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Foreword
No one doubts the economic importance of the creative industries to the UK. At 6.2 per cent of the
economy, and growing at twice the rate of other sectors, they are proportionately the largest of any
in the world.
But there is some evidence that the UK’s creative industries support innovation and growth in
other parts of the economy too. The significance of these spillovers has only recently begun to be
examined rigorously. And we know next to nothing about their geographical dimensions.
This gap in our understanding is what NESTA set out to address in Creative Clusters and Innovation,
the outcome of a two-year collaboration with Birmingham and Cardiff Universities. The study
adopts the concept of creative clusters as a starting point to examine the role that creative
industries play in local and regional innovation systems. Its publication accompanies an online
platform we have developed for users to examine creative industry concentrations at a fine level of
detail in their localities.
Hasan Bakhshi
Director, Creative Industries, NESTA
November, 2010
3
Executive summary
It has long been recognised that industrial clustering benefits businesses by
giving them access to skilled staff and shared services, and the opportunity
to capture valuable knowledge spillovers. This is equally true of creative
businesses, as exemplified by Hollywood, or closer to home by a host of
thriving UK clusters, from post-production in Soho to video games in Dundee.
This report is the most ambitious attempt yet to map the UK’s creative
clusters, showing where they are, which sectors form them, and what their
role is in the systems of innovation where they are embedded.
It makes a case for a new approach to local economic policy as it relates to
the creative industries: one that goes beyond ‘urban branding’ rationales,
and acknowledges their great potential as active players in local
innovation systems.
The research has shown that London is the too’ approach to economic development that
heart of the creative industries in Britain, compromises cities’ competitiveness.
dominating in almost all creative sectors, and
particularly in the most intrinsically creative The research also shows that the creative
layers of the value chain for each sector. The industries are more innovative than many
high level of geographical detail used in the other high-innovation sectors, for example
mapping has allowed us to pin-point nine professional and business services. What
other creative hotspots across Britain. They are is more, the creative industries provide a
Bath, Brighton, Bristol, Cambridge, Guildford, disproportionate number of the innovative
Edinburgh, Manchester, Oxford and Wycombe- businesses in most parts of the country.
Slough.
The research analyses co-location between
NESTA is making this unique dataset available creative sectors and other innovative
on an online platform that can be accessed industries such as High-Tech Manufacturing
at http://www.nesta.org.uk/areas_of_work/ and Knowledge Intensive Business Services
creative_industries/geography_of_innovation. (KIBS). It shows statistically robust patterns of
This platform will enable its users to examine co-location in several cases. Advertising and
creative industry concentrations at a high level Software firms are very often found near both
of geographical resolution. It will be updated High-Tech Manufacturing businesses and KIBS.
annually as a basis for policymaking at a Other creative sectors that provide content and
national and local level. cultural experiences show weaker, although still
significant, patterns of co-location with KIBS.
The analysis also shows which creative
industries tend to co-locate. Advertising and These findings suggest the existence of
Software firms often cluster near each other; complementarities between some creative
the same is true of Music, Film, Publishing and sectors and innovative businesses in other
Radio and TV businesses. parts of the economy. These complementarities
may be brought about by value chain linkages
It also shows that different cities across Britain and shared infrastructures. They could also
have different profiles of specialisation: cities be a consequence of knowledge spillovers
across the South present more diversity in their that happen when creative businesses share
creative specialisation, whereas Northern and new ideas with their commercial partners, or
Midlands cities (Manchester excepted) have when creative professionals move into other
similar creative profiles. This might reflect sectors, bringing useful ideas, technologies
common structural challenges for cities in the and ways of working with them. In other cases,
North, but it could also be indicative of a ‘me the presence of creative firms generates an
4
‘urban buzz’ that attracts skilled workers and to avoid wasting money on poorly considered
encourages collaboration. interventions. Armed with this knowledge,
policymakers concerned with local economic
The report examines some of these issues development should do the following:
in further detail through four detailed case
studies of creative clusters, produced using • Catalyse latent clusters rather than try to
business surveys and interviews with local build new ones from scratch
businesses and stakeholders. They are: Building clusters from scratch is notoriously
difficult; far better to identify whether there
• Software in Wycombe and Slough. are any latent clusters ‘hidden’ in their
regions or localities that would benefit from
• Film Production, Post-Production and Visual networking and awareness-raising. Increasing
Effects in Soho, London. the visibility of such clusters can also help
creative graduates find employment locally.
• Media Production (including Radio and TV
and Digital Media) in Cardiff. • Think about which sectors work well
together
• Advertising in Manchester. The co-location findings presented in this
report suggest that there are important
The case studies show how digitisation is synergies between some creative sectors,
driving innovation in the creative industries, but not others. The same thing happens
with most firms investing heavily in internal between creative sectors and Knowledge
research and development (R&D), and devoting Intensive Business Services, and High-Tech
large numbers of their staff to technology- Manufacturing. Local policymakers should
intensive activities in order to benefit from this harness these complementarities, and
digital revolution. avoid potentially wasteful ‘one-size-fits-all’
strategies for creative clusters that don’t pay
The case studies also show that the mere sufficient attention to the distinctive needs
existence of a creative agglomeration is of different sectors.
not enough for the benefits from clustering
to emerge. The other crucial ingredient is • Universities should do more to promote
connectivity between firms within a cluster, innovation in increasingly tech-intensive
with collaborators, business partners and creative industries
sources of innovation elsewhere (both in the It is important to complement the somewhat
UK and overseas), and finally, with firms in narrow view of universities as mostly
other sectors that can act as clients, and as providers of creative talent with a stronger
a source of new and unexpected ideas and emphasis on innovation. Technology-
knowledge. These three layers of connectivity intensive creative industries, for example,
are underpinned by a dense web of informal have something to gain from tapping
interactions and networking. into the public research base in their local
universities. Universities should also provide
local knowledge hubs where creative firms
can share information and build stronger
Implications for policy networks.
5
as venues for networking, killing two birds
with one stone.
6
Contents
Acknowledgements 55
7
Part 1: Introduction to the report
8
attractive for a ‘creative class’ of knowledge Structure of the report
workers and their innovative employers. In this
sense, they impact indirectly on the innovative Part 2 presents the main findings of The
potential of the places where they are located. Geography of Creativity, an interim report
Although some policies have focused more published in August 2009 where we mapped
broadly on the creative industries as drivers creative clusters across the UK using economic
of local economic growth, and provided them geography techniques.
with business support (including grants and
loans, training, networking and marketing), In Part 3 of the report we draw on the latest
they have rarely focused on them as a source of UK Innovation Survey (UKIS 2006) to examine
innovation.9 the innovative performance of the creative
industries nationally and regionally. Our
analysis shows that the creative industries are,
overall, highly innovative across a range of
But the creative industries are an active dimensions. This suggests that they play an
force for innovation important role in the systems of innovation
where they are located.
Generating novelty is at the core of what many
creative businesses do.10 Some creative sectors, Part 4 focuses on potential spillovers from
such as Advertising, Design and Software, creative clusters. Highly innovative creative 9. Evans, G. (2009) Creative
Cities, Creative Space and
provide inputs and skills that are crucial to firms are a likely source of beneficial creative Urban Policies. ‘Urban
the innovation processes of businesses in spillovers in the rest of the regional economy. Studies.’ 46, pp.1003-1040.
10. Stoneman, P. (2009) ‘Soft
other sectors.11 Creative businesses facing We identify the mechanisms through which Innovation.’ London: NESTA.
uncertain, ever-shifting markets have this could happen, and explore the hypothesis 11. NESTA (2009) ‘The
developed organisational practices, skill sets statistically through an analysis of the extent Innovation Index.’ London:
NESTA; also Higgs, P.,
and ways of working that can be fruitfully to which creative industries, High-Tech Cunningham, S. and
applied elsewhere.12 In fact, David Willetts Manufacturing firms and KIBS firms are co- Bakhshi, H. (2008) ‘Beyond
the Creative Industries.’
used the example of video games development located at the Travel to Work Area (TTWA) London: NESTA; also
in Dundee to illustrate the importance of level.13 Bakhshi, H., McVittie, E. and
Simmie, J. (2008) ‘Creating
clustering for innovation. Innovation.’ London: NESTA.
The causal nature of the links between creative 12. Potts, J. and Morrison,
K. (2008) ‘Nudging
The magnitude of the creative industries’ industries and innovation at the local level Innovation.’ London: NESTA;
impacts on innovation has however only are further explored, in Part 5, through four also Oakley, K., Sperry, B.
and Pratt, A. (2008) ‘The
recently begun to be examined rigorously. in-depth case studies of creative clusters Art of Innovation.’ London:
And we know next to nothing about their in Wycombe and Slough, Soho, Cardiff and NESTA.
geographical dimensions. Manchester. 13. ‘Travel to Work Areas’
are geographical units
comprising a ‘local labour
Part 6 discusses the findings of the project, market’. They are a more
finely grained geography
and presents their policy implications. than ‘regions’. A more
The ‘Creative clusters and innovation’ detailed definition of TTWAs
is available at http://www.
project statistics.gov.uk/geography/
ttwa.asp
This study adopts the concept of creative
cluster as a starting point to examine the role
that the creative industries play in local and
regional innovation systems. In doing so, it
addresses gaps in our understanding of the
dynamics of creativity and innovation at the
local and regional levels. It also builds a robust
and nuanced evidence base for the formulation
of local, regional and UK-wide policies that
can augment the contribution that the creative
industries make to innovation and economic
growth.
9
Part 2: Putting creativity on the map
10
Box 1: Defining creative clusters
The Geography of Creativity reviews the clusters, which underpins this project.
literature on creative clusters and other According to her, a creative cluster is a
allied concepts such as ‘cultural quarters’ place that brings together:
and ‘creative cities’. Following Michael
Porter (1990), the literature presents 1. A community of ‘creative people’ who
geographical agglomeration as a necessary share an interest in novelty but not
– but not sufficient – prerequisite for necessarily in the same subject.
the existence of a cluster. Firms in close
proximity need also to be related as 2. A catalysing place where people,
competitors or collaborators – and be relationships, ideas and talents can
embedded in a social and institutional spark each other.
ecosystem, including universities and
support bodies. This is acknowledged in the 3. An environment that offers diversity,
original Department for Culture, Media and stimuli and freedom of expression.
Sport (DCMS 2008) definition of creative
clusters, which also emphasises the role 4. A thick, open and ever-changing
that policy can play in nurturing them. network of inter-personal exchanges
that nurture individuals’ uniqueness and
This firm-level industrial analysis of creative identity.
agglomeration contrasts with the work of
Richard Florida and, in the UK, Clifton and For measurement purposes, the Geography
Cooke (2007), who focus on geographical of Creativity employs data on the number
concentrations of ‘creative professionals’, of firms located in a given area. The 20. See http://www.idea.
gov.uk/idk/core/page.
rather than firms, in a given place. relational, social and institutional aspects of do?pageId=7175806.
clustering – which are specific to different 21. Data availability issues mean
that our analysis didn’t
De Propris (2008) synthesises these places – are then examined in the in-depth include Northern Ireland.
streams of work in her definition of creative case studies in Part 5 of this report. Data at the MSOA level of
analysis are not available
for Scotland, so while our
regional and TTWA analyses
Source: Porter, M. (1990) ‘The competitive advantage of nations.’ London: Macmillan; DCMS (2008) ‘Creative cover England, Wales and
Britain: New Talents for the New Economy.’ London: DCMS; Clifton, N. and Cooke, P. (2007) ‘The ‘Creative Class’ Scotland, the MSOA analysis
only includes England and
in the UK: An Initial Analysis.’ Centre for Advanced Studies: Regional Industrial Studies Research Report 43. Wales.
