The dynamism of the cultural sector in favour of innovation and economic growth

Dr. Marianne Paasi, European CommissionFP7 SSH Research Programme, Unit L2

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Innovations in the cultural sector and growth in Europe – What are the issues

• Culture has a value as such for the society• The types of innovations in the cultural sector, need for modified

(technology based) innovation theories• How does the innovation in the cultural sector support

(endogenous) growth?• We want to come up with policies and strategies which support

innovation in the cultural sector and in the economy• What is the EU doing and the role of Member states and regions in

supporting innovation in the Cultural sector

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Cultural sector: publicly supported culture and cultural industries

• Green Paper 2010: goods and services which include cultural expressions. Cultural industries are those industries producing and distributing goods or services which at the time they are developed are considered to have a specific attribute, use or purpose which embodies or conveys cultural expressions, irrespective of the commercial value they may have.

• Production and provision of cultural goods and services both by non-profit sector/activities and profit-oriented cultural industries

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Cultural sector: Definitions

• Different definitions exist (European Commission Green Paper 2010, OECD, UNESCO (incl. Sports, environment, UK))

• European Commission 2006 a) Core: Visual arts, performing arts, Heritage b) Cultural industries: Film and video, Television and Radio, Video games, Music, Books and Pressc) Creative industries: Design, Architecture, Advertising d) Related industries: PC and MP3 player manufacturers, mobile industry etc.

• Cultural sector a) Core (outputs are prototypes/ potentially copyright) and b) Cultural industries (copyrights, industrial mass reproduction)

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Economic contribution of the cultural sector in Europe

• The cultural&creative sector represented 2.6% of Europe’s GDP (Europe 30); Germany 3.4%, Finland 3.1%, Belgium 2.6%

• Growth 1999-2003 EU 25: 6.6%, Europe 30: 12.3%• Cultural consumption: steady growth (high income elasticity of cultural

demand)/ structural changes from to modern• Cultural employment: in 2004 2.5% of the active employed population in

the EU25; Higher educational level in the cultural sector employment• Structure: micro-enterprises and self-employed; large firms• Exports of cultural and creative products and services: EU has a surplus

(Cultural statistics 2007)• The role played by public sector (investment); heritage sector: share of

public sector even 52-43%

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Cultural sector in the perspective of cities: great importance

• CREATIVE CITIES: London, Berlin, New York

• London: Creative industries are the second largest business activity (after business services/ financial services today?)third largest sector of employment

• Berlin: increase by 660% from 1998 to 2002; 2002 8% of the total Berlin employment;city tourism (cultural days, museums, opera theaters)

• multiple data sources

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Culture in the economic and innovation theories

Economics of culture: • Production of ideas/ arts: uncertain, semi-public good characteristics;

gatekeepers, contract theory

• Incentives and IPRs for ideas/ artistic output and demand

• Markets might reject ideas because seen as unprofitable

• Public policy issues: IPRs, public sector investment/ subsidies

Innovation theories and measurement: • technology based innovation theory and measurement (OSLO manual);

• chain-link model;

• innovation in the service sector; non technological innovations: management, organisational innovations;

• Innovation system concept

• Open innovation

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Relationship between creativity and innovation: what do we observe?

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Creativity and innovation: interactive relationships

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ECONOMICCREATIVITY

CULTURALCREATIVITY

SCIENTIFIC CREATIVITY

TECHNOLOGICALCREATIVITY

Relation between Creative climate, Creativity and Innovation

Relationship between design and competitiveness

• International competitiveness rankings data: WEF

• Design index: - Degree of customer orientation

- Extent of marketing

- Extent of branding

- Capacity for innovation (technology)

- Production process sophistication (technology)

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Relation between design index and growth competitiveness (P.Ylatalo 2007, ETLA)

Russia

India

China

Czech Republic South Africa

EstoniaUnited Arab Emirates

Slovenia

Spain

Luxembourg

Korea

Ireland

Hong KongCanadaAustralia

New Zealand

Island

Singapore

AustriaIsrael

Norway

Belgium

Taiwan

Italy

UKNetherlands Denmark

France SwitzerlandSweden

JapanGermany

USA

Finland

3,5

4,0

4,5

5,0

5,5

6,0

6,5

3,5 4 4,5 5 5,5 6 6,5

Growth Competitiveness

Des

ign

Marketing component and growth competitiveness (p. Ylatalo 2007, ETLA)

