Social network markets: a new definition of the creative industries

Abstract

We propose a new definition of the creative industries in terms of social network markets. The extant definition of the creative industries is based on an industrial classification that proceeds in terms of the creative nature of inputs and the intellectual property nature of outputs. We propose, instead, a new market-based definition in terms of the extent to which both demand and supply operate in complex social networks. We review and critique the standard creative industries definitions and explain why we believe a market-based social network definition offers analytic advance. We discuss some empirical, analytic and policy implications of this new definition.

This is a preview of subscription content, log in to check access.

Notes

  1. 1.

    See Howkins (2001), Hartley (2005), Cunningham (2006).

  2. 2.

    See, for example, Roodhouse (2001), Florida (2002), Garnham (2005), Hartley (2005: 26–31).

  3. 3.

    See Beinhocker (2006) and Foster (2006).

  4. 4.

    ‘Culture proceeds incrementally, building on whatever was available before, sometimes using a well-tried and established formula, other times innovating radically. No-one is sure what is going to “work”, the failure rate is high. … Culture creates its own markets and the pleasure of consumption is also the pleasure of possession because the consumer never faces the object of consumption as an isolated individual. We want some things few people have, but we also want things everyone has. Being in a market is a social activity.’ (Sassoon 2006: xvi).

  5. 5.

    See Howkins (2001), Cunningham (2006), Potts (2006), Potts and Cunningham (2008).

  6. 6.

    See White (1981) and Dopfer and Potts (2008a).

  7. 7.

    For the importance of moving beyond the ‘industry’ metaphor, see Hartley (2008b).

  8. 8.

    For example, Baumol and Bowen (1966), Throsby (1994), Heilbrun and Gray (2000).

  9. 9.

    This position is also advanced by Caves (2000), but in terms of information and transaction cost economics, as opposed to a conception of the market process.

  10. 10.

    See for example Castronova (2006), Chai et al. (2007), Potts et al. (2008).

  11. 11.

    Watts (1999), Earl and Potts (2004).

  12. 12.

    See Potts et al. (2008).

  13. 13.

    This explains why contemporary emergent producer-consumer integration (as in the neologisms: prosumer or produser) and the so-called pro-am revolution (Leadbeater and Miller 2004) is a feature of this process, along with the emergence of new organizations and markets.

  14. 14.

    cf. DCSM: ‘Those industries which have their origin in individual creativity, skill and talent and which have a potential for wealth and job creation through the generation and exploitation of intellectual property.’

  15. 15.

    A rule is defined here generically as an operationalized idea (Dopfer and Potts 2008a). Behaviours, organizations and technologies are all instances of rules. See also Nelson and Sampat (2001).

  16. 16.

    E.g., Strogatz (2001) or Barabasi (2002).

  17. 17.

    E.g., see the work of Paul Samuelson, J. K. Gailbraith, Michael Porter or Oliver Williamson. This is most clearly expressed in cultural economics through the work of Will Baumol.

  18. 18.

    See Shy (2001) on the economics of network industries.

  19. 19.

    In general equilibrium theory, everything is connected to everything else (Potts 2000), but in evolutionary theory structural sub-systems are defined that demarcate the complex order of the economic system (Simon 1962).

  20. 20.

    As the science studies scholars have explained, e.g., see the work of Philip Mirowski, Deirdre McCloskey, Steve Fuller, etc.

  21. 21.

    See also Swedberg (2006).

  22. 22.

    An obvious problem here is the term ‘industries’ itself, as what we are essentially arguing is that the creative industries is better defined in terms of social networks and markets. The term ‘creative economy’ is preferable.

  23. 23.

    On this point, see Foster and Potts (2006) and Dopfer and Potts (2008a).

  24. 24.

    Cf. Garnham (2005).

  25. 25.

    See cultural science: http://www.cultural-science.org/.

  26. 26.

    A network (or a graph) is formally defined as a set of vertices, or elements, with edges, or connections between them. Models of complex networks have been widely developed in sociology over the past three decades and have sought to model networks through several key dimensions including size (number of vertices), degree (average number of edges per vertex), centrality (measure of degree distribution), diameter (longest shortest path) clustering or transitivity (measure of triadic probability of vertices) and the existence of hubs (measure of preferential attachment of new edges differential degree vertices). An excellent overview of this general literature is Newman (2003) and of social networks in particular, see Vega-Redondo (2007). These methods have been greatly advanced in recent years with the application of computational techniques developed in statistical physics (Ormerod 2005). Models of social networks have been widely used in sociology to study the topology of social network interaction to estimate the connectivity of the social system (which is then applied for the study of e.g., the spread of sexually transmitted diseases, political opinions, fashions, etc.). Social network models have also been in economics (see Kirman (1993), Ormerod (1998), Potts (2000)) in the similar context of adoption/diffusion of new messages and technologies in order to explain how market (i.e., social) structure affects market dynamics (whether of prices or technological adoption).

  27. 27.

    Small world networks have the property of balancing high clustering with low diameter, see Watts (1999) and Strogatz (2001).

  28. 28.

    Scale-free networks with power-law degree distributions in which hubs occur at all scales, Albert and Barabasi (2000).

  29. 29.

    See De Vany (2004), Earl and Potts (2004), Chai et al. (2007).

  30. 30.

    This enables us to further develop work, such as by Benkler (2006), who recognises the centrality of networks to the new production-innovation-consumption synthesis, by bringing a network theory (as opposed to model/metaphor) in terms of social and economic systems.

  31. 31.

    This is in particular in relation to what Dopfer and Potts (2008a) call the phase of Meso 1, or origination.

  32. 32.

    Hesmondhalgh and Pratt (2005).

  33. 33.