Cardiff: Centre for Advanced Studies; De Propris, L. and Hypponen, L. (2008) Creative Clusters and Governance:
The Dominance of the Hollywood Film Cluster. In: Cooke, P. and Lazzeretti, L. (Eds) ‘Creative Cities, Cultural
Clusters and Local Development.’ Cheltenham: Edward Elgar. pp.340-371.
• The micro level analysis, at the highest level national average. A location quotient larger
of resolution, focuses on Middle Layer Super than 1 indicates that a particular sector is more
Output Areas (MSOAs), which are micro areas important to the local economy than it is to the
based on population count.20 There are 7,193 British economy.
MSOAs across England and Wales.21
These indicators were calculated using the
Using the most up-to-date data latest available data (2007 and 2008) on the
We use two indicators to help identify number of firms classified according to SIC-4s
the presence of creative clusters at each (following the DCMS definition) and SIC-5s
geographical level: the absolute numbers of (following the Frontier Economics definition).
creative firms in a given sector; and the sector’s SIC-4 level data were extracted from the
location quotient (LQ). Location quotients are Annual Business Inquiry (ABI), and SIC-5 level
a standard metric of agglomeration in economic data from the Inter Departmental Business
geography that measure a given area’s degree Register (IDBR).
of specialisation in a sector, compared with the
11
Table 1: Measure of firm concentration (LQ) by creative sectors and by regions – 2007 – DCMS definition
The Humber
Yorkshire &
Midlands
Midlands
Scotland
London
South
South
North
North
Wales
West
West
West
East
East
East
East
Industry
Advertising 0.69 1.18 0.74 0.72 0.76 0.91 1.77 1.06 0.8 0.42 0.55
Architecture 1.39 1.07 0.86 0.93 0.97 1.04 0.81 1.06 0.96 0.75 1.42
Arts and Antiques 1.09 1.05 1.09 0.98 1.03 0.97 0.82 0.95 1.15 1.1 1.08
Designer Fashion 0.64 1.15 0.77 2.73 0.98 0.55 1.73 0.39 0.55 0.48 0.76
Video, Film and Photography 0.55 0.57 0.56 0.49 0.5 0.71 2.68 0.94 0.77 0.55 0.69
Publishing 0.51 0.62 0.65 0.7 0.66 1.06 1.82 1.13 1.07 0.64 0.75
Radio and TV 0.38 0.53 0.36 0.3 0.43 0.56 3.05 0.9 0.74 0.96 0.56
Total Creative Industries 0.91 0.94 0.79 0.82 0.84 0.97 1.37 1.09 0.95 0.75 0.94
2.2 The findings of our mapping that their sheer size can hide substantial
industrial concentrations in specific
a. At the regional level: Creative London, areas. Indeed, our analysis at the more
Creative South-East disaggregated TTWA geographical level
The regional analysis using both the reveals several creative agglomerations,
official DCMS and the Frontier Economics in addition to London, not visible at the
definitions of the creative industries regional level (see Table 3 for a summary).
confirms a strong concentration of creative
activities in London, and, to a lesser Most of these creative agglomerations
extent, the South East of England (see encompass several creative sectors at the
22. The risk that this result Table 1). This is particularly the case for same time. They include Bath, Bristol,
could simply reflect the
relatively large impact the most intrinsically creative layers of the Edinburgh, Manchester, Brighton, Oxford,
of random variations in creative industries according to the Frontier Cambridge, Wycombe-Slough and
the numbers of creative
businesses on the clustering Economics definition (see Table 2). Guildford. Some other places specialising in
metrics was addressed by a single creative sector are also identified.
setting a high threshold in
the metrics used to establish This points to there being a creative
creative clusters at the ‘regional division of labour’ in Britain, c. At the MSOA level: a wide scatter of
MSOA level.
with London specialising on ‘core’ creative creative pockets of activity
activities, and other regions and nations Adopting the highest level of geographical
providing complementary inputs (such as resolution (MSOAs) produces an even more
raw materials and production technologies) complex picture, with a large number of
that feed into the creative process. ‘creative pockets’ – including core creative
activities – scattered across Britain.22
b. At the TTWA level: creative hubs across
the UK
One important limitation of examining
the industrial agglomeration of regions is
12
Table 2: Measure of firm concentration (LQ) by creative sectors, creative layers and regions – 2008 – Frontier Economics.
The Humber
Yorkshire &
Midlands
Midlands
Scotland
London
Britain
South
South
North
North
Wales
Great
West
West
West
East
East
East
East
Advertising 0.73 1.04 0.76 0.71 0.79 0.93 1.75 1.08 0.83 0.45 0.58 1
L1- Planning advertising campaigns 0.7 0.95 0.79 0.68 0.74 0.97 1.77 1.11 0.9 0.45 0.54 1
L5- Other advertising activities 0.8 1.21 0.72 0.78 0.9 0.85 1.71 1.02 0.7 0.43 0.66 1
L1- Architectural design & urban planning 0.83 0.78 0.85 0.76 0.8 0.88 1.49 0.96 1 0.76 1.3 1
L2- Engineering advice & design 1.45 1.15 0.81 0.95 0.97 1.01 0.73 1.05 0.94 0.71 1.6 1
L4- Sale of construction materials 0.96 1.02 1.1 1.12 1.07 1.2 0.63 1.06 1.09 0.98 1 1
Arts, Antiques and Craft Activities 0.83 0.91 1.14 1.09 1.38 0.95 1.06 0.88 1.03 0.85 0.77 1
L2- Exhibitions & fairs, antiques 0.61 0.55 0.78 0.8 0.87 0.84 1.78 1.03 1.07 0.65 0.88 1
L4- Wholesale of craft products 0.68 0.95 1.09 0.92 1.06 0.97 1.43 0.91 0.96 0.61 0.65 1
Designer Fashion 0.97 1.11 1.05 1.19 0.94 0.82 1.33 0.79 0.85 0.86 0.93 1
L1- Fashion, interior & graphic design 0.74 0.7 0.82 0.89 0.74 0.95 1.83 1.07 0.84 0.54 0.66 1
L3- Manufacture of clothing 0.66 1.13 0.77 2.67 1.1 0.53 1.7 0.39 0.54 0.54 0.74 1
L4- Manufacture of textiles and fabrics 0.47 1.48 1.19 1.65 0.78 0.71 1.71 0.54 0.57 0.49 0.63 1
L5- Retail sale of clothes 1.26 1.13 1.12 0.95 1.04 0.85 0.97 0.84 0.98 1.13 1.16 1
Video, Film and Photography 0.67 0.65 0.68 0.57 0.58 0.78 2.34 0.97 0.8 0.6 0.7 1
L2- Portrait photos 0.69 0.86 0.91 0.68 0.68 0.94 1.9 0.98 0.69 0.63 0.8 1
L5- Cinemas 0.95 0.92 0.9 0.55 0.79 0.76 1.4 0.83 1.26 1.38 1.19 1
Music and Performing Arts 0.55 0.6 0.59 0.57 0.55 0.83 2.35 1.02 0.88 0.74 0.57 1
L4- Wholesale of records 0.59 0.51 0.59 0.64 0.52 1.4 2.44 1.05 0.49 0.21 0.37 1
L5- Other recreational activities 1.25 1.18 0.92 1.1 0.99 0.88 0.57 0.91 1.28 1.83 1.15 1
13
The Humber
Yorkshire &
Midlands
Midlands
Scotland
London
Britain
South
South
North
North
Wales
Great
West
West
West
East
East
East
East
Publishing 0.81 1.01 0.8 0.93 0.99 1.03 1.2 1.1 0.97 0.88 0.74 1
L1- Journalism & news syndicates 0.54 0.67 0.54 0.76 0.58 1.01 2.19 0.94 0.67 0.59 0.96 1
L2- Publishing 0.61 0.62 0.66 0.74 0.7 1 1.64 1.16 1.16 0.68 0.85 1
L3- Bookbinding, printing 0.72 0.99 0.76 0.95 1 1.06 1.22 1.15 0.98 0.85 0.63 1
L4- Manufacture of paper and ink 0.62 1.8 1.25 1.21 1 1.11 0.57 0.76 0.82 1.13 1.04 1
L5- Retail sale of books, newsagents etc. 1.34 1.25 1.08 0.91 1.05 0.84 0.94 0.81 0.92 1.12 1.27 1
Software and Computer Games 0.56 0.81 0.7 0.79 0.84 1.13 1.31 1.4 0.93 0.59 0.7 1
L2- Other computer related work 0.58 0.96 0.74 0.79 0.86 1.03 1.14 1.39 1.16 0.7 0.62 1
L3- Hardware consultancy 0.68 0.75 0.84 0.99 0.8 1.29 1.18 1.38 0.9 0.6 0.59 1
L4- Wholesale of hardware and software 0.66 0.9 1.01 0.94 0.99 1.2 1.08 1.23 0.86 0.62 0.77 1
L5- Retail sale 1.07 1.09 1.08 0.96 0.96 1.05 0.62 1.02 1.16 1.18 1.31 1
Radio and TV 0.72 0.85 0.77 0.8 0.83 0.94 1.63 0.97 0.91 0.98 0.79 1
L1- Radio & TV production and broadcast 0.36 0.54 0.36 0.34 0.44 0.56 2.99 0.9 0.74 0.99 0.56 1
L3- Transmitters and TV cameras 0.42 0.98 0.68 0.55 1.21 1.26 0.7 1.5 1.12 1.23 0.7 1
L5- Retail sale 0.97 1.04 1 1.08 1.02 1.07 0.92 0.94 1.04 1.07 0.99 1
All Creative Industries 0.85 0.94 0.91 0.96 0.94 1.07 1.13 1.08 1 0.86 0.87 1
Layer 1 0.56 0.69 0.63 0.67 0.71 0.98 1.86 1.23 0.84 0.55 0.69 1
Layer 2 0.97 0.99 0.76 0.84 0.88 0.98 1.13 1.17 1.02 0.69 1.07 1
Layer 3 0.85 0.95 0.93 1.03 1 1.11 1.02 1.07 1.06 0.97 0.78 1
Layer 4 0.9 1.04 1.1 1.14 1.05 1.16 0.76 1.03 1.04 0.92 0.95 1
Layer 5 1.23 1.15 1.08 0.96 1.03 0.89 0.9 0.86 1.01 1.17 1.19 1
14
Table 3: Summary of creative clustering at the Travel to Work Area Level
Advertising Large number of firms in South of London (from St Albans to Tunbridge Wells
London and Manchester and Guildford), a south belt around Manchester and
Birmingham and its south counties, Warwickshire and
Worcestershire. Higher than average agglomeration
in Harrogate and Ripon and Blackpool
Arts and Very evenly distributed Very evenly distributed across the UK
Antiques across the country, in both
urban and rural areas
Designer Evenly distributed, with Midlands, North London and around Manchester
Fashion larger number of firms in
London, the South East,
Birmingham, Manchester
and Cardiff
Video, Large number of firms Very highly concentrated in London and its
Film and in London, Manchester, surrounding area (towards Oxford and Guildford, as
Photography Birmingham, Brighton, well as Slough and Wycombe), and Brighton, Bristol
Bristol and Glasgow and Bath
Music and the Evenly distributed, with London, Brighton, Bath and the South West of
Visual and larger number of firms in England
Performing London, Manchester, Bristol
Arts and Brighton
Publishing Very large number of firms Strong concentration in Oxford, Bath and Minehead.
