The Impact of Central Government Subsidy on Program Innovation

This master thesis is intended to continue the discussion on the efficiency of government subsidy on cultural organizations. The influence of government subsidy on cultural world is a standing concern in the study of cultural economics. Through this master research, efforts are made in investigating the impact of Dutch central funding on theater groups in terms of their repertoire production, with a focus on innovation. Theater groups in the three major Dutch cities that are Amsterdam, Rotterdam and The Hague, are chosen as observations, which form up in total 23 cases. The subsidy situation of the 23 theater groups are investigated, for which data are collected for the subsidy period 2001-2004 and 2005-2008. In addition, the exemplar role of the three cities in the country provides a motive to investigate the difference between them. Thus whether differences exist in the degree of innovativeness between Amsterdam and the other two cities is looked into. In the process of the research, I fist devote the first three chapters to construct a theoretical framework for the research. In chapter 1-3, concepts such as cultural goods, cultural values, market failure, crowd theory, as well as definition and measurement of innovation are discussed. Moreover, extensive explanation on conventionality index (CI) and the number of new plays are given, as they, as measurement of innovation, form up two dependent variables for this research. The conduction of this research is based on secondary data from various governmental sources, including the cultuurnota, statistic bureau documents, etc. The amount of the central subsidy granted to theater groups is the independent variable, which is anticipated to have an impact on the conventionality index and the number of new plays of theater groups. In total, 184 (23*8) observations are generated for analysis, which forms an important part for the panel data. Furthermore, control variables including population, reputation, income level as well as location are added up to the dataset. These factors are controlled during the analysis, so that a causal association can be tested between the independent variable and dependent variables. For the verification of hypotheses, Stata, a popular statistical program, is used for econometric l analysis. The four hypotheses of the research are verified respectively, so that the research questions raised at the beginning of this research is answered in the conclusion part. Through this research, efforts are made to conquer the limitations such as missing data. With the effort, I wish to contribute to the continuous academic discussion on the impact of government subsidy in cultural sector. In addition, I also hope this research will provide enlightenment for theater production.