The creative economy, innovation and entrepreneurship: an empirical examination

Abstract

We analyze the interrelationships among entrepreneurship, innovation and the creative economy. Ordinarily the word ‘entrepreneurship’ implies financial (or commercial) enterprise undertaken with a profit motive whereas the phrase ‘social entrepreneurship’ implies, on average, a non-profit activity undertaken to improve a particular societal unfavourable condition or ill. The word ‘innovation’ implies an improved or new idea, product, production technology or any one of the myriad of business processes. The word ‘creative’ is perhaps the most nebulous and accommodates a variety of meanings. In finance and economics, however, the word ‘creative’ imparts a specific meaning in the sense of knowledge-based and traditional artisan-based craft products and services. We use a sample of 160 countries of the world for an empirical examination of the relationships among these three concepts. The results demonstrate that social entrepreneurship and the creative economy vary systematically across the sample countries and they are positively associated. In two subsamples, the creative economy is positively associated with the rule-of-law and market-size. The results explain more than three-quarters of the variability in the creative economy and suggest that the creative economy can change and develop over time as societies build the institutions for fostering social entrepreneurship and social innovation.

Keywords:

• Creative economy
• entrepreneurship
• innovation
• social entrepreneurship
• social innovation
• econometric methods

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 An excellent recent example of the intertwining of entrepreneurship, innovation and creativity is provided by a full-page advertisement by Thailand (Time, Vol. 187, No. 14, April 18, 2016, p. 52.) celebrating the 84th birthday year of Queen Sirikit by extolling her efforts in extending the royal patronage to the rural population of the poor northeast of Thailand in their traditional art of silk weaving. The advertisement avers, “If she could convince the villagers to weave the silk for selling, she could help them preserve a Thai indigenous art while also providing the women with a livelihood that could raise their families’ incomes and make them more resilient in the face of floods and droughts. … She applied [the same model] to other indigenous arts, such as crafting the metal alloy known as niello into jewelry and decorative items.”

2 The immensity and difficulty of task can be gleaned from the following: Technological Forecasting and Social Change represents itself as a “major forum for those wishing to deal directly with the methodology and practice of technological forecasting and future studies as planning tools as they interrelate social, environmental, and technological factors.” With the last issue given as Volume 107 dated June 2016, a search on key words “creative economy” returns 512 citations, “innovation” returns 2,816 citations, “entrepreneur” returns 523 citations. And, this is just one forum. All three, viz., entrepreneurship, innovation and the creative economy, have spawned a major industry of research and publishing. The goal is not to provide an exhaustive survey of literature but rather point out some earlier attempts at seeing a forest instead of trees.

3 See http://www.culturalpolicies.net/web/unitedkingdom.php?aid=423 for a brief history.

4 The document identified the following 13 industries as creative industries: (1) Advertising; (2) Antiques; (3) Architecture; (4) Crafts; (5) Design; (6) Fashion; (7) Film; (8) Leisure software; (9) Music; (10) Performing arts; (11) Publishing; (12) Software and (13) TV and radio. Numerous UN agencies (UNCTAD, United Nations Development Programme (UNDP), United Nations Educational, Scientific and Cultural Organization (UNESCO), World Intellectual Property Organization (WIPO) and International Trade Centre (ITC)), various national governments and their agencies and other scholars have deepened their scrutiny of the Creative Economy so that definitions as well as the categories have been refined and made comprehensive.

5 Refer to Caves (2001); Florida (2002, 2005), Kuhmonen and Kaunisharju (2010), Milićević, Ilić, and Sofronijević (2013) for more information.

6 Gouvea and Vora (2018) provide more information and a study of the exports of creative products.

7 Gouvea and Vora (2016) provide more information and a study of the exports of creative services.

8 Almost all public-private partnerships require huge and continuing subsidies from the various levels of government. Discussions of these partnerships and their impacts typically suffer from “survivorship bias”.

9 Government intervention, intercession, subsidies, etc., can be called “imperium patronage”. An important part of this patronage in the U.S. is the use of eminent domain. See Kelo v. City of New London, 545 U.S. 469 (2005). An excellent cache of information is available at http://ij.org/case/kelo/.