in London, its surroundings, Significant specialisation in London, Cambridge,
Cambridge, Oxford, Bristol Peterborough, Ludlow and the North of Scotland
and Bath, Manchester,
Glasgow and Edinburgh
Software, Evenly distributed across Clustering around the West of London, around a
Computer the country, large number triangle Oxford-Cambridge-Reading and between
Games and of firms in London and its Blackpool and Manchester
Electronic surroundings, Birmingham,
Publishing Manchester, Milton Keynes
and Bristol
Radio and TV Large numbers of Very strong level of concentration with high
firms around London, agglomeration in London and its surrounding areas
Manchester, Cardiff, Bristol, (Wycombe and Slough), Brighton, Bristol, Cardiff
Glasgow and Manchester. and the North of Wales and Scotland
Significant presence in the
South-West of London
15
2.3 The Geography of Creativity also 2.4 Taking stock of the findings
examines statistical patterns in the
clustering data The Geography of Creativity presents, for the
first time, a rich and multi-layered picture
The Geography of Creativity also uses of the geographical distribution of creative
correlation techniques to identify statistically activities in Britain. Although London is
significant patterns in the way in which predominant in most creative sectors – and
creative sectors co-locate with each other, especially in the most intrinsically creative
and to explore similarities and divergences in stages of the value chain, we also identify
the creative specialisation profiles of different other places that ‘create above their weight’ –
cities. or alternatively, that ‘create under the radar’.
16
Part 3: Innovation in the creative industries, nationally
and regionally
17
Box 2: The 2006 UK Innovation Survey
Source: OECD (2005) ‘The Measurement of Scientific and Technological Activities: Oslo Manual 3rd Edition.’
Paris: OECD; DIUS (2008) ‘Persistence and change in UK innovation: 2002-2006.’ London: BIS.
some aspects of service and soft innovation creative industries at an aggregate level.29 Its
which are crucial in the creative industries (see findings supported the idea that the creative
Box 2 for a summary). industries are more innovative than the rest of
the economy as a whole. The DCMS used the
The then Department of Trade and Industry same data to show that they present levels of
already used data from a previous UKIS in a innovation activity above even sectors deemed
study of innovation in the UK that included to be highly innovative such as Engineering-
an overview of innovative activities in the UK’s based manufacturing or KIBS.30
18
Our analysis partly updates those studies using outputs of innovative activities. No assumption
more recent UKIS data. But it also goes beyond has been made about the intellectual property
them in disaggregating the creative industries methods adopted by different economic
into those specific sectors that are included sectors. By including informal methods of
in UKIS 2006. Following Abreu et al. (2008), protection, this indicator takes into account
we examine product innovations (which can the difficulty that some creative firms face in
be tangible goods or services), and process ‘formalising’ their innovation outputs.33
innovations.31
The creative industries display high levels
We also try to capture ‘soft’ or aesthetic of innovation...
innovation outputs (that might be particularly Table 4 and Figure 1 confirm that the creative
relevant for the creative industries) through industries overall display levels of innovation
a composite indicator that measures whether above the national average for all indicators.
a firm has used formal (including patents, The differences are particularly visible in the 31. Abreu, M., Grinevich, V.,
Kitson, M. and Savona, M.
trademarks, copyright or registration of design) use of internal R&D and the extent to which (2008) ‘Taking Services
or informal (confidentiality agreements, they launch new products in the market. Seriously: How policy
can stimulate the ‘hidden
secrecy, lead-time advantage or complexity of innovation’ in the UK’s
design) intellectual property (IP) protection This does not mean that the creative industries services economy.’ London:
NESTA.
methods during 2004-2006 – we refer to it as are the most innovative sector in the UK
32. Stoneman, P. (2009) ‘Soft
the ‘Intellectual Output Index’.32 economy. ‘Engineering-based manufacturing’ Innovation.’ London: NESTA.
and ‘Other Manufacturing’ tend to innovate in 33. A cautionary note regarding
the analysis below is that
These protection methods apply to goods, their products and processes more frequently. different creative and
services, processes and other intangible It seems that the innovation profile of the industrial sectors present
qualitative differences in
their innovation processes
and outputs – in that sense,
different rates of innovative
activity as indicated by
UKIS might have as much
to do with such differences
Table 4: Innovation activities and outputs by sector (percentage of all firms in each sector) (and the extent to which
– 2004-2006 their respective innovation
outputs are captured by
the survey questions) as
they do with the actual
Intellectual
Innovation
Innovation
Innovation
Innovation
in product
or process
in process
in service
(‘goods’)
products
products
Nevertheless, such
Index
Source: ONS. NA indicates cells with data that cannot be made available due to potential disclosure issues.
19
Figure 1: Innovation-related activities by creative businesses and other sectors in the UK
80
70
60
50
Percentage
of all firms 40
34. These comparative results
might appear to conflict with 30
those of the aforementioned
DCMS (2007) study.
However, note that Table
4 focuses specifically on 20
the introduction of new
products and processes, and
use of IP measures. This 10
contrasts with ‘innovation
activeness’, a wider indicator
which also considers
innovative activities in 0
progress or abandoned,
as well as innovation Internal External Machinery, External Training Design Market
expenditures in different R&D R&D equipment knowledge introduction
and software
areas – both of which are
considered in the DCMS
study. Creative industries Other industries All industries
35. Once again, we advise
caution in the interpretation
of these results, as
Source: ONS.
differences in innovative
performance across regions
could be explained by
variations in the sector
breakdown of the creative
industries in different places.
For example, those regions creative industries resembles most closely that often provide business services to companies in
where there is a majority
of Software, Computer of KIBS firms, particularly in the importance of other sectors.
Games and Electronic innovation in service provision.34
Publishing firms (which
were shown to be the most
innovative creative sector) ...but there are visible differences in the
will present higher levels
of innovation than those innovative performance of specific creative 3.3 Creative industries innovation at the
with a predominance of Arts
and Antiques companies
sectors regional level
(which are less innovative As Table 4 shows, the most innovative creative
according to UKIS data). As sector is Software, Computer Games and Although the creative industries have been
such the results discussed
above reflect as much on Electronic Publishing, where almost 60 per cent shown to be at the forefront of innovation
the differences in make-up of firms report having innovated in product or nationally, they could contribute more directly
between creative firms and
non-creative firms inside process from 2004 to 2006. Firms in this sector to innovation in some regions, and less so in
each region as they do also rely strongly on IP measures. others. This is an important question for the
differences in innovation
within creative sectors across analysis of the impact of creative clusters
regions. There are many innovative firms in other on innovation. We have examined this issue
creative sectors such as Advertising, Publishing, through an analysis of regional innovation
Architecture and Designer Fashion. By contrast, activities by creative firms using UKIS 2006
Film, Video and Photography and Arts and data. Our findings are presented in Tables 5, 6
Antiques firms show an innovation performance and 7, and Figure 2.35
below the national average for most variables.
The creative industries contribute directly
Reflecting the results for the creative industries to regional innovation
overall, specific creative sectors are usually less Tables 5 and 6 show that the creative industries
innovative than manufacturing in terms of new are generally ahead of the rest of the regional
‘tangible goods’ and ‘production processes’, economy in their innovative performance
and more so in respect to services. This no matter where they are located (with
difference is particularly visible in the case of the notable exception of London, which is
Advertising, Architecture and Software, which discussed below). The differences with other
20
Table 5: Innovation performance at the regional level: creative industries and other sectors – 2004-2006
Region
(new to market)
Other sectors
Other sectors
(new to firm)
(new to firm)
(new to firm)
(new to firm)
innovation
innovation
innovation
innovation
innovation
innovation
innovation
innovation
Creative
Creative
Creative
Creative
industry)
industry)
product
product
product
product
process
process
process
process
sectors
sectors
market)
(new to
(new to
(new to
Other
Other
North East 33% 21% 15% 6% 16% 11% NA* 4%
Source: ONS. *NA indicates cells with data that cannot be made available due to potential disclosure issues.
Table 6: Innovation performance at the regional level: creative industries and other sectors – 2004-2006 Property Index
Property Index
Region
Creative Wider
for innovation
for innovation
outside of the
outside of the
Copyright use
Other sectors
Other sectors
Collaboration
sectors wider
collaboration
collaboration
collaboration
Intellectual
Intellectual
Innovation
innovation
All Sectors
All sectors
Creative
Creative
Creative
region
region
Other
North East 64% 29% 23% 10% 83% 78% 61% 36% 7%
North West 48% 29% 10% 11% NA* 74% 61% 44% 8%
Yorks & Humber 56% 28% 12% 11% NA* 85% 53% 40% 6%
East Midlands 44% 29% 20% 13% 73% 86% 49% 44% 9%
West Midlands 51% 27% 14% 12% 76% 82% 59% 45% 9%
East 46% 34% 22% 13% 88% 90% 57% 47% 11%
London 16% 39% 17% 10% 86% 68% 50% 43% 15%
South East 32% 36% 17% 12% 84% 84% 66% 47% 13%
South West 42% 30% 15% 11% 79% 80% 59% 41% 7%
Source: ONS. *NA indicates cells with data that cannot be made available due to potential disclosure issues.
21
Figure 2: Location quotient for core creative activities, and share of firms in all sectors
that report the use of copyright as important or very important to protect innovation
1.86
London
1.23
South East
0.98
South West East
0.84
West Midlands
Location
0.71
quotient
for core North West Scotland
creative 0.69
activities
0.67
Yorks & East Midlands
Humber
0.63
North East
0.56
Wales
0.55
sectors are particularly striking with respect to And they punch above their weight as
the introduction of products that are new to regional innovators
market: creative firms in almost all regions are Table 7 estimates the weight of creative
twice as likely to have introduced new products businesses in the regional populations of
to the market as businesses in other sectors. innovators in products or processes drawing
on ABI and UKIS 2006 data. It shows that for
This does not mean that the creative industries all regions and nations with the exception of
are the most innovative sector at the regional London, the proportion of creative industry
level. Table 7 shows that Engineering-based innovators is larger than one would expect
Manufacturing companies are more likely to given their weight in the regional economy. For
introduce new products in all regions apart example, while creative businesses comprise
from the North East. Something similar 14 per cent of all firms in the South East, they
happens with Other Manufacturing businesses constitute 22.5 per cent of all innovators in
(which include food, wood, paper, chemical, products and processes.
rubber, metal, non-mineral metal products
and furniture manufacturing), The South East Why is London the outlier?
and Yorkshire and the Humber being the only In Part 2 we showed that London presents the
exceptions. strongest concentration of creative industries
in Britain – in some sectors, overwhelmingly so.
The creative industries are clearly shown to be And those firms based in the capital specialise
more innovative than retail and distribution, in the most intrinsically creative stages of the
KIBS and Other Services on all these measures, value chain. However, our analysis in this Part
with London again the only exception. has also shown that these creative firms are
22
Table 7: Firms’ product or process innovation by industrial sectors and regions – 2004-2006 (percentage of all firms
by sector in the region).
