Globalization and the Economics of Creativity and Innovation

Fall2011

Doctoral Seminar

HEC Montréal, JointPh.D. Program

Globalization and the Economics of Creativity and Innovation.

Patrick Cohendet, Ph.D.

Professor, Service de l’enseignement des affaires internationales

Office: 3.226;

E-mail:

Tel: (514) 340-6909

COURSE OUTLINE:

In 2008, an important report of the UNO asserts that the XXIth century will be marked by the central role of the interface between creativity, culture and economy, while underlining that the creativity can be found in all societies and all countries, rich or poor, technologically developed or not. Understanding this major evolution means deciphering «the rationale behind the emerging concept of the 'creative economy'» (United Nations, 2008, pp.11-12).

During the last years, many reports were produced by the other international organizations (OECD), by the increasing number of country (Great Britain, Italy, New Zealand, Australia), or of regions (Ontario, Euskadi), drawing the attention on the emergence of the creative economy and on its major impact for the economic development and the regime of growth. The economic crisis of the end of decade was only sharpening this attention, as far as the development of the creative economy is considered by many as one of the major perspectives of ending the crisis (Cunningham, 2006; Hamel, 2008).

These reports place the creative activities in the interface of the economy, the technology, the culture and society, by insisting on their potential of production of growth, of wealth and creation of jobs through the creation, the circulation and the combination of intellectual capital. The term "creative Economy" appeared in 2001 in John Howkins's book (The creative Economy) on the relation between the creativity and the economy. According to this author, the novelty does not lie in the creativity or the economy in itself but in the nature and the intensity of the links which unite them. Besides, the increasing importance of the creative economy would be due to the conjunction and to the interpenetration of two factors, the globalization and the connectivity, which upset the models of production, the modes of consumption and distribution, and invite to reinterpret in depth the links between culture, technology and economy (Castells, on 1996).

As regards the heart of the new economy, the reflection gradually appeared from a questioning on the increase in importance of the so-called "creative" industries. These creative industries depart from traditional models of industry, but they do not limit themselves to the sub-group of "cultural" industries. Institutional researches led in Great Britain at the end of the 90s revealed the economic weight of specific industries among which the business logics and the dynamics of production were widely based on the processes of creation and conception: the creative industries (CITF, 1998). They cover about fifteen sectors (software, architecture, videogames, performing arts, advertising, etc.) which " have their origin in the creativity, the skills and the talent and which have a potential of wealth and the job creation thanks to the generation and the exploitation of the intellectual property "(DCMS 2001, p. 4). As demonstrated by Howkins, the creative industries begin to weigh very heavy at the world level. For the UNO, since the beginning of the 90s, their growth rate is the quadruple of that of manufacturing industries.

If the attention concerns to the creative industries today, the creative economy does not limit itself to this type of activities. If many analysts (Nuala Beck, on 1992; Kevin Kelly, on 1999, Daniel Bell, on 1999, Reich, on 2001; Tyler, on 2002), underline the fact that the engines of the " new economy " are widely based on the control of high technologies, and in particular technologies of information and the communication, these last ones also allow the acceleration of the evolution of traditional industries by facilitating the circulation and the combination of knowledge (Castells, 1996). Beyond the only creative industries, the creative economy offers the opportunity to rethink in depth the complex interactions between the economic, cultural, technological and social aspects which guide the dynamics of the economy, by promoting at the same time the social integration, the cultural diversity and the human development. Furthermore, all the reports, in particular that of the UNO, underline that such an opportunity is not "reserved" only in the developed countries: supported by relevant public policies, the creative economy can generate new interactions at micro as well as at macro levels of any country or zone of the world including the less developed, and stimulate new avenues of creation of wealth.

The courseis declined on four themes. The first two themes describe and analyze the categories and the concepts. The two following ones apply them to two main categories of active units of creativity (firms and territories) and consider the implications of these evolutions on globalization. A transverse basic idea to the whole project: the role of "communities" in the emergence of the creative forms.

