Getting Ready for 2021: Capital Creation in the Creative Economy

Leona Chandra Kruse and Katharina Drechsler (University of Liechtenstein)

Why creative economy?

As the saying goes, where oil was the primary fuel of the 20th century economy, creativity is the fuel of the 21st century. This century has also seen rapid technological progress and we are still experiencing the fourth industrial revolution (also known as the industry 4.0). Digital technologies have been penetrating into our lives in many ways, bringing about both favorable and unfavorable changes. The coronavirus crisis amplifies this phenomenon. Many of us find ourselves relying on digital technologies to cope with the isolation. We hope to flourish digitally and still be relevant in the new normality–relevant, as in being irreplaceable by sophisticated technologies.

But the crisis also forces us to innovate. It encourages us to experiment with new possibilities and create new opportunities. Above all, we are called to use our creative imagination. The United Nations has declared 2021 as the international year of creative economy for sustainable development. Can we call this a fortunate coincidence? Your answer is most probably yes. So, let us discuss how capital creation works in the creative economy. Before getting to that, we explain what is meant by creative economy.

 

From creative industries to a creative economy

The idea of a creative economy was popularized by John Howkins in his book “The creative economy: How people make money from ideas”. Originally published in 2001, the book has been updated twice ever since. The creative economy places emphasis on human creativity, the power that transforms individual talents, skills, and visions into valuable outputs. It is an economic system that describes how value creation is shaped by creative imagination, a powerful resource that goes beyond the traditional land, labor, and economic capital triad.

For the UN , the creative economy is the sum of all the parts of the creative industries, a term to classify industrial sectors that (re)produce, promote, distribute or commercialize goods, services, and activities which are drawn from cultural, artistic or heritage origins. While capturing the importance of creativity, this classification could be misleading. Experts at NESTA, an innovation foundation, found that many occupations in creative industries are not necessarily creative, whereas we can find many creative occupations in non-creative industries. In other words, value creation through creativity is not limited to some industrial sectors, but it is demonstrated across them. We invite you to embrace a cross-sectoral and systemic approach when thinking about the creative economy.

 

Capital creation in the creative economy

In the creative economy, organizations and individual creative entrepreneurs (also known as artpreneurs) transform talents, skills, and creative imagination into something valuable. In the language we use at LC DCC, these actors valorize human capital by transforming it into various types of other capital, so that they can in turn be transformed into economic capital for future investments. But economic capital is only one example of the ultimate target capital–the value in value creation. Artpreneurs are usually resolute when it comes to their symbolic capital, the aesthetic experience that people get when interacting with their artworks and other creative outcomes. You can read more about each type of capital in the blog on Capital Creation and Organizational Innovation.

 

There is no one-size-fits-all mechanism for creating and transforming capitals in the creative economy. But we can show you how useful unboxing the elements is in the following two scenarios, in order to reveal what kind of support is of the highest priority to each creative economy actor. A picture is worth a thousand words. You can see the figures that portray both scenarios before we describe them.

Figure 1: Aspiring artpreneurs scenario [i]

 

The first scenario is based on our personal conversation with two aspiring artpreneurs. Although aspiring artpreneurs have their unique paths, we can conjecture some similar trajectories in their capital transformation mechanisms. Examples of artpreneurs include game designers, visual designers, art curators, and digital artists. At the beginning of their journey, they rely on their talents, skills, and creative imagination, as well as the social support from their existing network and potential collaborators. They sometimes draw inspiration from nature or use some of its elements as their raw materials. They transform this initial capital mix into a more valuable capital mix. They generate creative routines, shareable knowledge, and co-creation facilitation, strengthen their social ties, and enlarge their network that helps to promote their works. This transformation takes place through their creative works. As they can see their intermediate results, their confidence is enhanced, and so is their general satisfaction and wellbeing. Their creative outcomes have both monetary and aesthetic value, both of which is then reinvested in another creative venture, in another capital transformation mechanism (the feedback arrow in Figure 1).

Figure 2: Well-seasoned scenario

Successful artpreneurs are those who generate a more valuable mix of capital in their creative ventures–the bigger circle as depicted in Figure 2. Of course, they also embrace and learn from failures in the spirit of entrepreneurship. While people usually associate success with monetary wealth, we suggest a broader understanding. In the creative economy, success means being disposed of a good mix of capital. For artpreneurs, it could mean being widely recognized for the aesthetic value of their works, having a large fan base, enjoying financial stability, contributing back to nature and to the community of aspiring artpreneurs, and above all, improving their skills, creative imagination, and wellbeing.

We have shown how capital creation and transformation works in the creative economy. We have also illustrated why understanding the interplay among different types of capital is essential in order to make the most out of the creative economy. Knowing how different actors in the creative economy increase the productivity of their capital mix can inform policy makers and support organizations on how to best support them. This blog is just the first step toward our journey into the creative economy.

[i] Materials for Figure 1 and the capital creation discourse in this blog are adopted from Watson, R. T. (2019). Capital, Systems and Objects: The Foundation and Future of Organizations. Athens, GA: eGreen Press.