International Co- Production and Collaborative Agreements, the Case of the Finnish Film Industry

271 Pages·2011·4.91 MB·English

by  System Administrator

Department of Management and International Business
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ISBN: 978-952-60-4048-6 (pdf) BUSINESS + r
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H ISSN-L: 1799-4934
S ISSN: 1799-4942 (pdf) ART +
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+ er DOCTORAL
DOCTORAL s DISSERTATIONS
DISSERTATIONS ity
Aalto University publication series
DOCTORAL DISSERTATIONS 15/2011
International Co-Production and
Collaborative Agreements, the Case of
the Finnish Film Industry
Pia Naarajärvi
Aalto University
School of Economics
Department of Management and International Business
Aalto University publication series
DOCTORAL DISSERTATIONS 15/2011

© Pia Naarajärvi and Aalto University School of Economics

ISBN 978-952-60-4048-6 (pdf)
ISBN 978-952-60-4047-9 (printed)
ISSN-L 1799-4934
ISSN 1799-4942 (pdf)
ISSN 1799-4934 (printed)

Aalto Print
Helsinki 2011
Abstract
Aalto University, P.O. Box 11000, FI-00076 Aalto www.aalto.fi
Author
Pia Naarajärvi
Name of the doctoral dissertation
International Co-Production and Collaborative Agreements, the Case of the Finnish Film
Industry
Publisher School of Economics
Unit Department of Management and International Business
Series Aalto University publication series DOCTORAL DISSERTATIONS 15/2011
Field of research International business and law
Abstract
An often-used global model of international business (IB) cooperation in the film industry is
‘international film co-production’, consisting of two or more production companies from at
least two different countries jointly producing a film. Based on their characteristics,
international film co-productions can strongly be considered as international alliances
between production companies, mainly coordinated and regulated by collaborative
agreements called ‘co-production agreements’. Accordingly, international film co-productions
are not only interesting from the IB perspective, but also from the legal perspective, since
there are both business and legal challenges relating to such IB cooperation.
Regardless of the relevant topic, there is still little knowledge about the use of collaborative
agreements in international alliances obtained through multidisciplinary study combining
business and legal studies, and more specifically on how one specific international alliance is
structured, based on, and managed by an alliance contract, which contractual provisions are
included in the contract, and how the design of such contract could be approached and further
applied to the film industry. The purpose and objective of this study is to contribute to the
understanding of international alliances based on and regulated by alliance contracts,
including various business and legal issues to be agreed upon between the alliance partners
and influenced by the international legal environment, in the context of the Finnish film
industry as the case, international film co-production as the international alliance, and co-
production agreement as the alliance contract.
This doctoral thesis explores the research topic through the case of the Finnish film industry
by examining international film co-productions as alliances, the use and design of co-
production agreements as a basis for such international film co-production alliances, and the
relevant and applicable legal regulation having influence on such alliances and co-production
agreements. Moreover, this study follows a qualitative single-case study design, the primary
empirical source of data consisting of ten interviews carried out in Finland in which Finnish
film producers were the interviewees.
As contributions, this multidisciplinary study enables the exploration of the research area
from an extensive perspective, thereby contributing to the research on alliance contracting
and the film industry. Based on the literature review and the legal structure, a conceptual
framework is proposed for understanding international film co-production alliances based on
co-production agreements and influenced by the different legal regulation. Furthermore,
based on the empirical findings of this study, a process model is also proposed in order to
identify different phases of the design of a co-production agreement from business and legal
perspectives, one to be applied to international film co-productions in general, and the other
to be applied to the Finnish film industry.

Keywords International alliances, international film co-productions, collaborative
agreements, co-production agreements, alliance contracts, legal regulation, law,
the film industry
ISBN (printed) 978-952-60-4047-9 ISBN (pdf) 978-952-60-4048-6
ISSN-L 1799-4934 ISSN (printed) 1799-4934 ISSN (pdf) 1799-4942
Pages 266 Location of publisher Espoo Location of printing Helsinki Year 2011
ABSTRACT

An often-used global model of international business (IB) cooperation in
the film industry is ‘international film co-production’, consisting of two or
more production companies from at least two different countries jointly
producing a film. Based on their characteristics, international film co-
productions can strongly be considered as international alliances between
production companies, mainly coordinated and regulated by collaborative
agreements called ‘co-production agreements’. Accordingly, international
film co-productions are not only interesting from the IB perspective, but
also from the legal perspective, since there are both business and legal
challenges relating to such IB cooperation.

Regardless of the relevant topic, there is still little knowledge about the
use of collaborative agreements in international alliances obtained through
multidisciplinary study combining business and legal studies, and more
specifically on how one specific international alliance is structured, based
on, and managed by an alliance contract, which contractual provisions are
included in the contract, and how the design of such contract could be
approached and further applied to the film industry. The purpose and
objective of this study is to contribute to the understanding of international
alliances based on and regulated by alliance contracts, including various
business and legal issues to be agreed upon between the alliance partners
and influenced by the international legal environment, in the context of the
Finnish film industry as the case, international film co-production as the
international alliance, and co-production agreement as the alliance
contract.