The first theme is the most central: it is a global theoretical reflection on the notion of creative economy, by considering the creative industries as a new paradigm. The emergence of the creative economy offers a unique opportunity to rethink the economic dynamics by integrating into the same analytical vision science, technology, business and art/culture. This theoretical stake indeed answers an empirical need arisen from the evolutions of the demand for economic goods (requirement of multiple characteristics: technical, aesthetic, symbolic, ethical, ecological, etc.) and possibilities opened by the wide and global diffusion of the ICT (Information and communication technologies).The new model of innovation which appeared with ICT (open source) does not doubtless limit itself to this sector and to its privileged fields of application. It is thus necessary to conceptualize otherwise the process of innovation (once restricted to the only interactions between science, technology and industry) and to integrate in particular the complex connections between science, arts, culture, business, environment and industry which open considerable potentialities of new “open” innovations. Certain major concepts of the economy of the innovation certainly are to be revisited, as the distinction between radical innovations and incremental innovations, or the neo-Schumpeterian analyzes of the relation between invention and innovation in long-term cycles.

The second theme concerns the dynamics of innovation. It is a question of understanding how the creative process emerges, develops and diffuses from the creative individual to the market. Such a perspective raises the issue of the debate on the talent of the individual creator (the act of creation) versus the social process of construction of the creativity which calls for an in-depth analysis of the conditions of the creation, of its implementation and its final results. Therefore, it is necessary to analyze and to theorize about the interaction between: a) individual creativity; b) collective creativity carried by various types of social groups (either formal as teams, semi-formal as groups of experts, or widely informal as communities of practice, epistemic communities, etc.); c) organizational creativity carried by firms; d) distributed creativity carried by diverse types of territorialized or virtual / distant networks (cf. fourth theme)

It is also necessary to approach the role of transverse categories as communities or constructed intermediates of the creation that are the standards, the “codebooks”in Paul David's sense, the prototypes, scenarios, etc. The question of the new regime of intellectual property (IPR) evoked in the first theme must be taken back here, with the issue of the balance between IPR viewed as tools of exclusion and IPR viewed as tools of sharing knowledge. It is clear that this theme of research leads to break or to rethink the disciplinary borders. For example, the classical analytical distinction between the psychological field of creation(which would be the one of the invention/discovery) and the economic field (how to manage the phases of industrial implementation and the distribution of the novelty) does not hold any more when we consider the collective character of the creativity and the importance of the social interactions of the individual. What all the recent contributions of the economists suggests it is to understand the process of creation as involving simultaneously creative individuals, communities and institutions, but to varying degrees according to the phases of the process.

The third theme concerns "the theory" of the creative firm. The issue at stake is to conceive a theoretical frame which distinguishes it from the traditional firm. In the knowledge based economy, the activities of creation are going to occupy a ceaselessly increasing place in the strategies of innovation of companies. This inevitable phenomenon opens fundamentally new horizons as well in the field of the economy as that of the management, and raises in particular strategic issues in terms of acquisition and sharing of knowledge, and of the development of the individual, collective and organizational creative capacities. The development of the creative economy supposes to wonder about the role and the functioning of firms seen as the central processing units of any economic system, but the challenges are particularly many for companies in the new context which tends to weaken the traditional meaning of the limits of the firm and to question the classic distinctions between process of exploration and exploitation. The works on the recent key experiences (such as Linux, Debian, Procter&Gamble, etc.) show that we can approach the question of the creativity in a very rich way through the concept of open model of innovation.

The fourth theme raises the question of the creative territories. The development of the creative economy supposes to re-conceive the question of the innovative territories beyond the industrial clusters and the other constructed innovative forms of agglomeration on the performance of the spatial relations between science and industry. This subject took recently a specific importance and a particularly polemical dimension with the notion of " creative cities " often associated with the work of Richard Florida, but also worked in depth by an increasing number of academics (Scott, 2000, 2005, 2008; Scott and Garofoli, 2007; Grabher, 2001; Pratt, 2009, 2010, etc.). As a matter of fact, a lot of at once theoretical and empirical literature was dedicated to concepts as that of "learning territory ", but, on this field also, can we reduce the creation to the mere diffusion of new information? Are the approaches in terms of "talents" and "creative class" operational? The cultural approaches of territories must be certainly completed by the description of communities and "places" which are not defined simply geographically. The creative territories constitute a central object of research, but they join the wider problem of the territorialisation (see Barnes and alii, 2003) which it is necessary to be able to report, in the context of the globalized economy.

