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Chapter 13: Creative Industries and Innovation in a Knowledge Economy
13 Creative industries and innovation in a knowledge economy Jason Potts The cultural and creative industries contribute to the knowledge economy by their role in reproducing cultural knowledge and through provision of entertainment, experience and leisure goods with cultural content, for which they are widely acknowledged as suffering serious market failure problems (Baumol and Bowen, 1966; Throsby and Withers, 1979). But they also contribute to the innovation process, an aspect that has only recently been appreciated. Specifically, the creative industries are a driver of the knowledge economy by their contribution to the innovation process on the demand side of consumer uptake of new ideas and by their facilitation of consumer-producer interaction. The creative industries are, in this respect, a legitimate part of the innovation system of a knowledge economy. Creative industries in the classic Department of Culture, Media and Sport (DCMS, 1998) conception refer to an industrial subset of economic activity in which creativity is the key input and intellectual property is the key output. This definition was proposed as a way of expanding the erstwhile ‘cultural industries’ of high art and culture, which traditionally received public subsidies, to a wider set of ‘creative industries’ to include explicitly commercial and market-focused production. This was accompanied by a shift from the market failure model of cultural economics to a Schumpeterian or innovation economics focus on creative industries (Garnham, 2005; Hartley, 2005; Potts, forthcoming a). To the cultural industries of visual and performing arts, crafts, heritage and music (more or less) were...
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