Finland

USA

Russia

India

China

Estonia

Germany

France

Japan

Switzerland

Sweden

Denmark

UKNetherlands

Belgium

Italy

Austria

NorwayUnited Arab Emirated

Spain

South Africa SloveniaCheck Republic

Hong KongIsrael

Ireland

KoreaLuxembourgNew Zealand

CanadaAustraliaIsland

SingaporeTaiwan

3,5

4,0

4,5

5,0

5,5

6,0

6,5

3,5 4,0 4,5 5,0 5,5 6,0 6,5

Growth competitiveness

Mar

ketin

g k

no

w-h

ow

co

mp

on

ent

Cultural sector in the innovation perspective

• The cultural sector provides new ideas/ways/combinations, concepts, arts: innovations. Technology based innovation misses most of the innovation in the cultural sector

• Creativity or profit-oriented incentives? making culture is making money?• CS provides inputs to the innovation activities of other entreprises/

organisations: chain link model of innovation (types of knowledge and users)

• CS is a user/ demander for new technologies (ICT), adaptations: gives innovation impulses, innovation models of KIS

• Soft innovations, i.e. asthetic anad content innovations or experience innovations

• Open innovation model• Innovations from novel combinations of existing technologies, content and

processes 14

‘Hidden Innovations’ in the cultural sector

• The innovation processes are not formalised but involve often the same activities (R&D, business models, novel combinations, interactions)=> they are not measured, recognised

• CIS4 data : measurement of innovation/ Intangible assets (copyrights, industrial property rights/ design and goodwill)

• Investment of knowledge and creativity (intangibles) in relation to turnover in cultural and creative sector (Economy of culture, p. 109 for 2003): LI, CR and IRE countries over 10% of turnover , UK and Denmark 7.9% high; Finland 4.7%, Sweden 4.4%, Italy 3.6%

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Cultural sector in the growth perspective: too small, just consumption?

• Cultural sector is itself about ideas, a sort of innovation but it has a small size although the most dynamic sector

• Cultural sector creates cultural goods and services which serve mainly consumption (with exceptions like design) and demand is increasing due to increasing income.

• Arts and humanities research as a source of (R&D) knowledge spillovers?

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Endogenious growth from cultural innovations: in search for creativity spillovers

• Consumption of cultural goods and services: Creativity as attitude /Culture as social capital creates spillovers through increased creativity in the economy as a whole and attracts additional resources

• Creativity spillovers: New economic opportunities / inputs to the innovations of other sectors as spillovers

• Human capital vs. Creative workers: new ideas induce (permanent, endogenous) economic growth. Creative workers attracts additional resources

• Variety and economic growth• Economices of scale and Ideas (fixed costs, marginal costs are often zero)

once they are produced the size of the market determines the profit

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Local perspective: Creativity and cultural sector in regional and urban innovation and development

• Fuel digital devices and networks• Experience economy; innovation friendly climate• Creative innovation services (CCI inputs)• Creative workers: new ideas/ Creative class (persons) are the

key drivers in urban and regional growth (Florida: 3T: Technology, talent, tolerancy

• Cultural tourism: for example Berlin’s Museums insel – New national musemum: international arcitect/team for the concept; use of new possiblilities

Comment: or just the impact of the new economy?