Manufacturing
Manufacturing
Region
Share of CIs in
Engineering-
the regional
Distribution
industries
industries
economy
Creative
Services
Retail &
based
Other
Other
KIBS
All
North East 37% 35% 45% 18% 31% 18% 24% 12%
North West 37% 38% 37% 27% 30% 14% 26% 12%
Yorks & Humber 36% 39% 33% 19% 31% 20% 24% 10%
East Midlands 38% 38% 48% 25% 32% 16% 28% 11%
West Midlands 39% 40% 47% 20% 35% 16% 27% 11%
South East 43% 44% 38% 19% 30% 18% 27% 14%
South West 35% 41% 38% 25% 36% 21% 28% 12%
Source: ONS.
23
Part 4: Creative spillovers and co-location
The high levels of innovation in the creative A typology of creative industry spillovers
38. Griliches, Z. (1992) The industries reported above supports the idea As we noted in Part 3, the consideration of
Search for R&D Spillovers.
‘Scandinavian Journal of that, in addition to contributing directly to the creative industries as a force for innovation
Economics.’ 94 Supplement, regional innovation processes through the is only a recent development and in no small
pp.29-47.
39. Frontier Economics (2007)
innovative activities in which they engage, part a reflection of NESTA’s previous research.
‘Creative Industry Spillovers: they could also do so indirectly, by generating Only a few studies have begun to examine
understanding their impact
on the wider economy.’
spillovers that benefit the wider economies of the creative industries from an innovation
London: Frontier Economics. the places where they are located. perspective. This means that there have been
40. Hargadon, A. and Sutton, few analyses of the potential spillovers that
R. (1997) Technology
Brokering and Innovation This part of the report reviews existing studies their activities generate. We now draw on an
in a Product Development that articulate the mechanisms through which emerging body of literature that looks into the
Firm. ‘Administrative Science
Quarterly.’ 42, pp.716-749; such spillovers might take place, and presents mechanisms through which ‘creative spillovers’
also Sunley P., Pinch, P., the results of a statistical analysis of the co- could occur. In doing so, we build on and
Reimer, S. and Macmillen,
J. (2008) Innovation in a location patterns between creative firms and augment the typology of creative industry
creative production system: those in other highly innovative sectors such spillovers developed by Frontier Economics for
the case of design. ‘Journal
of Economic Geography.’ 8, as High-Tech Manufacturing and KIBS. Such DCMS in 2007.39
pp.675-698. patterns might indicate – though of course not
41. Bakhshi, H., McVittie, E. and
Simmie, J. (2008) ‘Creating
prove – that spillovers indeed take place. • Knowledge spillovers occur when new ideas
Innovation.’ London: NESTA; and technologies developed by creative
also Sunley P., Pinch, P.,
Reimer, S. and Macmillen,
businesses are fruitfully applied elsewhere
J. (2008) Innovation in a without compensation: for example, the
creative production system:
the case of design. ‘Journal
4.1 The case for creative spillovers use of social networking features originally
of Economic Geography.’ 8, developed by digital media companies to
pp.675-698.
Innovation can generate beneficial manage communications in businesses. In
spillovers in other sectors some cases, these spillovers are mediated
It is generally acknowledged that innovative by business-to-business interactions, for
sectors and activities such as R&D are an example, design firms working with clients in
important source of spillovers with benefits different sectors have been shown to channel
that spread across the economy.38 These knowledge beyond their brief and across
spillovers occur where the knowledge activities firms, thus producing unexpected novelty.40
of one firm or industry result in economic NESTA research shows that firms that spend
benefits for another one that the former is double the average on creative inputs are 25
not able to fully capture. Establishing their per cent more likely to introduce products
existence and magnitude is important for which are new to the firm or market.41
policy: their presence is an instance of market
failure that may justify the introduction Australian economist Jason Potts argues
of measures to support the activities that that many creative businesses organise their
generate them (if the benefits of intervention productive and innovative activities using
are shown to outweigh the costs) – for open and collaborative models which are
instance, tax credits for R&D, and public more suitable for highly dynamic competitive
investment in the science base. Otherwise, they environments, and that these models can
will occur less than would be socially optimal. spread to those businesses in other sectors
24
that engage with them – he refers to this as a ‘Creative Cities’ noted how a thriving
creative ‘nudging of innovation’.42 cultural scene attracts knowledge workers,
who can then be employed by other local
Knowledge spillovers can also be embodied businesses (or indeed bring in foreign
in labour flows. Creative professionals investment from companies attracted by the
such as designers, advertisers or software strong local talent pool).47 Michael Storper
developers may be employed outside the and Tony Venables argue that the creative
creative industries, bringing with them new industries also create an ‘urban buzz’ or
techniques, ideas and ways of working. atmosphere which is more conducive to local
Or, they may start spin-off companies in collaboration and innovation.48
a different sector – for example, Apple’s
Steve Jobs and Steve Wozniak met while
working at Atari, a video games developer.43
NESTA research shows that creative and arts 4.2 Co-location between creative firms 42. Potts, J. and Morrison,
K. (2008) ‘Nudging
professionals have skill sets that can induce and other sectors Innovation.’ London: NESTA.
innovation in the organisations that employ 43. Kent, S. (2001) ‘The
them.44 Location, location, location Ultimate History of Video
Games.’ New York: Prima
Many of the mechanisms for the knowledge Publishing.
In addition to these ‘creative push’ and network spillovers described above – such 44. Oakley, K., Sperry, B. and
Pratt, A. (2008) ‘The Art of
knowledge spillovers, there are also instances as commercial relationships and collaborations, Innovation.’ London: NESTA.
where creative businesses can make their and labour flows across sectors – are more 45. Markusen, A., Gilmore,
suppliers more innovative through knowledge likely to take place between firms that are S., Johnson, A., Levi, T.
and Martinez, A. (2006)
embodied in their sophisticated demand (this located close to each other. ‘Crossover: How Artists
is what innovation researchers call ‘demand Build Careers across
Commercial, Nonprofit and
pull’ effects).45 The development of new The economic geography literature has also Community Work.’ Available
computer chips and server technologies shown that specialist knowledge conducive to at: http://www.haassr.
org/html/resources_links/
in response to the graphically intensive innovation is often hard to ‘codify’ into easily pdf/caCrossover.pdf [Last
demands of video games developers is one understandable instructions and information. In accessed 21 April 2010].
46. Flowers, S., von Hippel, E.,
example of this. order to be communicated effectively between deJong, J. and Sinkowicz,
different parties, there needs to be a degree T. (2010) ‘Measuring User
Innovation in the UK.’
The literature on user innovation has shown of trust between them – this trust emerges London: NESTA.
that some ‘lead users’ with advanced needs more easily ‘on site’ through face-to-face 47. Florida, R. (2004) ‘The
in some cases develop new technologies interactions.49 Rise of the Creative Class.’
London: Basic Books.
to address them, and that these are then 48. Storper, M. and Venables,
adapted and commercialised in the market by All of this creates barriers for the perfect T. (2004) Buzz: face-to-
face contacts and the
specialist suppliers. A recent NESTA study of transmission of knowledge to places far urban economy. ‘Journal of
user innovation across the UK economy has away, making it ‘geographically sticky’. An Economic Geography.’ 4(4),
pp.351-370.
shown that the creative sectors considered implication of this is that knowledge spillovers
49. Iammarino, S. and McCann,
explicitly in the survey (Software and Other tend to ‘degrade’ with distance – geography P. (2006) The structure
Creative Activities, including Architecture, and location matter for innovation. It also and evolution of industrial
clusters: Transactions,
Advertising and Photography) present means that the presence of spillovers can technology and knowledge
comparatively high levels of user innovation, drive the firms that benefit from them closer spillovers. ‘Research Policy.’
35(7), pp.1018-1036.
which might spill over into their suppliers. to their sources – as when corporations set
50 per cent of all the Software firms and up a subsidiary somewhere near to a research
25 per cent of those in Other Creative laboratory: in this sense, the close location of
Activities reported that they engage in user firms in the same place could be explained by
innovation.46 spillovers between them.
• Product spillovers take place when creative A first step towards establishing creative
goods and services increase demand for spillovers in the local economy
complementary goods in other sectors, or are Here we consider the results of a statistical
adapted to other markets: the widespread analysis looking into the patterns of co-
availability of online music increases the location between the creative industries
attractiveness of iPods, or a Disney film and two other innovative sectors, High-Tech
generates additional revenues through the Manufacturing and KIBS.
sale of merchandise and toys.
The presence of such patterns might suggest
• Network spillovers occur where the mere strong value chain inter-linkages (firms in
presence of creative businesses in a given these sectors are found in the same places
place benefits other local firms. Florida’s because they trade frequently) and beneficial
25
knowledge spillovers (mediated by those the simultaneous strong presence of several
business to business transactions, labour flows sectors in more industrious areas. Although the
and informal networking which occur more way in which location quotients are calculated
easily when firms are close to each other). (capturing the weight of a sector in the local
The reason we focus on high-technology economy relative to their national importance)
manufacturing and KIBS firms is that these should in principle reduce the severity of this
sectors are perceived to embody high levels of effect, by introducing industrial mass as an
innovation. additional control, we have sought to reduce
the effects on the correlation of other factors
Co-location does not, however, imply that may be approximated by it – for instance,
causation: proximity between creative firms better infrastructure that benefits all firms
and these other sectors does not demonstrate located in a place, or large consumer markets.
the existence of creative spillovers. Indeed,
there could be backwards spillovers from other Many creative sectors co-locate with High-
sectors into the creative industries. Or there Tech Manufacturing and KIBS
could be other underlying factors unrelated to Table 8 presents the results of the analysis of
spillovers which underpin co-location – such co-location between the nine DCMS creative
50. AeA (2002) ‘High-Tech
Industry Definition.’ as the presence of universities or a research sectors and High-Tech Manufacturing and KIBS
Available at: http://www. infrastructure attracting many firms to a given firms at the aggregate level.51
aeanet.org/Publications/
Idmk_definition.asp; also place.
EFILW (2005) ‘Sector Advertising, Designer Fashion and Software,
Futures: The knowledge-
intensive business services As such, the findings below should be seen Computer Games and Electronic Publishing are
sector.’ Available at: http:// as indicative rather than demonstrative of shown to co-locate significantly and strongly
www.emcc.eurofound.
eu.int/publications/2005/ creative spillovers. The direction of causality, with KIBS (coefficients above 0.5). All these
ef0559en.pdf [Last as well as the role of other environmental and sectors also co-locate significantly, although
accessed 21 April 2010).
See Appendix 1 for the SIC infrastructural factors in the local dynamics of less intensely, with High-Tech Manufacturing
codes included in these creativity and innovation, is explored in the businesses.
two definitions. The SIC-92
used in the AeA definition case studies presented in Part 5.
has been linked to the SIC- Most other creative sectors co-locate with
2003s according to which
ONS data are currently Data and methodology for the co-location KIBS, but not with High-Tech Manufacturing
classified. Any SIC codes in analysis industries. Their pattern of co-location with
the DCMS definition have
been removed from these Our study of co-location uses the location KIBS is strong for Architecture and Video, Film
definitions to avoid spurious quotients of the nine creative sectors identified and Photography and weak for Music and the
correlations.