10 Seelos and Mair (2012) make a supportive argument splendidly in their article.

11 For citations, see Godin (2008, p. 21).

12 See Godin (2015) for citations and Godin (2008b) for genealogical history of the concept.

13 Both of the following mention Richard Branson.

Inc. (http://www.inc.com/business-insider/8-traits-of-extremely-successful-leaders.html) reports the following eight traits. Successful people

1. Are passionate about what they do.

2. Work hard while having fun.

3. Have a specific focus.

4. Push themselves out of their comfort zones.

5. Consistently come up with new ideas.

6. Are constantly getting better.

7. Provide value to others.

8. Are persistent through failure.

Entrepreneur (https://www.entrepreneur.com/article/252538) reports the following 12 traits. They

1. Don’t play the blame game.

2. Are open minded.

3. Are willing to take appropriate risks.

4. Set realistic goals.

5. Know how to solve problems.

6. Can empower others.

7. Are proactive.

8. Are lifelong learners.

9. Ask well-considered questions.

10. Are willing to walk away.

11. Collect facts before making a decision.

12. Know their strengths and hire for their weaknesses.

For Mother Teresa we could find only the following (https://kqduane.com/2015/02/23/10-character-traits-from-mother-teresas-humility-list/). Humility List.

1. Speak as little as possible about yourself.

2. Keep busy with your own affairs and not those of others.

3. Do not interfere with the affairs of others.

4. Accept small irritations with good humor.

5. Do not dwell on the faults of others.

6. Choose always the more difficult tasks.

7. Do not seek to be admired or loved.

8. Give in to the will of others.

9. Be courteous and delicate even when provoked by others.

10. Do not protect yourself behind your own dignity.

We are not sure what the author meant by No. 10.

14 Actually Grameen Bank is merely the most well-known example. Strictly-speaking, all mutual-type organizations and coöperatives are nonprofit. Indigenous peoples of Canada and Alaska, USA, have a hybrid form of organization. The Makivik Corporation, based in Nunavik, northern Québec, like their counterparts in Alaska, is one of the most interesting examples of organizational form adopted by the Native groups. The Makivik Corp. comprises of a nonprofit corporate parent company with for-profit subsidiaries. In addition, the parent serves a quasi-government function. The Native groups’ choice of the hybrid form is important for both economic and social purposes of the tribe (Janda, 2006; Smiddy, 2006). Smiddy labels the Alaska Natives’ corporations as “Social Enterprise”!

The “Certified B Corporation” movement is relatively a new twist on the form vs. goal debate. B Lab is a nonprofit organization that certifies a for-profit entity as a B Corp. This is what the B Corp movement states: “Individually, B Corps meet the highest standards of verified social and environmental performance, public transparency, and legal accountability, and aspire to use the power of markets to solve social and environmental problems. Collectively, B Corps lead a growing global movement of people using business as a force for good^TM. Through the power of their collective voice, one day all companies will compete to be best for the world^TM, and society will enjoy a more shared and durable prosperity for all.” Therefore, all B Corps are for-profit social enterprises! So far, however, the movement is limited to a handful of countries (see https://www.bcorporation.net/b-corp-community-0/global-partners).

15 One of the most edifying changes one can come across would be the eradication of (or drastic reduction in) diseases or prevention of blindness. For the former there is no better example than the Carter Center-led effort to eradicate Guinea Worm infection (http://www.scientificamerican.com/article/global-guinea-worm-cases-drop-to-126-in-2014/) while for the latter the World Health Organization (http://www.who.int/mediacentre/factsheets/fs213/en/) and Aravind Eye Hospitals (http://www.aravind.org/default/Index/default). Additional examples can be given: Greyston Bakery (profits go to its non-profit parent organization), Greyston Foundation (profits are used for the upliftment of the local community), Rugmark (hand-woven carpets, which carry a guarantee against the use of child labor) (Dacin, Dacin and Matear, 2010; Kacprzyk, 2010; Rich, 2014).

