Creative Economy: A Feasible Development Option

3Analysing the creative economydifficult to capture these external effects without specific surveysand measurement tools. Nevertheless, such positiveexternalities might include:■■■■■knowledge spillovers, where firms benefit from new ideas, discoveriesor processes developed by other firms, e.g.,through their R&D activities;product spillovers, where the demand for a firm’s productincreases as a result of the product development of anotherfirm, such as when the demand for CD players rises as aresult of the development of the CD;network spillovers, where firms gain benefits from other firmsthat are located nearby, such as in the clustering of filmproduction services in particular areas;training spillovers, when labour that is trained on one industrymoves to another, as when actors trained in the subsidizedtheatre move to commercial theatre or television;artistic spillovers, where the innovative work of an artist or acompany advances an art form to theFigure 3.2benefit of other artists or companies.service providers, etc., that compete but also cooperate.Porter’s model is often depicted in the form of a diamond,showing the sources of locational competitive advantage.A simplified version of the diamond appears in figure3.2. This model is readily applicable to the creative industries,where the opportunities for creative clusters are evidentin such subsectors as film production, fashion and design.Although creative clusters may grow of their own accordwhen commercial businesses spontaneously sense the advantagesfrom co-location with other firms, public policy may also play arole in starting the process. For example, start-up investments maybe facilitated via government programmes to encourage firms tolocate in a particular area, with a view to enabling the industry tobecome self-sustaining once a critical mass has been reached.Some researchers, however, have pointed to the relative weaknessesof the standard Porter model of business clusters in relation tointernational transfers and international organizations. 10Simplified diagram of Porter's model for clusters3.3.4 Location analysisContext for firmstrategy and rivalryThe model of creative clusters articulatedby Michael Porter provides animportant approach to economic analysisof the creative sector. In his original workon the competitive advantage of nations(Porter, 1990), he put forward a microeconomicbased theory of national, stateand local competitiveness in the globaleconomy in which clusters have a prominentrole. Clusters are geographic concentrationsof interconnected companies,Factor input conditionsA local context thatencourages investmentand growth, withvigorous competitionamong local rivalsRelated andsupporting industriesDemand conditionsBox 3.2Creative clustersA distinctive feature of creative enterprises is that they thrive only in one another’s company. Whether they are artists in the East End of London, film makersin Bollywood, fashion designers in Milan or animators in Seoul, creative enterprises gather together in visible hot spots which, when fully established,become self-sustaining clusters of creative activity. This happens at every level, from the media centre in a small town to global centres such as Hollywood.The purpose of the United Kingdom Creative Clusters Conference (www.creativeclusters.com) is to understand why the sector develops in this way and toexamine the consequences for development policy. As we do this, it becomes apparent that the lessons learned have a wide application across other areasof social and economic development.Why clusters?Clustering is not confined to the creative sector. Specialist markets, neighbourhoods devoted to particular trades and region-based industries have always10 Pratt (2008).80 CREATIVE ECONOMY REPORT 2010