Creative Economy and Innovation Ecosystems: does it have any connection?
For just over 20 years, the concept of “Creative Economy” has been discussed internationally as a generator of economic development, functioning as the engine of developed and developing economies, as they are capable of displacing jobs that are highly based on operational techniques and on physically demanding repetitive tasks, with jobs that require quite intellectual skills for analysis and judgment. The creative economy involves forming an idea about the substantive features and meaning of the creative economy, as well as mastering various scientific methods for solving the problems of forming creative opportunities in the field of generating new ideas and their implementation. This concept, until reaching the current term of “Creative Economy”, has been developed in recent times and reflects the changes that have taken place in the global economy, where economies that were once centered on the production of goods are now giving way to expansion driven by specific sectors of services.
John Howkins (2001), states in his book “The creative economy — How people make money from ideas”, that these creative activities encompass those companies driven by the production of intellectual property, which arise mainly from creativity, as driving forces for the generation of wealth and jobs, causing an impact on related industries as political, social and educational influencers in their community. A few years later, the author mentions that in the creative economy the main capitalized value is new ideas, e.g., “thinking is already an act of work”. Therefore, it is an economy based on innovation, news, and creative products (Howkins, 2006). However, an innovative product does not need to be a new technology, it can be something familiar positioned under a new angle, in a new context, that is, something that can surprise future consumers.
Therefore, it is correct to say that the attention of a significant number of organizations, researchers and specialists today is focused on the creation of innovative solutions and enterprises. It is no coincidence that researchers and specialists already perceive innovation as the basis for the development of entrepreneurship. The object of analysis is the methods and tools for creating and developing business processes that form the basis of an innovative company’s activity and entrepreneurship. Still, to say that innovation is important for an organization seems obvious. However, in recent years, the very concept of innovation has evolved so much that it seems to have no end to its evolution. Therefore, knowing how and why to innovate has been one of the most analyzed issues by academics and industry professionals. Antti Hautamäki (2014) states that the global economy has entered a phase led by innovation and the ability to innovate in a cyclical and constant way has become a prerequisite for the competitiveness of companies, which operate in a completely international sphere, where the market and resources are no longer local, but global.
A bit of history about the “innovation”:
There are quite old records of the definition of innovation in economics and business literature. Perhaps one of the main authors is Joseph Schumpeter and his theory that aimed to explain the activities that lead to the cycles of expansion and contraction of the capitalist system. Since Schumpeter, the concept of innovation predominantly focuses on economic and technical developments, while the social sciences were particularly interested in processes and corresponding social effects (Harrison, 2012). Schumpeter (1939) described a process in which newer innovations eventually replaced older innovations, in what he called “creative destruction”. Historically, the long wave view was first raised by Kondratieff, but it was very well applied by Schumpeter to develop a relevant theory of what he called the “conglomeration of innovations”. Such waves are getting closer every day, i.e., the interval between each of them is getting smaller. This is an indicative of some phenomena that are occurring due to the development of technologies that show exponential growth.
Source: adapted from (The Natural Edge Project, 2012)
Hence, why is innovation so important to an organization that theorists and practitioners have known about for so long? According to the Oslo Manual (OECD, 2006), innovation is the introduction of something new in any human activity. The diversity of meanings of innovation is due to the scope of its application as a vector of human development and improvement of the quality of life. It can be said that innovation is one of the most difficult concepts to define in the business world. We can say that this is due to the constant expansion and learning of all the parties involved. Still, due to its nature to be something related to the exchange of knowledge between different parties, understanding the parties and how they interact with each other seems very necessary.
Innovation environments and the generation of economic value:
Recent studies on innovation often lead to the fact that innovations flourish in special interactive environments. Such environments came to be called “Innovation Ecosystems”. The ecosystem metaphor emphasizes the beneficial interaction between different factors and actors, as well as the interdependence between them, being able to generate self-regulation. Therefore, an ecosystem does not need external guidance to be viable. Similarly, in natural ecosystems, certain species flourish because they have excellent living conditions and the food chains in which they are included are complete (Hautamäki, 2014). According to Granstranda and Holgerssonb (2020), the concept of innovation ecosystems has become popular in the last 15 years, leading to a debate about its relevance and conceptual rigor.
According to Hautamäki (2014), innovative ecosystems can be examined both in terms of idea generation and idea execution. He cites the Silicon Valley ecosystem, which is characterized by a very strong business culture that encompasses creativity, risk-taking, work orientation and cooperative exchange, being very conducive to the emergence or increase of entrepreneurial activities, as well as being more risk-tolerant and with structures that support cooperation between businesses. This turns the innovation ecosystem itself into a huge laboratory for testing new ideas.