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Cities and Agglomeration

Distance costs for routine, standardized and non-knowledge intensive activities have fallen

Distance costs for non-routine, non-standardized and knowledge-intensive activities have risen

From: Prof. P.McCann; graph: L.Dijkstra DG Regio

Public policy for innovation in and from the cultural sector – heterogenity of « market failures »

• Underinvestment in ideas/concepts (risk, appropriability etc): IPRs to promote incentives and capacity to innovate

• Diffusion of new technologies (like digitalisation) creating new economic opportunities and business model

• Cultural innovations in the supply chain of other (existing) industries: renewal of existing activities/ industries

• Culture as attitude (social capital)• Micro firms: acess to finance; promoting growth• Support interdisciplinarity• Stimulate employment of graduates (capacity to educate)

• Soft innovations: business models, demand for ideas 21

EU policy for innovation in and from the European cultural sector: motivations

• Legal basis: Lisbon Treaty (2009) about culture and innovation• Barrosso’s political programme: Europe 2020 A strategy for

smart, sustainable and inclusive growth (COM 2020 final) • Economic reasoning for EU level policies: Market/system

failures at the EU level? Culture is bound in regions and cities: strong source of regional growth

• Creative performances of Member states differ: indicates room for policy

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Creative climate differs accross the Member statesfrom Hollanders et al 2008)

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EU and European policy: Political orientations of the EU

• Barrosso’s political programme: Europe 2020 • Three priorities

- Smart growth: knowledge and innovation- Sustainable growth: efficient, green, competitive economy - Inclusive growth: high employment, social and territorial cohesion

• EU targets for 2020; 5 Flagships

• Flagship initiative « Innovation Union »: re-focus research and innovation policies on the challenges of the European society; includes for example copyrights and trademarks

• Europe’s strengths in creativity and design• Other flagships contain also for CS important issues like Digital

Agenda for Europe24

European cultural policy

• Green Paper 2010, Unlocking the potential of cultural and creative industries (relying on Europe 2020)

• 2009 European year of Creativity and innovation• Agenda for Culture 2007: three common sets of objectives: cultural diversity and

intercultural dialogue; culture as a catalyst for creativity; and culture as a key component in international relations.

• EU culture programme 2007-2013: The aim of the multi-annual Programme is to encourage and support cultural cooperation within Europe in order to bring the European common cultural heritage to the fore. The Programme proposes funding opportunities to all cultural sections and all categories of cultural operators contributing to the development of cultural cooperation at European level, with a view to encouraging the emergence of European citizenship.

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EU innovation policy: main features

• Flagship initiative « Innovation Union » (Communication)• Innovations to adress societal challenges• European Competitiveness Report 2010: creative industries• Broad based innovation policy (Finnish EU presidency 2006):

excellence in design, improvements of processes and organisational change, business models, marketing, branding and design; more focus on demand side and users

• Financing; Venture capital (chronic underinvestment in cultural and creative industries)

• Creativity, innovation; culture as an attitude • SMEs • Public sector as driver of innovations

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Other EU policies with relevancy to the innovation in the cultural sector

• The Digital Agenda• Strategy on Intellectual Property; TRIPs• Education (EIT), Research, labour market/ mobility• Single market: European creative single market; competition• SMEs/Micro firms/ persons: more flexible measures• Creativity to be in line with evolving markets, project funding, prize-

awards (EU award?)• In particular:

Culture is bound in regions and cities: strong source of regional growth; EU cohesion policy (rural, urban); cluster policy; role of Regional policy and Structural funds for implementation (allows to adress the heterogenious activities of CS)

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Examples about proposals to support innovation in the cultural sector

• Innovation vouchers, Design thinking in businesses (cultural sector), Artists in residence etc. (KEA)

• individuals/ freelanchers• Access to finance: creative industries bank, attract investment• Access to markets: poor knowledge of consumer markets =>

market information, B2B partnerships across borders, facilitating the translation of innovation and knowledge into (marketable) products, processes and services

• Platform on the Potential of Cultural and Creative IndustriesHeterogenity of the sector

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Future challenges and perspectives

Better scientific knowledge for innovation models and policies in the cultural sector: innovation/economic/interdiscplinary research; economics of knowledge/ innovation economy (new ways)

Governance in policies for creativity and innovation: create policy synergies/ Support for interactions between actors

Support for interdisciplinarity: EIT, Aalto university, Germany (regional) Opportunities from globalisation and digitalisation New ways for public sector as driver of innovations in the cultural

sector? Statistics: CIS4 has only firms with 10 or more employees; GDP:

Satellite accounts for cultural sector; difficult comparisons across the Member states and with the USA

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