Abstract Why do creators sometimes act as firms, internalizing the realization of their work, while in other settings they delegate realization to market intermediaries or operate under hierarchical employment? We develop an analytical framework in which creators choose how to organize realization when contracts are imperfectly enforceable and limits on contractual payments constrain transfers to creators. Delegation can reduce coordination burdens by shifting realization to established intermediaries, but may fail to meet creators’ participation constraints, making self-integration an endogenous response to contracting limitations. The framework highlights how organizational choice depends not only on coordination costs, but also on the feasibility of contractual transfer and the timing of diffusion. We illustrate the model using the history of Western classical music, where composition and realization are technologically distinct yet jointly required for value creation, yielding a transparent make-or-buy setting. The framework is consistent with the historical evolution from salaried employment under patronage, to entrepreneurial self-organization as markets expanded under weak copyright, and ultimately to delegation under mature intermediation and contracting. It also clarifies why composers sometimes sequenced dissemination—using performance before publication—when the timing of diffusion could not be governed through contract. Similar trade-offs shape creator-intermediary relationships in contemporary creative markets.
Borowiecki et al. (Fri,) studied this question.