Does star power mitigate the negative effect of cultural distance on box office revenue? Evidence from Taiwan

ABSTRACT This paper examines the effects of star power and cultural distance on box office revenue. Movies released in Taiwan from 2015 to 2019 are collected as the sample. Combined it with the data of movies which were not imported in Taiwan, we propose the Heckit model to cope with the endogeneity decision for distributors as the empirical methodology for the sample selection problem. The results indicate that cultural differences have a negative and significant impact on box office performance. In addition, a U-shape relationship between box office revenue and cultural distance is observed, which improves the cultural discount theory. Star power is measured in several different ways and consistently shows a positive and significant effect on box office revenue. Finally, our results further indicate that with the same cultural distance, the movies with distinguished cast can generate higher box office revenue than the movies without distinguished cast. Star power is sufficient to mitigate the negative effect resulting from cultural differences.