51. See Appendix 2 for tables
by the DCMS mapping of the creative Performing Arts, and TV and Radio. The Arts
with the values of the industries, and of the industries included in and Antiques sector presents negative patterns
correlation coefficients
summarised in Tables 8
the definitions of High-Tech Manufacturing of co-location with other innovative sectors:
and 9. and KIBS produced by AeA and EFILW.50 The this sector tends to be found strongly in TTWAs
52. Arts and Antiques is not location quotients have been calculated at where KIBS or High-Tech Manufacturers are
included in the table: Table
9 shows that this creative the TTWA level (which captures local labour absent.
sector shows negative markets) using ONS data.
correlation coefficients with
a large number of High-Tech A more detailed analysis of co-location
Manufacturing and KIBS The value of the partial correlation coefficients The results of a more detailed examination of
sub-sectors.
between each of the sectors being compared co-location patterns between creative sectors
indicates the likelihood of finding them and specific sectors within the High-Technology
strongly concentrated in the same places Manufacturing and KIBS categories are
(in which case the sign of the coefficient presented in Table 9.52
is positive) or in opposite places (in which
case the sign is negative). For example, a Firms in Advertising co-locate strongly with
positive correlation coefficient of 1 means that some KIBS businesses such as Hardware
whenever one finds one sector ‘in strength’, Consultants, Accountants, Consultants
the other is always present with the same and Market Researchers. Firms in Designer
strength. The results can be considered only Fashion are found close to some High Tech
robust when they are statistically significant – Manufacturers – Computer Manufacturing and
that is, when significant underlying patterns are Measuring Equipment as well as Information
detected in the data. Technology (IT)-based KIBS activities such
as Hardware Consultancy, Data Processing
The total number of firms in a TTWA has been and Database Work. Predictably, Software,
used to control for the ‘industrial mass’ of each Computer Games and Electronic Publishing
of the considered places, thus attenuating present very strong co-location patterns with
‘urbanisation effects’ that could account for IT-related high-tech sectors and KIBS such
26
Table 8: Results of the aggregate co-location analysis
Strongly co- Colocates Weakly co- Negatively
locates with with locates with locates with
Note: All results significant at the 1% level. Strongly co-location reflects a correlation coefficient greater than 0.5. Co-
location coincides with a correlation coefficient between 0.2 and 0.5, and weakly co-location with a correlation coefficient
smaller than 0.2.
27
Table 9: Results of the detailed co-location analysis
Industry Strongly co-locates with Co-locates with Weakly co-locates with Co-locates negatively with
Music and the Market Research, Database Work, Scientific Motor Manufacturing,
Performing Accounting, Consulting R&D, Social Sciences R&D Pharmaceutical
Arts Preparations, Holding
Companies, Testing,
Personnel
Note: All results significant at the 1% level. Strongly co-location reflects a correlation coefficient greater than 0.5. Co-location coincides with a correlation
coefficient between 0.2 and 0.5, and weakly co-location with a correlation coefficient smaller than 0.2.
which suggests substantial complementarities chain and infrastructural drivers for co-location
and shared resources and infrastructures between firms in Music or TV and Radio
between certain creative sectors, High-Tech broadcast content sectors and KIBS and High-
Manufacturing and KIBS firms. The results are Tech Manufacturing businesses.
less suggestive of significant spillover, value-
28
Part 5: A tale of four clusters
The analysis of UKIS 2006 data at the regional We take into account all these variables,
level has shown that the creative industries together with the rates of growth in businesses
play a direct role in the dynamics of local and employment within the dominant creative
and regional innovation. Although the co- industry for each ‘candidate’ (defined at the
location analysis of the creative industries TTWA level) when selecting the case studies.
and other innovative sectors undertaken in This allows us to cover different configurations
the previous section has provided indicative of creative clusters which may or may not be
evidence of linkages between creative industry linked to the local and regional economy.
presence and local and regional innovative
performance, it is not enough to establish any Particular attention is paid to the two variables
causal relationship between both variables and, depicted in Figure 3: the intensity of cluster
in particular, whether the creative industries presence and the innovative performance of
generate spillovers in the rest of the economy. the rest of the economy.
Additionally, it is difficult to characterise the On the basis of these variables, we select the
institutional context within which creative following creative clusters for an in-depth
clusters operate in purely quantitative terms. analysis:
Yet these are crucial issues for policymakers.
• Software in Wycombe and Slough.
To address this, we introduce four in-depth
case studies of creative clusters in Britain and • Film, post-production and visual effects in
summarise our findings in relation to them. By London (Soho).
comparing and contrasting creative clustering
and innovation dynamics in these different • Media Production (incorporating TV
cases – selected to represent a spread of cluster production and Digital Media) in Cardiff.
types – we aim to draw some generalisable
inferences, that will, in turn, complement the • Advertising in Manchester.
previous part of the report.
This selection includes a combination of
places with strong focus on a small number
of sectors (Cardiff and Wycombe-Slough), as
5.1 Selection of the case studies well as creative hubs concentrating various
creative sectors (London and Manchester),
Getting the right mix clusters comprising creative business services
As we have shown, different creative sectors and content providers (Wycombe-Slough and
tend to be present in different places across Cardiff), and clusters with different levels of
Britain, with different levels of innovative overall innovation (higher for Wycombe-Slough
performance. In some places, the creative and Manchester, and lower for London and
industries form ‘hubs’ including several sectors, Cardiff).
while other places specialise in a single sector.
The wider local economy also varies in its sector
composition and innovative performance.
29
Figure 3: Creative cluster presence and innovation as criteria for case study selection
High
London
(Music/Film and Video/Radio & TV/Software/
Advertising/Publishing/Designer Fashion)
South East
(Software/Music/Video/
Publishing/Radio & TV)
East
(Publishing/Software)
East Midlands
(Designer Fashion)
Wales
(Radio & TV)
West Midlands
Scotland (Advertising/Software)
(Advertising)
North East
(Architecture)
Low High
Overall innovation performance
5.2 Methodology and Data Firms in these related sectors located in the
regions surrounding the cluster are then
Framing the case studies targeted in a Stage 2 survey.
The design of the case studies has been
informed by the Regional Innovation System Ninety-two firms are surveyed as part of each
(RIS) analytical framework briefly summarised case study (with the exception of Cardiff,
in Box 3. This approach emphasises the which is discussed below), with a small degree
importance of relationships between local of variation across cases in the split between
private and public sector actors, as well as the Stage 1 and Stage 2 sample sizes.
role of the public institutions that support
innovation activities within the system. The surveys administered to firms in the four
cases studies examine:
We have also reviewed the available literature
to characterise the value chains, industrial 1. The factors that drive creative
structures and innovation processes of each of clustering: The Stage 1 survey explores the
the creative sectors at the core of the clusters factors that explain creative clustering in
being analysed. the places being analysed.
Each case study is based on data collected 2. Innovation activities and innovation
through two sequential surveys sources: Both Stage 1 and Stage 2
The Stage 1 survey targets firms operating surveys ask firms about their innovative
within each creative cluster (bounded performance, activities and investments.
geographically at the TTWA level). Crucially,
this first survey is used to identify those 3. Relationships and cooperation: The
‘related sectors’ with which firms within the Stage 1 and Stage 2 surveys assess the
cluster tend to interact more frequently – that significance of different mechanisms
is, those that might be expected to play a for knowledge sharing between firms in
stronger role in their innovation processes the area, the geographical location of
and which are more likely to benefit from any their partners, and channels for informal
creative spillovers. networking.
30
Box 3: Regional Innovation Systems
Innovation systems have traditionally been report’s authors, Phil Cooke (1992, 1993),
analysed at the national level. It is, after all, to describe the systems of public and
at this level where scientific priorities and private organisations and institutions that
basic university funding (including research interact at the regional level in order to
and teaching) are decided, and much of produce innovation outputs. The framework
the business and employment regulatory builds upon Perroux’s (1955) pioneering
framework set. work on regional growth poles, and several
research strands in economic geography
Nevertheless, many national policies are that have examined regional industrial
moderated and implemented regionally. It networks, such as the industrial networks
is also at this level where regional paths of in the ‘third Italy’ and regional ‘innovative
historical evolution lead to the emergence milieus’.
of specific institutional frameworks and
patterns of industrial specialisation. The application of the RIS approach ‘on
the ground’ has shown that, in successful
Indeed, differences in economic regions such as Silicon Valley, Baden
performance are often more visible Württemberg and Emilia Romagna, it is
regionally than they are nationally – regions possible to identify a system of strong,
situated in the same National Innovation ‘locally embedded’ and trust-based
System (NIS) diverge markedly in economic relationships between firms and other
performance. Within the European Union, innovation ‘agents’ (Braczyk et al., 1998).
for example, intra-state differences are
at least as significant as inter-state ones Developing trust and coordinating activities
(European Commission 2004, 2007). This is easier when different participants in
means that, for the most part, EU economic an innovation system are located close
development policy is implemented in to each other – opportunistic behaviours
regions. are easier to detect and ‘tacit’ knowledge
can be transmitted more effectively. This
The Regional Innovation Systems (RIS) geographical ‘stickiness’ of knowledge helps
framework which underpins these case explain the persistence of some regional
studies was first proposed by one of this specialisation in the face of globalisation.
Sources: European Commission (2003) ‘Innovation policy: Updating the Union’s Approach in the Context of
the Lisbon Strategy, COM (2003) 112 Final.’ Luxembourg: EC Publications Office; European Commission (2004)
‘Third Report on Economic and Social Cohesion.’ Luxembourg: EC Publications Office; Cooke, P. (1992) Regional
Innovation Systems: Competitive Regulation in the New Europe. ‘Geoform.’ 23, pp.365-382; Cooke, P. (1993)
Regional Innovation Systems: An Evaluation of Six European Case Studies. In: Getimis, P. and Kafkalas, G. (Eds)
‘Urban and Regional Development in the New Europe.’ Athens: Topos; Braczyk, H., Cooke, P. and Heidenreich, M.
(Eds) (1998) ‘Regional Innovation Systems.’ London: UCL Press; Perroux, F. (1955) Note sur la Notion de Pôle de
Croissance. ‘Economie Applique.’ 8, pp.307-320.
4. Creative clustering and the regional We also use in-depth interviews with local
dynamics of innovation: The Stage creative firms and stakeholders
2 survey examines the patterns of This has helped to characterise more accurately
collaboration between firms in the creative some of the ‘softer’ innovation dynamics at
cluster and those in ‘related sectors’ as play in the locality and the region, and the
reported by the former. Specific attention impact of policy on the activities of the creative
is paid to the impact of the cluster on the industries in the region.
innovation activities of other sectors in the
regional economy.
31
Box 4: Digital innovation in four creative sectors
32
Table 10: Summary of findings of the case studies
Software in The South of England Few respondents Less innovative than Local information Relationships with
Wycombe and hosts several leading are aware of the the national Software plays a minor role pharmaceutical firms,
Slough IT multinationals. existence of the sector. in supporting consultants and
cluster. innovation. advertising.
Several world- Sources of innovation
class computing Location decisions are mostly based There are low Where collaboration
departments. driven by proximity in-house, or clients, levels of informal occurs, it focuses on
to home, clients and usually based in networking inside the innovation activities.
