Understanding the creative sector and its value

Apr 24, 2022 News

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The Creators’ Cove…

By Zena Henry

Kaieteur News – Thrilling movies, designer clothing and high-quality music are among the contributions appreciated when looking at the creative sector of developed countries. In the United States for instance, the fashion industry, movie industry, gaming industry, music, among many others, provide massive amounts of money to that country and of course displays the high level of talent held by persons in those industries.

These talents were recognised and nurtured in societies that understand the significance of maintaining the cultural and creative fabric of its people, not only as a form of identity, but as a marketable product also. Sometimes, the most expensive products are the ones handcrafted and custom designed; for the simple fact that it is the idea and creativity put into its production that drives the value of the item.
Being cognisant of this, heavy investment in the creative sector could easily be seen as a plus for human development, and as a tool to lift citizens out of poverty. Especially in developing countries, creative sectors are often viewed by outsiders as easy areas for increasing human development. However, not understanding the workings of the creative sector, developing countries have caused its people to miss the bus on great developmental opportunities. Far less funds are spent developing people’s creative skill sets compared to economic investments and infrastructural development.
In terms of Guyana, where we are set to increase the country’s income through oil, investments in the creative sector could be a positive move as a low cost, people-based investment that will develop skills, create jobs and income, and make room for innovation. To make better sense of the creative economy, the Inter-American Development Bank (IDB) sought to help developing countries create policies for creativity and innovation. They described the creative sector as the ‘orange economy’ and highlighted various areas of everyday life where creativity provided the foundation for satisfying a particular need, whether it is good or service.

It was explained that the term orange economy is commonly used in Latin America and the Caribbean (LAC) to refer to what is also called the creative economy. First introduced in Buitrago and Duque (2013) to represent the particular set of activities based on creativity, the orange economy is becoming even trendier than innovation in the region. However, although attractive, the concept is still fuzzy. Is there any part of the economy that is not creative?
It could be that some products are routinely delivered without any major content of creativity at the production or distribution phases. But supplying new goods and services and improving existing ones, which adds value for consumers, involves a large amount of creativity. And this definition is not that far from what has been traditionally used to characterise innovation. The difference lies in the focus of the changes. On one hand, creativity is generally related to aesthetics. That is, the appearance of goods and services and the changes in the emotions that these products generate in consumers.
On the other hand, traditionally, innovation has been related to scientific and technological progress, and associated with changes in product functionality that can be directly linked to generating economic value. But if a good or service is aesthetically or emotionally desirable, socially and/or privately, this does not mean that it has no economic value or that it does not follow economic rules. On the contrary, its production process requires capital, labour, and knowledge that could have been used for other activities.
In other words, it is clearly part of the traditional economic problem. However, often the real contribution of creative activities to the aggregate economy is not recognised. Further, it is difficult to identify clearly what inputs are required and the impacts such activities generate. Characterising creative activity is not a trivial task, but this does not mean that it does not exist or that it is not generating value for producers and, in particular, consumers.

The orange or creative economy is considered a group of activities through which ideas are transformed into cultural and creative goods and services whose value is or could be protected by intellectual property rights (IPRs). Specifically, these commonalities include: (i) the recognition of creativity, arts, and culture as productive endeavours; (ii) the relationship with generating and exploiting IPRs, in particular copyright; and (iii) the direct role of these activities in the value chain that transforms ideas into products. Following this approach, the creative economy includes activities related to three main concepts: (i) traditional and artistic activities, (ii) the creative industry, and (iii) activities that provide creative support to traditional industries.
Traditional and artistic activities consist of efforts related to preserving and transmitting the material and immaterial cultural heritage of a society. This component of the creative economy includes activities such as literature, visual arts (e.g., ceramics, painting, and sculpture) and performing arts (e.g., theatre, dance, and opera).
Creative industry comprises business activities where the value of the final output is mainly due to its creative content, including cultural industry (activities recognised to be strongly related to culture, such as publishing, audiovisual, and phonographic), and functional creations (output is creative but not necessarily related with culture, such as video games, advertising, or fashion).
We have called the sum of traditional and artistic activities and cultural industry the cultural economy. Further, it is possible to identify activities of creative support, which are part of the value chains of other industries. In this case, the output of the creative activity is used as an intermediate input in the production process of a good or service that is not necessarily in itself creative. Typical examples are product design, packaging design, and marketing. Progressively, the creative economy has been recognised as an important driver of economic development (Potts and Morrison, 2009), directly contributing to the economy of a country in terms of value added, exports, employment, investment, and productivity growth.
Recent estimates show that creative and cultural industries generate revenues of US$2,250 billion and 29.5 million jobs worldwide, employing approximately one percent of the world’s active population (Ernst & Young, 2015) and presenting high innovation and productivity rates (Bakhshi and McVittie, 2009; Müller, Rammer, and Trüby, 2009).
The economic contribution of creative activities is both direct and indirect, both within and outside creative industries. In fact, creative outputs are closely related to the innovation dynamics of a society as a whole and often their benefits spill over to other sectors.
Innovation is described as a key determinant of long-term economic development. Empirical evidence shows that about half of the variation in income levels and growth rates among countries is due to differences in total factor productivity. In its essence, innovation is the transformation of new ideas into economic and social solutions (Navarro, Benavente, and Crespi, 2016; Crespi, Fernández-Arias, and Stein, 2014). Innovation can be a new way of doing things more efficiently (a more effective use of resources), a new or significantly improved product (good or service) or process, a new marketing practice, or a new organisational method in business practices, workplace organisation, or external relations (OECD, 2005).
Traditionally, this definition has been interpreted with a focus on changes in functionality and with an emphasis on technical improvements. However, there is increasing consensus that a broader scope needs to be considered in defining innovation that includes transformations that do not necessarily improve the objective functionality of a good or service, but modify its aesthetic and appeal. In other words, the transformation changes how people perceive the product or service. This has been defined as soft innovation (Stoneman, 2010).
The link between the creative economy and innovation is complex and goes beyond soft innovation. The creative industry contributes to a society’s innovation performance by increasing demand for state-of-the-art technology. In particular, cutting edge, tailor-made information and communication technologies (ICTs) developed by creative firms could influence the overall market, promoting new technology diffusion in other sectors of the economy. Creative activities that produce intellectual property are also an important source of external knowledge and ideas that enable other innovation activities in traditional sectors.

 

 

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