Management of Art Galleries – Business Models - Universität St.Gallen

Quantitative Analysis 115 / 225can leverage sales and profits, their salary can also have a negative impact since it enters theincome statement as costs.At first, we can observe that R² rose to .6, only a tiny improvement on what we had seen before.Above and beyond what is captured by Bieger’s dimensions and all other covariates, employeesdo not appear to contribute to profits significantly, economically and statistically. Interestingly,the number of part-time employees has a negative impact on profits (€-10,846), while thenumber of full-time employees shows a positive sign (€8,568). Like the belief that minor-citygalleries can’t be profitable, our results disprove the belief underlying one widespread industrypractice. It seems to be common in the industry to employ interns or freelance employees on alarge scale to increase flexibility and lower costs. It seems, however, that working with full-timeemployees has a very positive impact on profits. Again, we must be careful in interpreting theseresults. Our results do not imply that part-time employees are not necessary to generate highprofit but part-time employees do not seem to be an independent contributor to success. In otherwords, simply hiring one more part-time employee does not leverage profits. This could be dueto an absence of or insufficient qualifications, low motivation or a lack of structure within thecompany that allows part-time employees to progress beyond their qualifications. This is arelevant point that needs to be further considered in the following part.When it comes to Bieger’s dimensions we find that the point estimates of all dimensions changeslightly. While some coefficients change their signs, six of the nine dimensions remainstatistically insignificant and economically rather small. As we have experienced in the previoustables organisational concept, communication concept and growth concept remain statisticallyand economically significant. Hence, our conclusion from above regarding the effect of Bieger’sdimensions on profits still hold true.Finally, Model VI includes the remaining control factors. These are the participation at art fairsand number of yearly exhibitions. We control for the participation at art fairs because art fairsrepresent one of the top three cost factors and also generate 10-20% of yearly revenue. We alsocontrol for the number of exhibitions per year since we propose that a higher number ofexhibitions might increase revenue.Again, we only find a small increase in R² to .61. Participation at art fairs as well as the numberof exhibitions are both positively correlated with profits, although only the latter is statisticallysignificant (10% level). At the same time, we find that the location of the gallery (major city,decentral) also becomes marginally statistically significant, although negative. The positiveimpact of the number of art fairs could be due to a multitude of factors, the most likely of whichis the profit associated with participating at art fairs. It appears that despite high participationfees galleries still make profits. As we have found out above, art fairs have become a valueincome stream for art galleries. The number of exhibitions follows a similar, yet less surprising,logic. Since rent is considered a main cost, galleries that use their showrooms more efficiently(for example, renting it out for photo shoots, private dinners, talks, etc.) have higher income by