Diverse client base. and suppliers, and a the UK. cluster – the Internet
strong skills base. is the main source of
informal contacts.
Film in Soho Strong cluster of film Strong awareness of Highly innovative, High levels of Strong linkages to
and video firms in the Soho film cluster. technology-intensive networking. other sectors such as
distribution, post- firms. optical instruments
production and visual The cluster is seen to Local availability and photographic
effects. support the business Diversified portfolio of information equipment, TV and
objectives of Soho of innovation sources: about technology historical sites.
London hosts most film and video firms. internal, external and and markets play
of the sector’s interstitial (such as an important role The cluster is the
support institutions Proximity to clients freelancers). in supporting main source of
and professional and suppliers, a innovation. innovation for
associations. critical mass of Innovation sources some of these
businesses and social are both local and Professional sectors. Inter-sector
networks make Soho international. association meetings collaboration focuses
an attractive location help companies to on innovation, design
for firms. ‘keep up to speed’ and information
with technological sharing.
trends in the sector.
Media Three major TV There isn’t a strong Digital Media Local information Most instances of
Production in broadcasters are awareness of the companies provide supports innovation cooperation take
Cardiff based in Cardiff. existence of a Cardiff TV firms with by digital media place inside the
TV cluster. technologies companies. They media production
IP ownership has and services for tend to network more cluster.
driven growth. Central location, innovation. intensely.
availability of skilled The activities of
Strong linkages labour and proximity Digital Media TV production the cluster produce
between TV to clients are more businesses are businesses cooperate economic benefits
production and important than a more open and less with each other for Cardiff and Wales
digital media. critical mass of TV internationally due to concerns more generally in
firms in the area. focused in about IP. terms of tourism.
their sources of
innovation.
Advertising in Strong digital and Advertising firms are Mostly small firms Local information and Other sectors are less
Manchester media sector. strongly aware of specialising in critical mass support aware of the cluster –
the cluster and its different stages of innovation in the they still tend to use
Local bodies are benefits. the value chain. cluster. advertising firms in
building a robust London.
evidence base Central location, Wide portfolio of There are strong
to support local proximity to other innovation sources, levels of informal Collaboration focuses
innovation and firms and social both local and networking in the on production and
linkages. networks are strong international. cluster – Professional innovation activities.
attractors, as well as a Association meetings,
critical mass of clients training courses and
and suppliers. public events play an
important role.
33
Table 11: Innovation activities and investments in the four clusters
Innovation activities
Innovation investments
Firms that invest above 30% of their 29% 38% 27% 24% 26%
turnover on innovation
Firms that employ more than 30% of 45% 59% 57% 43% 58%
their staff on tasks requiring high levels
of technology-intensive knowledge
Number of observations 42 50 21 50 50
Manchester Advertising cluster over the last ownership over their IP, and strengthened their
decade is causally linked to the city’s strong incentives to innovate in order to exploit it.
software sector.
Creative firms can also generate revenues by
Reciprocally, creative industries’ strong demand licensing the innovative technologies, tools and
for technology and digital services supports platforms that they develop. Post-production
the growth of local digital clusters: in Cardiff, firms in Soho are investing in the development
the high levels of collaboration between TV of visualisation and modelling technologies
production companies and Digital Media firms for specific clients, and then exploiting the
are blurring the boundaries between both resulting innovations in subsequent projects.
sectors. Firms in the Wycombe and Slough
Software cluster often sell their services to
regional Advertising companies.
b) Clusters for courses
New opportunities to generate value
Digital distribution gives smaller creative firms Different rationales for cluster development
new channels to reach existing audiences, and The case studies have shown diverse drivers for
also create new ones. As distribution channels the emergence and growth of creative clusters
and media for the consumption for content (see Table 12). Software firms in Wycombe
multiply, so do the opportunities to generate and Slough benefit from a skilled labour pool,
revenues from creative IP. proximity to clients and the perceived good
quality of life in the South East. Although there
This makes IP ownership more important is clearly a critical mass of Software firms in
than ever. In the Cardiff Media Production the area, respondents do not actually consider
cluster, the changes in terms of trade between themselves to be part of a cluster.
independent TV producers and broadcasters
brought by the Communications Act of 2003 The presence of three large television
have enabled production companies to retain broadcasters in Cardiff has attracted TV
34
Table 12: Innovation activities and investments in the four clusters
production firms to the Welsh capital. Local A dense web of relationships is crucial, not
TV firms do not tend to see themselves as only as a source of new knowledge, but also
part of a cluster, perhaps because they do not to support the development of smooth value
collaborate much as they are wary of disclosing chain links within the cluster, which improves
sensitive IP to competitors. its efficiency and ability to satisfy customer
demand. As respondents from the Soho cluster
By contrast, a critical mass of firms in the have highlighted, the availability of a well-
sector, and proximity to important social developed ecosystem of suppliers of support
networks play a more significant role in firms’ services – ranging from production facilities
decisions to locate in Manchester and Soho. to lawyers and a freelancer pool – makes
In both cases, there is a strong feeling that them more flexible and efficient. On-site
the cluster makes firms in the sector more collaboration is seen as crucial to ensure the
competitive. Indeed, it seems that these quality of the final product.
more ‘self-aware’ and active clusters are
stronger innovators than their creative sectors The situation is very different in Wycombe
nationally. and Slough. Reflecting the lack of awareness
of a Software cluster in the area, firms rarely
The strength of local ties collaborate with each other. Their levels of
The case studies have shown that firms feel informal networking are also lower than in the
part of a cluster to the extent to which they other clusters. This means that information
have strong relationships with each other about markets and technology is not shared
(see Table 13). Firms in Manchester and Soho locally. This could explain why local information
collaborate locally as part of their innovation about technology and markets is a minor factor
activities, and engage in higher levels of supporting innovation by firms in the cluster by
informal networking, both through contacts comparison to those in Soho or Manchester.
and meetings with personnel in other firms,
and participation in professional associations. Cardiff is a special case that illustrates
In both cases, freelancers who move across the trade-offs between collaborating and
businesses play a significant role as a source appropriating value. Although the TV
of ideas and new knowledge for innovation. regulatory framework has driven growth and
The survey also shows that, in some cases such innovation, local stakeholders interviewed
as Digital Media in Cardiff, and Advertising as part of the research report that it has also
in Manchester training courses can operate created barriers to collaboration between TV
as a venue for networking between creative firms keen to protect their IP from competitors.
professionals. Freelancers make a limited contribution to
innovation because they are often subject
35
Table 13: External sources of innovation, networking and local information sharing
Sources of innovation
Competitors 5% 6% 4% 0% 8%
Informal networking
Contact with friends in the area of 19% 60% 42% 47% 58%
business
Informal personal meetings with other firms 2% 36% 35% 55% 46%
36
Table 14: Location of sources for innovation
Software firms in Wycombe and Slough Table 14 also illustrates the complementarities
draw readily on online information for their between what seems to be a rather
innovation activities, and partner with introspective and ‘locally focused’ TV
other companies overseas using real-time production sector in Cardiff and the pool of
collaborative tools. But the lack of networking Digital Media firms, all quite well connected
between them might mean that valuable with sources of innovation located further
information about international opportunities away. Insofar as Digital Media firms channel
and technological trends is not shared more these ideas and knowledge into the TV
widely, to the detriment of the cluster’s companies with which they work, there might
competitiveness. be less need for these to scan the international
environment directly.
Table 15: Collaboration partners of firms in the cluster at the local and regional level
Local 4% 8% 5% 18%
37
Table 16: Relationships between other sectors and the cluster
Firms in Stage 2 that chose the current location 10% 48% 14%
because of the cluster
Firms in Stage 2 that have relationships with the cluster 46% 55% 35%
Firms in Stage 2 that use the cluster as its main source 3% 10% 28%
of innovation
38
Table 17: Nature of collaboration between related sectors and the cluster
choose to hire the services of more established as well as an infrastructure to support local
Advertising agencies in London, with which innovation.
Manchester competes.
Although the availability of a skilled labour
Table 17 presents the types of collaboration pool – largely provided by universities – is an
with the cluster reported by firms in related important factor underpinning the decision
sectors. It shows that whenever it takes to locate in each of our four clusters (see
place, collaboration focuses on innovation, Table 12), the findings paint a starker picture
production and design. In Soho, there is also regarding other forms of engagement between
evidence of significant levels of knowledge- universities and nearby creative firms (Table
sharing between film companies and those in 18).
other sectors.
The creative businesses that we have surveyed
Local universities are missing from the rarely see universities as an innovation source
innovation picture or a local factor supporting innovation. Even
Creative clusters are part of a wider Regional in the Manchester Advertising Cluster, where
Innovation System that includes firms in other a larger proportion of firms have identified
sectors, as well as local institutions, public universities as supporting local innovation, they
support bodies and universities. These actors are the least important factor, and none of the
supply skills and other knowledge resources, surveyed firms acknowledge them as a direct
source of innovation.
39
5.4 Summary of the case studies • Local connections within the cluster help
small creative companies to establish
Different drivers for different clusters smooth and fluid value chain linkages that
Different creative clusters emerge, operate and increase their efficiency and flexibility, and
innovate following distinctive drivers, shaped to disseminate knowledge that supports
by their sector’s industrial structure and value innovation.
chain, and local conditions.
• External connections enable firms in a cluster
• The strong Software presence in Wycombe to draw on sources of innovation located
and Slough is explained by the availability elsewhere, and to embed themselves in
of a skilled labour pool and a diverse client global creative value chains.
base. Despite large numbers of Software
firms in the area, most do not consider • External links with other local sectors are
themselves to be part of a cluster. This is important commercially, and are a source
reflected in low levels of information-sharing, of novel ideas that can be recombined for
collaboration and informal networking innovative purposes. As content converges
between them. across different platforms, the boundaries
between different creative sectors – and
• Soho is a well-established Film and Video between creative and digital sectors – are
cluster that has developed world-leading becoming increasingly blurred. This means
technological capabilities in the post- that collaboration across sectors can help
production and visual effects stages of the local clusters develop the innovative and
value chain, and is supported by a strong interactive forms of content increasingly
network of relationships – both commercial demanded by global audiences.
and informal – between its businesses and
60. They also show how weak with other sectors, as well as internationally. These three layers of connectivity have a
connections, as is the case
of software in Wycombe- ‘formal’ aspect, as when businesses develop
Slough, can constrain the • The Cardiff Media Production cluster works new commercial relationships or engage in
benefits from agglomeration.
closely with several ‘anchor’ broadcasters – collaborations for innovation, and an informal
most obviously the BBC – who commission one, exemplified by social networking and
creative content that TV producers can then information sharing.
exploit elsewhere. The ability to generate
revenues from their IP after it is broadcast These three layers reinforce each other
provides these firms with incentives to There are positive feedbacks between the three
seek alternative distribution routes, often layers of connectivity described above:
through digital innovation. These activities
are supported by a thriving digital media • Building the dense web of relationships that
sector, which can also help to disseminate underpins a strong and visible cluster can
knowledge between TV production firms help to attract the attention of potential
that don’t talk much to each other for fear of partners elsewhere in the UK, or overseas.
disclosing valuable IP. By sharing information with each other, firms
can diminish the uncertainties and risks of
• The Manchester Advertising Cluster has collaboration with parties located far away.
developed over the last decade in close
connection with the city’s strong digital • Collaboration with other sectors – for
sector. It is mostly composed of small example, technology suppliers – helps
businesses that engage in high levels of disseminate valuable information across
information sharing and networking. Local the cluster, and generates cross-sector
and regional firms in other sectors do not innovations that distinguish it from its
show high levels of awareness of this young competitors.
cluster.
