
As commute time increases, unrestricted contributed revenue decreases.
Contributed revenue is boosted by a high percentage of the population 18-24 years old and elevated levels of independent artists living in the community.

Other traits describe households rather than individuals:

Households led by single moms, nonfamily households, and those with annual income above $200,000 all lead to higher unrestricted contributed revenue.

How does the number of competitors, complements, and substitutes in the community affect contributed revenue?

Unrestricted contributed revenue is negatively affected by the presence of one of the country’s highest-attendance museums, as well as the number of restaurants and cinemas. Evidently, restaurants, cinemas, and high-draw museums draw resources away from arts and cultural organizations.
More hotels, on the other hand, leads to higher contributed revenue.
A high presence of corporations with under 100 employees or those with 250 or more boosts contributed revenue while those with 100-249 employees negatively impact it.
More local foundations mean more contributed revenue, not surprisingly.
There is high competition for unrestricted contributed revenue when there are many arts and cultural organizations of nearly every sector (all but theater) vying for the same limited market resources.
High total levels of operating revenue for every arts and culture sector in the market positively impacts the unrestricted contributed revenue of any individual organization. There is a strong complementarity effect.

Community Highlights for Total Expenses

How do socio-demographic characteristics of the community affect performance?

Arts and cultural organizations have higher expenses in communities with a higher percentage of Hispanics and lower expenses when there are more Asian Americans or more people 65 and over.
Communities with a higher percentage of the population in the labor force tend to have smaller-budget organizations, perhaps a shift in supply that caters to time-constrained working adults.
Total expenses are lower when commute times are longer, and they rise with consumer confidence in the community.

With respect to households:

Arts and cultural organizations in communities with a higher percentage of households led by single fathers tend to have lower total expenses while those with more bi-racial households have higher expenses.
A high percentage of households with annual income above $200,000 leads to higher expenses.

How does the number of competitors, complements, and substitutes in the community affect total expenses?

Total expenses of arts and cultural organizations tend to be lower in communities with a high number of art dealers.
Budgets are larger when the arts and cultural landscape of the community includes the presence of one of the country’s highest attendance museums.
More sports teams and zoos in the market are related to lower levels of total expenses, and the more parks and hotels lead to higher total expenses.
A high presence of corporations with 1000 or more employees in the community leads to arts and cultural organizations having larger budgets, while those with 100-249 employees or 500-999 employees negatively impact total expenses.
More local foundations had no effect on total expenses, which was a bit surprising.
Budgets tend to remain small when there are high numbers of arts education organizations, art museums, music ensembles, opera companies, or performing arts centers, demonstrating substitution effects as organizations compete for community resources.
The exception is the ‘miscellaneous’ sector, whose strong numbers boost total expenses for any individual organization. It appears they are sufficiently different from the other sectors and serve as complements rather than substitutes.

High total levels of operating revenue for nearly every arts and culture sector in the market is a positive for the total expenses of any individual organization. This is intuitive, and the data show a strong complementarity effect.

The more aggregate operating revenue in the market for each arts and culture sector, the more demand or interest there is in the local market for supporting that sector, allowing organizations that are part of it to grow.
The more interest in the market, the better off all arts and cultural organizations are.

Do any of these finding resonate with you? What did you find suprising? Please let us know on twitter @artsresearch and on Facebook. Next week we will explore community characteristics and how they driveProgram Revenue and Program Personnel Compensation.