STUDENTS EVALUATION

A student’s learning will be assessed in several ways, according to his/her understandingof central issues and the fulfillment of the above objectives. Assessments will bear thefollowing respective weights:

▪ Class participation 15%

▪ Article discussion and written summaries 30%

▪ Integration of assigned readings 10%

▪ Term paper 45%

‐ Proposal 10%

‐ Manuscript 25%

‐ Class presentation 10%

COURSE MATERIALS:

The following are relevant works for each session and topic. Their common thread isbriefly underlined, and required readings are marked “main references”. This list is of course not anexhaustive one.

Week 1: From the Knowledge-based Economy to the Creative Economy:some main evolutions of the global industrial system.

The objective of this first session is to characterize the recent evolution of the economic system by showing that the passage in a creative economy can be interpreted as a new regime of growth which prolongs the period of Knowledge- based Economy (identified at the beginning of the 90s by the economists of the OECD, such as Mr Abramowitz or P.David). At the origin of the regime of the Knowledge-based Economy, the accumulation of the intangible capital (and thus the accumulation of knowledge) would have substituted itself for the accumulation of the physical capital as main engine of the growth. Models of endogenous growth (based on the accumulation of knowledge) correspond well to this period marked by the development of "interactive and closed" models of innovation (concentrated on what is produced in terms of knowledge inside a given firm, even if the creative spark can be introduced outside of this firm, as von Hippel has shown).The period of the creative economy can be interpreted as the logical result of the evolution of the Knowledge based Economy, where the knowledge reveals gradually one of its major properties: it is not so much indeed the accumulation of the knowledge that creates economic value, but the capacity to quickly access the knowledge which we need to act, produce, and create. The new regime of growth could so be interpreted as a regime based on the dynamics of variety (not simply on a dynamics of accumulation).

Main references

1. Howkins, J. (2001) The Creative Economy: How People Make Money from Ideas. New York : Penguin Books
2. United Nations/ UNCTAD (2008). Creative Economy Report. The Challenge of Assessing the Creative Economy: Towards Informed Policy-Making. Genève: UNCTAD. (
3. Romer, P. M. (2010). “What Parts of Globalization Matter for Catch-Up Growth?”,American Economic Review, 100(2): 94-98.
4. Paul Krugman, The Return of Depression Economics and the Crisis of 2008 (December 2008) ISBN 0-393-07101-4
5. Ruth TowseTowards an economics of creativity? , Erasmus University Rotterdam, Paper presented at the Vienna Workshop on Creative Industries, 20 March 2004
6. S. Becker with Erik Hornung and LudgerWoessmann, Education and Catch-up in the industrial Revolution, forthcoming 2011 at the American Economic Journal: Macroeconomics (AEJMacro)

Additional references.

1. d’Aspremont Cl., R. Dos Santos Ferreira and L.-A. Gérard-Varet, "Strategic R&D investment, competitive toughness and growth", International Journal of Economic Theory, 6, 273-295, 2010.
2. Foray, D. (2000) L'économie de la connaissance. Paris : La DécouverteRepères.
3. Amin A., Cohendet P. (2004), Architectures of knowledge: firms, capabilities and communities, Oxford University Press, Oxford, UK
4. Galbraith, J. K. (1973). Economics and the Public Purpose. Boston : Houghton Mifflin.
5. Alchian,A. (1950): “Uncertainty, evolution and economic theory”, Journal of Political Economy, vol.58, pp. 211-221
6. Michael G. Heller, Capitalism, Institutions, and Economic Development. New York: Routledge, 2009, ISBN: 978-0-415-48259-2.
7. Richard N. Langlois, The Dynamics of Industrial Capitalism: Schumpeter, Chandler, and the New Economy. The Graz Schumpeter Lectures 2004. London: Routledge, 2007.
8. Boulding, K. E. (1978). Ecodynamics: A new theory of societal evolution. Beverly Hills, California : Sage Publications
9. Beck, N; (1992). Shifting Gears: Thriving in the New Economy. Toronto :Harpercollins Canada.
10. Bell, D. (1999). The Coming of Post-industrial Society. New York: Basic Books.
11. Castells, M. (1996). The Rise of the Network Society, The Information Age: Economy, Society and Culture Vol. I. Cambridge, MA. et Oxford, UK : Blackwell Publishing.
12. Castells, M. (1997). The Power of Identity, The Information Age: Economy, Society and Culture Vol. II. Cambridge, MA. et Oxford, UK : Blackwell Publishing.
13. Gorz, A. (2003). L'immatériel: connaissance, valeur et capital. Paris : Galilée.
14. Kelly, K; (1999). New Rules for the New Economy. New York : Penguin Books.
15. Sen, A. (1993). Markets and Freedoms: Achievements and Limitations of the Market Mechanism in Promoting Individual Freedoms. Oxford Economic Papers, vol. 45, n°4, pp. 519-541.