16 Two recent examples would illustrate the role of human ingenuity confronting changes in all their complexity. The first example is the use in hydraulic fracturing of a product derived from a legume. Hydraulic fracturing is a process that uses a combination of water, chemicals and sand to drill deep into the ground to extract oil and natural gas. The vegetable product used in this process is guar gum. Guar gum is the powered endosperm from the seed kernel of the guar plant. Its unique viscosity properties have proven effective in the aforementioned combination (Albuquerque Journal 2016, 2012). The second example is the frightening prospect of China’s behavior towards the exports of rare earths (Tse 2011, MIT 2016). Tse points out “Rare earths are used widely in high-technology and clean-energy products because they impart special properties of magnetism, luminescence, and strength. Rare earths are also used in weapon systems to obtain the same properties.” Honda Motors announced recently that its engineers co-developed with Daido Steel a hybrid engine that uses significantly less rare-earths. This engine is not completely free of rare-earth metal because it still uses neodymium, but this element is mined also in North America and Australia (Ars Technica 2016).

17 “Traditionally, the masculine singular pronouns HE, HIS, and HIM have been used generically to refer to indefinite pronouns like anyone, everyone, and someone (Everyone who agrees should raise his right hand) and to singular nouns that can be applied to either sex (painter, parent, person, teacher, writer, etc.): Every writer knows that his first book is not likely to be a bestseller. This generic use is often criticized as sexist, although many speakers and writers continue the practice.” (Random House Webster’s Unabridged Dictionary.) In the interest of simplicity, concision and prose style, we will adhere to the traditional usage.

18 One of the best examples is the American National Red Cross (ANRC), popularly known as the American Red Cross (ARC). It is the oldest congressionally chartered organization which is philanthropic in nature. The organization was first chartered on June 6, 1900 although it had been in existence since May 21, 1881. Of course, the charter has been amended numerous times since then with major alterations in its managerial structure enacted in 1947. The most recent codification (Jan 19, 2004) of the charter may be accessed at http://uscode.house.gov/browse/prelim@title36/subtitle3/chapter3001&edition=prelim.

19 We do not want to use the word digital because that would imply the exclusion of non-digital items, e.g., films and music which were recorded and preserved in analog form and only now are being slowly converted to digital form.

20 There may be some controversy about the cut-off levels for these statistical tests. We use what we perceive to be the vastly used cut-off levels.

21 We use Stata 12 for the empirical work. Recognize that Stata provides four methods of extraction for factors, viz., principal factor (the default) (PF), principal-component factor (PCF), iterated principal factor (IPF) and maximum likelihood factor (ML). For more information, see http://www.stata.com/features/multivariate-methods/.

22 The list of countries is given in Table 10.

23 The variance inflation factor shows the severity of multicollinearity in an OLS regression analysis. It is an indicator of the extent by which the variance of an estimated regression coefficient is increased because of the presence of multicollinearity. Kutner, Nachtsheim and Neter (2004) suggest that a VIF greater than 10 indicates a high multicollinearity whereas others recommend a threshold of 5.

24 The intercept terms of all three samples are significantly negative. Because the regression is on predicted factors, the standard interpretation of the intercept is not useful here.

25 The site is a building, city, complex, desert, forest, island, lake, monument or mountain possessing special cultural or physical significance. Currently 1,031 sites are listed at http://whc.unesco.org/en/list//en/news/1049/en/list: 802 cultural, 197 natural, 32 mixed in 163 member-countries with Italy leads with 51 sites, followed by China (48), Spain (44), France (41), Germany (40), Mexico (33) and India (32).

Additional information

Notes on contributors

Raul Gouvea

Raul Gouvea is professor of international business management at the Anderson School of Management, University of New Mexico. He has published in the areas of international trade, international business, innovation, creativity, national security, indigenous entrepreneurship, and sustainability.

Dimitri Kapelianis

Dimitri Kapelianis is associate professor of marketing at the Anderson School of Management, University of New Mexico. He has published in the areas of advertising, marketing, management, and international business.

Manuel-Julian R. Montoya

Manuel-Julian R. Montoya is associate professor of international business at the Anderson School of Management, University of New Mexico. He has published in the areas of international business, Latin American studies, and environmental studies.

Gautam Vora

Gautam Vora is professor of finance at the Anderson School of Management, University of New Mexico. He has published in the areas of finance, economics, regulation, innovation, and creativity.