Proximity is not enough
Three layers of connectivity for innovation The case studies have also shown that the
Even with these differences, when considered mere spatial proximity of a critical mass of
together, our case studies highlight how firms within a sector is not sufficient for these
different types of connections support the beneficial relationships to emerge. If the
innovation activities of firms in clusters, and firms are not aware of each other – as with
strengthen each other, potentially generating Wycombe and Slough – it is doubtful they will
the virtuous circles of innovation and growth seek to establish such connections. Something
that have been described in the literature:60 similar happens between firms in the young
40
Manchester Advertising cluster and the rest of
their regional economy.
41
Part 6: Conclusions and policy implications
6.1 Creative clusters in the new firms, but also as potential sources of spillovers
framework for local economic into other sectors.
development
The creative industries are a force for
The ‘Local Growth: Realising Every Place’s innovation at the national and regional level
Potential’ White Paper published in October Data from UKIS 2006 presented in Part 3 of
2010 sets out a new policy architecture for this report put the creative industries at the
61. See http://www. local and regional development in England. forefront of the UK knowledge economy. Their
communities.gov.uk/news/
corporate/1708630. Local Enterprise Partnerships (LEPs), bringing particular strengths are in services innovation
62. See http://www. together the private sector and civic leaders, and the introduction of new products to
communities.gov.uk/news/
newsroom/1626475. are replacing Regional Development Agencies market. They rely strongly on IP measures
(RDAs) as the bodies in charge of creating local to protect aesthetic forms of innovation and
environments conducive to business growth. intangible outputs.
Some roles which were in the past carried out A regional analysis of the innovation
by the RDAs – including inward investment, performance of the creative industries confirms
sector leadership, business support, innovation that they punch well above their weight in
and access to finance – will now be led by terms of innovation across almost all regions in
national bodies such as the Technology the UK.
Strategy Board, UK Trade and Investment
(UKTI) and the Skills Funding Agency. The And a strong element of the regional
UK Screen Agencies, which have played an knowledge economy
important role in supporting the creative High levels of innovation in the creative
industries regionally, will continue operating, industries make them a potential source of
although it is not yet clear how they will innovation spillovers into other sectors. Whilst
coordinate their activities with Local Enterprise a growing number of studies have begun to
Partnerships.61 articulate mechanisms through which these
spillovers might occur, establishing their
The White Paper also describes in further presence and magnitude is difficult. Available
detail the £1.4 billion Regional Growth Fund data for the creative industries do not yet
announced in June 2010.62 This fund is lend themselves to sophisticated econometric
available for private sector and public private analyses that are possible in sectors with heavy
partnerships with proposals that support R&D outputs or substantial patenting.
private sector growth in areas at risk of being
affected by public spending cuts. Part 4 of this report has nevertheless taken a
first step towards evidencing these spillovers
Why do creative clusters matter? through an analysis of the patterns of co-
Although the framework for local economic location between creative firms and those in
growth is still taking shape, what this report other innovative sectors such as High-Tech
has made clear is that creative clusters have Manufacturing and KIBS.
a role to play in it – not only as competitive,
connected agglomerations of high-growth
42
This analysis has revealed statistically Production in Cardiff, and Advertising in
significant connections between the presence Manchester illustrates this.
of creative businesses (particularly in sectors
such as Advertising or Software) in a given Dominant UK clusters – particularly London
place, and firms in these other highly – would on their part be well advised not to
innovative sectors. This suggests that these rest on their creative laurels, and ensure that
sectors thrive on the same resources, and that their firms have access to the technological
there is the potential for knowledge spillovers resources and relationships needed to remain
between them. It also reinforces the view that innovative leaders in the emerging digital
creative industries are part of complex value marketplace.
chains comprising other high technology and
knowledge-intensive companies outside of
what are traditionally defined as the ‘creative
industries’ – a theme that NESTA is planning to 6.2 Zooming in on creative clusters, and
develop in future research. supporting their innovation activities
Digitisation is increasing the potential Having made a case for why creative clusters
innovation impacts of the creative should be part of national and local strategies
industries… to drive economic growth across the UK, this
It is often said that the creative industries do section sets out recommendations on how best
not have a monopoly on creativity. This is true, to support them.
but neither do manufacturing nor engineering
have a monopoly on technological innovation. NESTA is launching an online platform to
As the overview of the innovation processes support an evidence-based approach to
and activities of the clusters studies carried cluster identification and development
out in Part 5 has shown, digitisation is making This platform will provide policymakers, 63. Menzel, M. and Fornahl, D.
(2010) Cluster life cycles:
creative firms more technology-intensive. To businesses and researchers with access to dimensions and rationales of
remain competitive in online, convergent and the data on creative industry location that cluster evolution. ‘Industrial
and Corporate Change.’
data-rich markets, they are procuring and we compiled to produce the Geography of 19(1), pp.205-238.
producing technologies, tools and technology- Creativity. These data will be available at
related knowledge that could be used in other the level of Government Office Regions and
tech-rich sectors of the economy. Nations, Travel to Work Areas and Middle Layer
Super Output Areas. Yearly updates in these
The high levels of technology-related data will make it possible to identify and track
innovation from creative businesses could also emerging clusters, and evaluate local initiatives
be expected to exert a ‘demand pull’ on the to support the creative industries.
innovative activities of hardware and other
equipment supplies. The co-location between Look for ‘latent clusters’ before trying to
creative sectors and high-tech manufacturers build them from scratch
that were identified in Part 4 supports this As mentioned in the introduction, clusters have
argument. become a ‘holy grail’ for policymakers keen
to support local and regional development.
…and it could dramatically change their There are, however, doubts about the extent
location to which policy initiatives can produce strong
The industrial cluster lifecycle literature has and sustainable clusters. Competitive industrial
shown that radical changes in the competitive agglomerations emerge through lengthy and
environment can make established clusters organic processes that require the right mix of
obsolete by destroying the competences on local resources and relationships.
which they relied on in the past.63 Digitisation
constitutes one such shift for the creative Before trying to build new clusters from
industries. scratch, policymakers should use data to
establish whether there are any existing
This makes the current instability as good industrial agglomerations in their regions that,
a time as ever for traditionally ‘peripheral’ with the right support, could develop the dense
localities – some of which were identified in web of internal and external links conducive to
the Geography of Creativity – to attempt to local competitiveness, innovation and growth.
top the ‘global creative league’ by developing The disconnected agglomeration of Software
strong synergies between their creative and firms in Wycombe and Slough is a good
digital industries. The rapid growth of Media example of a ‘latent’ cluster that would benefit
from publicly sponsored networking and
43
awareness-raising activities. An implication of trades, or exchanges knowledge. Attempting
this is that creative clusters can be branded and to implement ‘one size fits all’ policies to
promoted in the same way in which creative support the creative economy, understood as
cities and cultural quarters are. an undifferentiated whole, will be less efficient
than adopting better targeted, and more
The survey instruments that we have used realistic strategies that focus, as discussed
to analyse the relationships within creative above, on ‘building up and connecting’ those
clusters and across creative sectors can help sectors which are already present – and
identify the ‘weaker links’ in their layers of complementary with each other.
connectivity that might deserve further support
through targeted networking initiatives. We Balance the trade-offs between
are making these survey instruments available collaboration and appropriation
online. Raising awareness about the presence of a
critical mass of firms in a locality is a necessary,
Nurture talent, and give it reasons to stay but not sufficient, condition for connections to
In all the case studies, the presence of a happen. As the Cardiff case study has shown,
specialised and knowledge-intensive pool of local creative businesses keen to protect their
labour is a key factor in businesses’ decision valuable ideas or client portfolios might be
to locate there. But if talent pools from local wary of collaborating for fear of disclosing
universities are to be harnessed, it is important sensitive information.
that there are local employment opportunities
for graduates and that where they exist, Local bodies need to take this into account
graduates are aware of them. when they design initiatives to encourage
networking and knowledge sharing between
In the absence of sufficient information about local businesses. NESTA’s own experience
64. See http://www. young yet thriving clusters in their vicinity, new in building relationships between small
manchestermasters.com.
65. Economic geographers graduates searching for a job in the creative and large companies for Open Innovation
refer to these collective industries might be driven somewhere else in suggests that the use of an ‘airlock’ model
advantages generated by the
proximity between distinct the UK (usually London), missing employment (where engagement takes place in a neutral
but nevertheless connected opportunities that existed ‘on their own space managed by a trusted and independent
sectors as ‘related variety’.
doorstep’ (and at the same time depriving local organisation) can help businesses to build the
66. See http://www.brighton.
ac.uk/profitnet creative firms from access to talent). In this trust needed to collaborate.
sense, sharing of intelligence and collaboration
between local bodies that support the creative The ProfitNet Programme, currently being run
industries, universities and the creative by the Centre for Innovation Management
industries themselves can help to ensure that (CENTRIM) at the University of Brighton is
investments in ‘creative capital’ are captured another example of this sort of initiative.
locally. Manchester Masters, a programme ProfitNet brings together firms in the South
partly funded by NESTA that teams high calibre East in facilitated workshops aimed at
graduates from Manchester Universities with improving their innovation capacity, helping
companies in the city, is an example of the sort them to network and connecting them to
of initiative that can help cities across the UK university experts.67 This illustrates how
to keep hold of the talent that they produce.64 universities can harness their knowledge and
‘trusted status’ to facilitate the sorts of local
Harness the power of complementarities relationships that underpin strong clusters.
between sectors
The analysis of co-location between creative It is also possible to design certain business
sectors summarised in Part 2, and of co- support initiatives (for example computer or
location between creative sectors and other marketing training) in ways that encourage
highly innovative parts of the economy networking and collaboration, both within local
presented in Part 4 suggests that there are businesses in a sector and across them. Indeed,
beneficial complementarities between some one result of our surveys is that training
sectors, but not others.65 courses can play an important role as a source
of informal contacts – the first step towards
Policymakers would be well advised to closer forms of collaboration. In providing well-
pay attention to these complementarities needed training for innovation and a venue for
when they set in place their strategies for networking at the same time, these courses can
local economic growth – what they mean help to ‘kill two birds with one stone’.
is that supporting a given industry can be
beneficial for other sectors with which it
44
Enhance the impact of local universities on public funding should favour those investors
innovation in the creative industries and projects that allow local firms to retain
In the context of the creative industries, ownership over the IP that they generate.
universities tend to be seen mainly as a source Initiatives that enable local creative firms to
of skilled labour. This contrasts with the experiment with digital distribution methods
technology and science-based sectors, where where they are able to go straight to their
universities are a crucial source of knowledge customers, such as NESTA’s funded consortium
for innovation, as well as high-growth spin- for video games self-publishing, also show
offs. This divergence may explain why the much promise.
creative businesses that we interviewed in our
case studies do not currently see universities Be aware of the opportunity costs of large-
as a source of innovation, or a local factor scale capital investments
supporting their innovation activities. Although investments in the iconic public
buildings that are seen to be the hallmark of
But as this report has shown, the creative creative cities can produce undoubted cultural
industries are becoming increasingly reliant on and economic benefits, they also take money
sophisticated knowledge and tools (which is from other initiatives to support local creative
often technology-related), and this increases businesses using an ‘industry and innovation’
the potential benefits of linking with the local approach – such as those that have been
research base. outlined above.69
It is important to ensure that the local Although the latter approach creates less
creative industries engage more actively immediately visible outputs, it might also be
with universities to harness research outputs more conducive to developing a healthy and
that might enhance their productivity sustainable local creative ecosystem – one
and innovative performance. At the same where creative graduates are able to gain 67. Kitson, M., Howells, J.,
Braham, R. and Westlake,
time, universities should adopt ‘connected employment when they finish their degree, S. (2009) ‘The Connected
models’ and engage more actively with the creative value is captured locally, and local and University.’ London: NESTA.