This doctoral thesis explores the research topic through the case of the
Finnish film industry by examining international film co-productions as
alliances, the use and design of co-production agreements as a basis for
such international film co-production alliances, and the relevant and
applicable legal regulation having influence on such alliances and co-
production agreements. Moreover, this study follows a qualitative single-
case study design, the primary empirical source of data consisting of ten
interviews carried out in Finland in which Finnish film producers were the
interviewees.

As contributions, this multidisciplinary study enables the exploration of
the research area from an extensive perspective, thereby contributing to the
research on alliance contracting and the film industry. Based on the
literature review and the legal structure, a conceptual framework is
proposed for understanding international film co-production alliances
based on co-production agreements and influenced by the different legal
regulation. Furthermore, based on the empirical findings of this study, a
process model is also proposed in order to identify different phases of the
design of a co-production agreement from business and legal perspectives,
one to be applied to international film co-productions in general, and the
other to be applied to the Finnish film industry.

In summary, by studying international film co-production alliances and
co-production agreements as alliance contracts from the Finnish film
industry perspective as a multidisciplinary study that combines
international business and legal perspectives using a qualitative case study
methodology, this doctoral dissertation contributes to the alliance literature
and theory by developing a conceptual framework of an alliance contract’s
business and legal environment and a process model representing the
design of an alliance contract combining business and legal perspectives.

Keywords: international alliances, international film co-productions,
collaborative agreements, co-production agreements, alliance contracts,
legal regulation, law, the film industry

2
ACKNOWLEDGEMENTS

Writing this doctoral dissertation has definitely been an interesting and
challenging journey. I have learned a lot about scientific research, but above
all carrying out this doctoral thesis has challenged me in patience, long
term determination and numerous considerations on defining myself as a
researcher as well as making choices I honestly believe in. This would not
have been possible without the support of several people and organizations
to whom I am highly grateful.

First, I would like to thank my outstanding supervisors Professors Hannu
Seristö and Matti Rudanko who have always been there for me along the
way and shared the inspiration with me. Thank you for all your genuine
support and believing me! Without you this doctoral thesis would not have
been carried out, and hopefully, our paths keep crossing over the years to
come.

I am also thankful to my pre-examiners Professors Africa Ariño and Mika
Hemmo who had the time and interest in my doctoral thesis and provided
me with valuable comments. Moreover, I am excited to have Professor
Birgit Kleymann as my opponent to discuss and challenge my research. I
am also grateful for the financial assistance I have received during my
research from the Foundation for Economic Education and HSE
Foundation.

I also wish to thank the International Business faculty members at Aalto
University School of Economics for being involved in various ways.
Especially, I would like to thank Professors Asta Salmi and Rebecca
Piekkari for their supportive actions and advice regarding my research.
Additionally, I wish to warmly thank my fellow students, Hanna Kalla, Tiina
Ritvala and Arno Kourula, for all the stimulating discussions with you. I
much appreciate the interest you have showed towards my research.
Further, I also want to thank the interviewees of my doctoral thesis and the
persons in the audiovisual industry for showing an interest in my research
work.

Finally, I would like to thank my family and friends for all the support
during these years of hard work. Most of all, my dear mum Hilkka and my
dear brother Harri, thank you for the enormous encouragement and
limitless love and support you have given me all these years, I could not
have survived without you! Thank you for believing in me and sharing my
thoughts and hopes with me every day. You have always been the wind
beneath my wings, which I value the most and will be forever grateful.

Helsinki, January 2011

Pia Naarajärvi

3
TABLE OF CONTENTS

LIST OF FIGURES...........................................................................................6
LIST OF TABLES………………………………………………………………….……….….....6
LIST OF KEY LEGAL REGULATION……..…………………………………..….…..7
LIST OF APPENDICES…………………………………………………………………….….8

1 INTRODUCTION................................................................................10

1.1. Background of the Study…………………………………………………………………..10
1.2. Research Problem and Gap………………………………………………………………13
1.3. Research Objectives, Questions and the Case Study Setting………....16
1.4. Definitions and Limitations…………………………………………………………..…19
1.5. Structure of the Study……………………………………………………………………….21

2 LITERATURE REVIEW AND LEGAL STRUCTURE………….….23

2.1. International Film Co-Productions as Alliances and Contracting..23
2.1.1. International Co-Productions in the Film Industry…………..…………..……23
2.1.2. International Film Co-Productions as Alliances……………………………..….26
2.1.2.1. Inter-firm Cooperation and International Co-Production in
IB................................................................................................26
2.1.2.2. Alliances and Various Research Perspectives…………………..….29
2.1.3. Contracting in International Film Co-Production Alliances……………...…31