Source: (Hautamäki, 2014)
Such an ecosystem configuration has been purposefully encouraged to exist in different locations around the world. However, does every ecosystem have to be the same way? Certainly not. However, without entering the discussion about the best existing model, it is important to bring up the concept of Economic Externality to demonstrate the relationship between innovation, as a competitive advantage and generator of value, with the creative economy.
Externality needed for the existence of innovation:
Very briefly it can be said that an externality is a cost or benefit caused by a producer that is not financially incurred or received by that producer. An externality can be positive or negative and can result from the production or consumption of a good or service. Costs and benefits can be private — for an individual or an organization — or social, meaning they can affect society. Basically, it is important to note that the phenomenon of externality occurs in an economy when the production or consumption of a specific good or service impacts a third party that is not directly related to the production or consumption of that good or service. We can give the example of an artistic event taking place in a city environment and claim that third parties such as local producers, travel, and tourism companies, among others, who are not making direct investment in the event, will benefit from it.
Source: Own authorship
Therefore, it can be said that externality must always be observed. However, everything changes depending on the perspective of the observer. For example, if the observer is an investor or a group of investors, they will tend to ignore everything that cannot be recovered as an investment, i.e., their account will be related to the number of actors and stakeholders they are able to include in their value chain, especially via formal contracts. The amount invested must be less than the amount recovered through financial return from products and services sold to participants. It seems simple, right? But it is not!!
However, imagine that you, an investor, are not part of a company or even do not represent a group of investors, but a city, country, or region? Well, this investor’s perspective is or should be much more sympathetic to the concept of externality, since the value invested in services based on creativity and which connect many actors, have a great capacity for multiplication and value generation for parts that he can barely envision. Therefore, the behavior cannot only be oriented to seek a direct return on the amount invested with those who have formalized relationships, but rather understand as much as possible of what is not directly observable. Still, seek to create value-generating elements for each service generated through creativity.
Source: Own authorship
Therefore, using the idea of externality, it is possible to understand the reason for the generation of high-risk contracts (e.g., Venture Capital) between investors and startups, since the investor’s gaze (in case 1) is very oriented to the analysis of the return on investment (ROI) of the initiative, and this analysis seeks to see value only in the directly observed part. However, thinking like a state or government investor, it is important to note that, even without knowing exactly all the potential value generated by each venture, the chances of success depend on the ability of many other actors to generate value with knowledge, both to achieve prominence in products and services sales (e.g., management, marketing, among others), as well as in the generation of new services based on culture and creativity. As previously shown, the quality of the workforce, which depends on collaboration and interconnection between educational institutions and industry, behaviors aimed at entrepreneurship culture, collaboration between parties and, mainly, openness and comfort for risk investments are very important for the success of an ecosystem. For the latter case, it is possible to observe the dialectic relationship between openness to investment and existing success cases, which are directly dependent on the factors previously mentioned.
In short, we can say that the relationship between the creative economy and innovation ecosystems is direct, however, we are still a long way from clearly understanding the interdependence of each side, i.e., how to relate the factors that turn a place into a good ecosystem, with the actors involved and the flow of value generated. For this, I have been researching a lot about organizational learning in open innovation ecosystems and I will bring more news soon. Hope you enjoyed this post.
REFERENCES
Howkins, J. The creative economy — How people make money from ideias. London: Penguin Books, 2001.
Howkins, J., Creative Ecologies: Where Thinking is a Proper Job (2006).
Hautamäki, A. (2014). Creative economy and culture at the heart of innovation policy.
Harrison, J. D. (2012). “Small Businesses Created “Essentially Zero” Jobs in August,” Washington Post. September 6, 2012 and updated September 7, 2012. http://www.washingtonpost.com/business/onsmall-business/small-businesses-createdessentially-zero-jobs-in-august/2012/09/06/91da9a88-f84e-11e1-8253-3f495ae70650_story.html. Accessed on December 14, 2012.
Schumpeter J. Business cycles: a theoretical, historical and statistical analysis of the capitalist process. [Livro]. — Nova York : McGraw-Hill, 1939. — Vol. 1.
Granstrand, O, Holgersson, M. 2020. “Innovation ecosystems: A conceptual review and a new definition,” Technovation, Elsevier, vol. 90.
OCDE (2006). Manual de Oslo: diretrizes para coleta e interpretação de dados sobre inovação tecnológica [Relatório]. — São Paulo : FINEP (Financiadora de Estudos e Projetos).