68. CIHE (2010) ‘The Fuse:
local creative industries from an innovation regional innovative performance is improved. Igniting High Growth
standpoint.67 The way in which the University It is thus crucial to ensure the right balance for Creative, Digital and
Information Technology
of Abertay has supported the growth of the between both types of investments. Industries.’ Available
renowned Video Games cluster in Dundee68 – at: http://www.cihe.
co.uk/wp-content/
not only by collaborating with local firms to Epilogue: East London Tech City as the themes/cihe/document.
produce industry-ready graduates, but also by beginning of a new approach for creative php?file=1009TheFuse.pdf.
providing bespoke services to developers, and cluster development? 69. Markusen, A. and Gadwa, A.
(2010) Arts and Culture in
setting up a Prototyping fund for promising The Prime Minister’s recent announcement of Urban or Regional Planning:
new video games ideas – should be an the East London Tech City set of initiatives, A Review and Research
Agenda. ‘Journal of Planning
inspiration for other universities seeking to aimed at building up the vibrant high-tech Education and Research.’
build deeper relationships with the creative and digital media cluster in Old Street and Vol.29, No.3, pp.379-391.
70. See http://www.number10.
firms in their vicinity. Shoreditch is a step in the right direction.70 gov.uk/news/speeches-
Rather than trying to create a new cluster and-transcripts/2010/11/
east-end-tech-city-
Capture creative value locally from scratch, East London Tech City aims speech-56602.
The generation of original IP is at the core to take an organic, already competitive
of what many creative businesses do. Where cluster to the next level, by providing it with
they retain ownership over their IP, they have the right infrastructure (both physical and
more incentives to innovate to exploit it, digital), and developing its connections with
generating additional revenues that can be global companies and London’s world-class
reinvested in growth, and building commercial universities.
and collaborative relationships with other local
firms. This should only be the first step. Other
budding creative clusters across Britain can,
The extent to which specific projects and with the right policy interventions, become
organisations produce creative value that global hubs for high-growth, innovative
can be captured by local firms through creative industries. This report has identified
IP ownership and exploitation, should be where they are, and how best to support them.
taken into account by bodies funding or
co-funding content production (such as
the Screen Agencies), and by bodies trying
to attract foreign direct investment to their
localities. Other things being equal, any such
45
Appendix 1: Industrial Classifications of the Creative
Industries, High-Technology Manufacturing and Knowledge-
Intensive Business Services followed in the report
Architecture 74.2 Architecture and engineering activities and related technical consultancy
Crafts ND
Design ND
46
Table 20: The Frontier Economics definition of the creative industries
Advertising
Layer 5 74.40/9 A ‘catch-all’ code for advertising, including handing out free samples and aerial
advertising
74.40/1 Selling or leasing advertising space or time
Architecture
Layer 3 36.63/9 Catch-all SIC code for ‘other manufacturing’ (potentially some craft firms, if
they are large enough to be covered by the IDBR)
36.22, Manufacture of jewellery and dinnerware made of precious metals and
36.61 imitation jewellery
36.30, Making musical instruments and watch and clock making
33.50
28.75, Making various metal products like swords but also ship propellers etc. and
28.61 making cutlery
27.54, 27.41, Casting and production of heavy and precious metals and manufacture of
26.82/9 mineral products
26.30, 26.25, Making ceramic tiles, pots, jars, tableware, statuettes etc. and cutting stone for
26.21, 26.70 building and ornamental use
17.51/9, 17.51/2, Carpet and rug making
17.51/1
Layer 4 51.47/9 A catch all SIC code that includes the wholesale of floor coverings but also
stationary and sportswear etc.
51.44, 51.47/8 Wholesale of china and of travel and fancy goods
51.47/3, 51.47/4 Wholesale of jewellery and imitation jewellery
47
Design Activity
Designer Fashion
Layer 1 74.87/2 Fashion design but also interior design and graphic design
Layer 3 17.53, Manufacture of clothing items like hats, shoes, outerwear and underwear or
17.71,17.72, accessories like bags and luggage
18.10, 18.22/1,
18.22/2, 18.23/1,
18.23/2, 18.24/1,
18.24/3, 18.24/9,
18.30, 19.20, 19.30
Layer 4 17.11, Manufacture of fibres, textiles, prepared fur and prepared leather
17.12, 17.13, 17.14,
17.15, 17.16, 17.17,
17.21, 17.22, 17.23,
17.24, 17.25, 17.30,
17.54/1, 17.54/2,
17.54/9, 17.60, 19.10
51.16, 51.24/1, Wholesale of, and activities of agents involved in the sale of fabrics, fur and
51.24/9, 51.41, clothing
51.42/1, 51.42/2,
51.42/3, 51.42/9
Layer 2 74.81/2 Portrait photos (mainly passport photo companies, although doesn’t include
photo machines)
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Music and Performing Arts
Layer 3 92.34/9 ‘Other entertainment activities’ code that includes VUE and Tussauds
51.47/5 Wholesale of musical instruments
22.31 Reproduction of sound recording
Publishing
Layer 3 74.87/9 Business activities note covered by other SIC codes, including author’s agents
but also consultants etc.
22.25 Activities like embossing and laminating
22.24 Pre-press work, like composition and typesetting
22.23 Bookbinding
22.22 Printing maps, magazines, music manuscripts, diaries and similar items
22.21 Printing newspapers
22.15 Publishing photos, posters, timetables etc.
Layer 1 36.50/9 Manufacture of video game machines but also chess sets, dolls, playing cards etc.
72.21 Development and supply of ready made software ‘off the shelf’
72.22 Development of made to order software, software consultancy and web page design
Layer 2 72.6 Computer-related work not covered under other SIC codes
Layer 5 52.48/5 Retail sale of toys (including video games), sports goods, stamps and coins
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Radio and TV
Layer 4 51.43/9 Wholesale of radios, TVs, lighting equipment and some other appliances
32.3 Manufacture of TVs, video recorders, camcorders, record decks, microphones
and similar goods
Layer 5 52.45 Retail sale of radios, TVs, DVDs, musical instruments and musical scores
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Appendix 2: Detailed results of the co-location analysis
Table 22: Partial correlations between creative, high-tech and KIBS sectors controlling for size
Control Variables LQ LQ LQ LQ LQ LQ LQ LQ LQ
ADV ARCH ART DES VID MUS PUB SOFT TV
TOTAL firms LQ High Tech Correlation .321 .125 -.353 .398 -.002 -.065 .070 .494 .017
Significance .000 .058 .000 .000 .973 .327 .290 .000 .795
(2-tailed)
LQ KIBS Correlation .651 .335 -.395 .644 .362 .184 .260 .742 .180
Significance .000 .000 .000 .000 .000 .005 .000 .000 .006
(2-tailed)
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Table 23: Partial correlations between creative, high-tech and KIBS sectors
Control Variables LQ LQ LQ LQ LQ LQ LQ LQ LQ
ADV ARCH ART DES VID MUS PUB SOFT TV
TOTAL firms LQ OFFMACH .077 -.029 -.025 .074 .064 -.051 -.003 .094 .023
LQCOMPMAN .341 .059 -.261 .427 .045 .078 .052 .401 .025
LQVALVES .201 .025 -.090 .264 -.010 -.033 -.041 .280 -.062
LQTVRADTRANS .182 .022 -.150 .277 .062 .092 .025 .269 .048
LQRADREC .210 .047 -.193 .272 .030 .092 .158 .233 -.027
LQMEASURING .205 .254 -.184 .439 .060 .071 .116 .435 -.015
MANPROCESSEQ .247 .235 -.238 .302 -.085 -.107 -.175 .240 -.004
MANOPTICAL .079 -.048 -.079 .001 -.085 -.041 -.068 .000 -.052
LQ Aircraft .168 .046 -.146 .280 -.061 -.076 -.016 .193 -.035
LQ Motor .086 -.067 .033 .156 -.177 -.135 -.022 .001 -.186
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Control Variables LQ LQ LQ LQ LQ LQ LQ LQ LQ
ADV ARCH ART DES VID MUS PUB SOFT TV
TOTAL firms LQ Telco .080 .034 -.277 -.041 .031 -.099 .051 .225 .138
LQBASPHARMA -.006 .059 -.084 .044 -.064 -.023 .001 .051 .000
LQPHARMAPREP .035 -.040 .011 -.016 .050 -.150 .085 .128 -.003
LQHARDCONS .510 .256 -.361 .589 .129 .031 .080 .649 .082
LQDATAPROC .377 .276 -.285 .410 .165 .018 .090 .575 .060
LQDATABASE .389 .078 -.152 .455 .282 .192 .195 .476 .092
LQR&DSCI .064 .175 -.121 .029 .162 .168 .289 .190 .221
LQR&DSOCSCI .002 -.021 -.113 -.018 .070 .196 .183 .025 .303
LQLEGAL .100 .057 .067 -.110 .111 -.083 -.125 -.027 .021
LQACCOUNT .579 .064 -.102 .586 .312 .253 .257 .345 .077
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Control Variables LQ LQ LQ LQ LQ LQ LQ LQ LQ
ADV ARCH ART DES VaID MUS PUB SOFT TV
TOTAL firms LQCONSULT .588 .290 -.367 .619 .391 .284 .321 .719 .221
LQHOLDING .416 .271 -.388 .396 .034 -.223 -.051 .488 -.063
LQTESTING .015 .622 -.300 .023 -.120 -.227 -.192 .271 -.024
LQ Market Research .420 .044 -.178 .404 .380 .342 .264 .421 .281
LQPERSON .384 .224 -.331 .358 .024 -.192 .015 .461 -.047
Source: ONS.
54
Acknowledgements
The authors would like to thank the members of the steering group for the project for their expert
input. They are: Iain Bennett, Sandra Bulli, Alan Freeman, Simona Iammarino, Alexandra Jones,
Rubbina Karruna, David Mulligan, Kate Oakley, Anna Smart and Peter Sunley.
Anthony Szary and Andy Botterill at the ONS, Stephanie Robson at BIS and the ONS Virtual
Micro-data Laboratory Team also provided helpful input while accessing and interpreting the
data that underpin the research.
Julie Porter assisted in the production of the Cardiff Media Production case study.
Hasan Bakhshi at NESTA has been one of the driving forces behind the research. His sustained
engagement and contributions have been invaluable in the production of this report. Stian
Westlake and Albert Bravo-Biosca have provided valuable suggestions and feedback, while
Brian MacAulay has been instrumental in the timely implementation of the online platform that
accompanies this report.
55
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