2.2. Co-Production Agreements as a Basis for International Film
Co-Productions………………………………………………………………………………….33
2.2.1. Co-Production Agreement of the Film Industry………………………..……….33
2.2.1.1. Co-Production Agreement as Collaborative Agreement……..…33
2.2.1.2. Co-Production Agreement as Business Contract……….………...35
2.2.2. Design of a Co-Production Agreement………………………………………………37
2.2.2.1. Design of Alliance Contracts and Contractual Provisions……..37
2.2.2.2. Key Contractual Provisions of Co-Production Agreements......41
2.2.2.3. Commitment and Trust as Influence on Business Contracts…56

2.3. Legal Regulation as Influence on International Film Co-
Productions……………………………………………………………….……………….………57
2.3.1. Legal Regulation Relating to International Film Co-Productions............58
2.3.1.1. Legal Environment of International Film Co-Productions…….58
2.3.1.2. International Law………………………………………………..……………59
2.3.1.3. Legal Systems and National Laws of Contracting Parties………61
2.3.2. Legal Regulation Applicable to International Film Co-Productions
from the Finnish Film Industry Perspective.............................................62
2.3.2.1. International Treaties…………………………………………………….…62
2.3.2.2. Finnish Law…………………………………………………………………..…69
2.3.2.3. Rules and Regulations of Financiers………………………………..…79
2.3.2.4. Summary of the Key Legal Regulation……...…………………..……85

2.4. Conceptual Framework and Multidisciplinary Approach of the
Study…………………………………………………………………………………………………..86

4
3 RESEARCH METHODOLOGY………………………………………………..92

3.1. Research Design and the Case Study Setting……………………..……..……92
3.2. Interviews as Qualitative Research Method………………………………..…94
3.3. Analysis of Data……………………………………………………….………………………101
3.4. Validation Criteria – Credible Qualitative Research……………………104
3.5. Legal Research Methodology…………………………………………………………106

4 CASE OF THE FINNISH FILM INDUSTRY…………………………109

4.1. Empirical Data Collection………………………………………………………………109
4.1.1. The Finnish Film Industry……………………………………………..………..……109
4.1.2. Qualitative Interviews……………………………………………………………..….…110
4.1.3. Example Case of International Film Co-Production…………………..…..…111

4.2. Discussion and Analysis of the Empirical Data…………………….…......113
4.2.1. International Film Co-Productions………………………………………………...113
4.2.1.1. Alliance perspective……………………………………………………..…113
4.2.1.2. Contracting………………………………………………….....................115
4.2.2. Co-Production Agreements…………………………………………….……..…...…116
4.2.2.1. Usage and Significance……………………………………………..…….116
4.2.2.2. Coverage…………………………………………………………………..……119
4.2.2.3. Drafting………………………………………………………………...…..….120
4.2.2.4. Key Content……………………………………………………………………123
4.2.2.5. Challenging Elements, Uncertainties and Risks……………...…130
4.2.3. Influence of Legal Regulation…………………………………………………………134

4.3. Key Findings and Conclusions of the Study……………………………….…136

5 CONTRIBUTIONS AND IMPLICATIONS OF THE STUDY…147

5.1. Theoretical Contributions………………………………………………………………147
5.2. Managerial Implications……………………………………………….………………..151
5.3. Suggestions for Further Research……………………………….………..………153

REFERENCES……………….……………………………………………………..…..….155

APPENDICES…………………………………………………………………….....……..165

5
LIST OF FIGURES

Figure 1. Four stages of the strategic alliance process (Pekar & Allio,
1994)……………………………………………………………………………..31

Figure 2. Modified model of the four stages of the strategic alliance
process by Pekar and Allio (1994)…………………………………....32

Figure 3a. International film co-production including one co-production
agreement………………………………………………………………..…….36

Figure 3b. International film co-production including several co-
production agreements……………………………………………………37

Figure 4. An example of legal regulation relating to and having
influence on international film co-production between
production companies representing different countries, such
as Finland and Denmark.……………………………………..............59

Figure 5a. Conceptual framework for multidisciplinary study on
international film co-production alliances; the case of several
co-production agreements……….……………………………………..89

Figure 5b. An alternative conceptual framework for multidisciplinary
study on international film co-production alliances; the case of
one single co-production agreement…………………………………90

Figure 6. The film “Jade Warrior” (2006) as an example of an
international film co-production……………………………….....…112

Figure 7. Process model on the design and management of a co-
production agreement combining the business and legal
perspectives……………………..…………………………………………..141

Figure 8. Process model on the design and management of a co-
production agreement combining the business and legal
perspectives applied to the Finnish film industry……………..145

LIST OF TABLES

Table 1. Key contractual provisions of a co-production agreement…..42

Table 2. Legal regulation applicable to international film co-
productions from the Finnish film industry perspective…….86

Table 3. Modified hierarchy of legal norms presented by Naarajärvi
and Koivisto (2002)………………………………………………………107

Table 4. The most and the least important elements of co-production
agreements based on the empirical data…………………….……128

6