Creative Economy: A Feasible Development Option

and register it as its own in another country. The developingcountry then has no legal claim to what it may regard is itsown intellectual property. It is for this reason that considerableassistance is needed to extend the logic of intellectualproperty in the developing world and to sustain a viable systemfor the collection and distribution of IPRs.3.3.7 Contract theoryComplex creative industries such as film and televisionproduction depend on the existence of contractual arrangementsat all stages in the value chain. Richard Caves’ book onthe creative industries (2000) identifies the peculiarities ofcultural production that cause contracts in the creative industriesto be unlike those in other areas of the economy. Cavesproposes that creative activities are characterized by severalfundamental properties, beginning most importantly with theuncertainty of demand, epitomized in the well-knownHollywood aphorism, “nobody knows”. This property meansthat at virtually no stage in the production sequence can theproject’s final outcome be predicted with any degree of assurance:sleepers inexplicably turn into smash hits, and sure-firesuccesses flop. Next comes what Caves labels the “art for art’ssake” property, the fact that creative workers care passionatelyabout the quality of their product and will therefore oftenbehave in ways that are contrary to the predictions of rationalmarket labour theory. Other characteristics of creativeproducts that he suggests include their infinite variety, the factthat they require diverse and vertically differentiated skills,and their durability, which enables them to yield rents over along period. These properties make it all but impossible towrite a complete contract at any stage of the game. So, inresponse to the dual motivation of artistic and economicincentives, the creative industries have evolved a variety ofmeans for organizing themselves and for doing deals thatserve the interests of all participants as effectively as possible.Caves’ analysis relates to the creative sector of the UnitedStates, but at present is also of relevance to most of thedeveloping world. As the creative industries continue toexpand and become more diversified in developing countries,the importance of an effective contractual basis for theiroperations is growing, as illustrated in boxes 3.4 and 3.5.The general case for value-chain analysis can be consideredcompelling. However, work on the organization of creativeproduction chains has pointed to the importance ofaudience feedback and critique as well as market research onthe creative economy. Moreover, while value-chain approacheshave sought to maximize economic value, production-chainapproaches have sought to stress the nature of the culturalproduct as well as price. This is why we advocate productionchainapproaches. More sustainable cultural production systemshave well-developed critical feedback mechanisms, andless sustainable ones, little feedback. The development of this“critical culture” often rests on a longer-term investment inthe funding of public arts and education as well as the promotionand sustenance of a viable civil society; these latterresources are commonly weaker in the developing world.3Analysing the creative economy3.4 Structure of the creative industriesAs a consequence of practice in the creative economy, 11the profile of the creative industries is distinctive although, in abroad sense, the structure of the creative economy is much thesame for industrialized and developing countries alike, comprisinga productive sector, a distribution and marketing network,and a body of consumers who demand creative output in itsvarious forms. However, there are likely to be differencesbetween countries in the relative importance of the differentcomponents of the creative economy, depending particularly oncountries’ different stages of development.3.4.1 Predominance of small and mediumsizedenterprisesSmall and medium-sized enterprises (SMEs) — many ofwhich are micro or sole trader businesses — predominantlypopulate the various stages of the supply chains of creativeproducts in many countries. Information from available studiesconfirms that this market structure is evident across bothdeveloped and developing economies. 12 Micro and smallenterprises are especially evident at the top of the supply11There are also significant differences within the creative economy in different industries in terms of employment norms, training and ownership.12See, for example, Kamara (2004); UK Trade & Investment (2005); KEA (2006); New Zealand Trade and Enterprise (2006); Higgs et al. (2007); and HKTDC (2002). Note thatthe size measurements are relative, as what is small in one context might be considered medium-sized or perhaps large in another.CREATIVE ECONOMY REPORT 201083