Week 2: The characteristics of the creative economy and their consequences on the global economy.

In the new glance which embraces today all the human sciences,and particularly the economy, on creativity, this one is no more connected to the vision of a production of new knowledge which shifts the border of the state of the art in a discipline given (a vision which was situated in paradigm of the accumulation). Creativity is nowadays connected to the production of new knowledge which "associates", binds, and connects domains of knowledge which had never been bound together in this way. The various texts of this session try hard to characterize the notion of creativity associated essentially with a new way of conceiving the sources of innovation in society.

Main references.

1. David W. Galenson, Understanding Creativity, NBER Working Paper No. 16024, May 2010
2. Åke E. Andersson, Economics of Creativity , chapter 5 of the book New Directions in Regional Economic Development , Advances in Spatial Science, 2009, 79-95,Springer verlag
3. R. Florida, «The Great Reset», Randomhouseeds, 2010.
4. Lessig, L. (2004). Free Culture: The Nature and Future of Creativity. New York : PenguinPress.
5. von Hippel, E. Democratizing Innovation. The MIT Press: 2006.
6. H. Tsoukas, A Dialogical Approach to the Creation of New Knowledge in Organizations, Organization Science, November1,2009; 20(6): 941 - 957.

Additional references.

1. R.Baumol, W. J. et Bowen, W. G. (1966). Performing arts, the economic dilemma : A study of problems common to theater, opera, music, and dance. Millwood, New York : Kraus Reprint Co.
2. Benhamou, F. (2008). Les dérèglements de l’exception culturelle. Paris : Seuil.
3. Ginsburgh, V. A. et Throsby, C. D. (2006). Handbook of the Economics of Art and Culture, Vol. 1. Amsterdam: Elsevier.
4. Cunningham, S. D. (2006). What price a creative economy? Platform Papers.
5. Throsby, C. D. (1994). The Production and Consumption of the Arts: A View of Cultural Economics. Journal of Economic Literature, vol. 32, n°1, pp. 1-29.
6. Heilbrun, J. et Gray, C. M. (2001). The Economics of Arts and Culture. New York : Cambridge University Press, 2ème édition.
7. Castells, M. (1998). End of Millennium, The Information Age: Economy, Society and Culture Vol. III. Cambridge, MA. et Oxford, UK : BlackwellPublishing
8. P.Cohendet, D. Grandadam, L. Simon“Economics and the ecology of creativity: Evidence from the popular music industry”, (2009), International Review of Applied Economics, vol23, n6, pp709 à 722

Week 3: Models of innovation and the creative economy: towards interactive models of open innovation.

In the context of a creative economy, the main authors advance the idea that it is not any more the only mechanism of the invention (situated in paradigm of the accumulation) that is generative of creativity, but diverse industrial arrangements in networks in an interactive model of open innovation. In particular, one of the main ideas would be that in the context of creative economy, the positive externalities (related to the production of knowledge) and the negative externalities (related to the environment) can be internalized "from the beginning", in the phase of conception of products or processes. Beyond the examination of the main models of innovation, this session will try hard to clarify the fundamental distinctions between innovation, invention and creation.