    Note this last point implies a dynamic approach to welfare, which is consistent with the evolutionary approach to policy (see Pelikan and Wegner 2003).

  34. 34.

    Heilbrun (1991), Cowen (2002).

  35. 35.

    Interestingly, this would move the CIs from irrelevance to the forefront of innovation policy, when understood as a supervening set of industry, competition, cultural and education policy (Cunningham 2006).

  36. 36.

    This will be adaptive economic policy (Pelikan and Wegner 2003).

  37. 37.

    See Beinhocker (2006), Benkler (2006).

References

  1. Albert, R., & Barabasi, A. L. (2000). Topology of complex networks: Local events and universality. Physical Review Letters, 85, 5234.

    Article  Google Scholar 

  2. Arthur, W. B. (1989). Competing technologies increasing returns and lock-in by historical events. Economic Journal, 99, 116–131.

    Article  Google Scholar 

  3. Barabasi, A. L. (2002). Linked: The new science of networks. Cambridge, MA: Perseus.

    Google Scholar 

  4. Baumol, W., & Bowen, W. (1966). Performing arts: The economic dilemma. New York: Twentieth Century Fund.

    Google Scholar 

  5. Beck, J. (2007). The sale effect of word of mouth: A model for creative goods and estimation for novels. Journal of Cultural Economics, 31(1), 5–23.

    Article  Google Scholar 

  6. Beinhocker, E. (2006). The origin of wealth: Evolution, complexity and the radical remaking of economics. Boston: Harvard Business School Press.

    Google Scholar 

  7. Benkler, Y. (2006). The wealth of networks. New Haven: Yale University Press.

    Google Scholar 

  8. Bentley, R. A., Lipo, C., Herzog, H., & Hahn, M. (2007). Regular rates of popular culture change reflect random copying. Evolution and Human Behavior, 28, 151–158.

    Article  Google Scholar 

  9. Bentley, R. A., & Ormerod, P. (2008). Selection and fashion in consumer choice: Bagging the Scottish Munros. Paper presented at the Scottish Economic Society Conference, April 2008.

  10. Castronova, E. (2006). Synthetic worlds: The business and culture of online games. Chicago: University of Chicago Press.

    Google Scholar 

  11. Caves, R. (2000). Creative industries: Contracts between art and commerce. Harvard: Harvard University Press.

    Google Scholar 

  12. Chai A., Earl, P. E., & Potts, J. (2007). Fashion, growth and welfare: An evolutionary approach. In M. Bianchi (Ed.), Advances in Austrian economics. Elsevier.

  13. Cowen, T. (2002). Creative destruction. Princeton: Princeton University Press.

    Google Scholar 

  14. Cunningham, S. (2006). What price a creative economy? Platform papers #9. Sydney: Currency House.

  15. Currid, E. (2007). The Warhol economy: How fashion, art, and music drive New York City. Princeton: Princeton University Press.

    Google Scholar 

  16. DCMS (Department of Culture, Media, Sport, UK Government). (1998). Creative industries mapping document. London: HMSO.

    Google Scholar 

  17. De Vany, A. (2004). Hollywood economics. London: Routledge.

    Google Scholar 

  18. De Vany, A., & Walls, W. (1996). Bose-Einstein dynamics and adaptive contracting in the motion picture industry. The Economic Journal, 106(439), 1493–1514.

    Article  Google Scholar 

  19. Dopfer, K., & Potts, J. (2008a). The general theory of economic evolution. London: Routledge.

    Google Scholar 

  20. Dopfer, K., & Potts J. (2008b). Evolutionary institutional economics. Mimeo, School of Economics, University of Queensland.

  21. Earl, P. E., & Potts, J. (2004). The market for preferences. Cambridge Journal of Economics, 28, 619–633.

    Article  Google Scholar 

  22. Florida, R. (2002). The rise of the creative class. New York: Basic Books.

    Google Scholar 

  23. Foster, J. (2006). From simplistic to complex systems in economics. Cambridge Journal of Economics, 29, 873–892.

    Article  Google Scholar 

  24. Foster, J., & Potts, J. (2006). Complexity, networks and the importance of demand and consumption in economic evolution. In M. McKelvey & M. Holman (Eds.), Flexibility and stability in economic transformation. Oxford: Oxford University Press.

    Google Scholar 

  25. Foster, J., & Potts, J. On the use of simulation and econometrics to empirically analyze the rule-structure of an evolving economic system. Schumpeter Society 2006 Conference Volume (forthcoming).

  26. Garnham, N. (1987). Concepts of culture: Public policy and the culture industries. Cultural Studies, 1(1), 23–38.

    Article  Google Scholar 

  27. Garnham, N. (2005). From cultural to creative industries: An analysis of the implications of the “creative industries” approach to arts and media policy making in the United Kingdom. International Journal of Cultural Policy, 11, 15–29.

    Article  Google Scholar 

  28. Granovetter, M. (1973). The strength of weak ties. American Journal of Sociology, 78(6), 1360–1380.

    Article  Google Scholar 

  29. Hahn, M., & Bentley, R. A. (2003). Drift as a mechanism for cultural change: An example from baby names. Proceedings of the Royal Society B, 270, S1–S4.

    Google Scholar 

  30. Hartley, J. (1996). Popular reality: Journalism, modernity, popular culture. London: Arnold.

    Google Scholar 

  31. Hartley, J. (Ed.). (2005). Creative industries. Oxford: Blackwell.

    Google Scholar 

  32. Hartley, J. (2008a). Television truths: Forms of knowledge in popular culture. Oxford: Blackwell.

    Google Scholar 

  33. Hartley, J. (2008b). From the consciousness industry to creative industries: Consumer-created content, social network markets and the growth of knowledge. In J. Holt, & A. Perren (Eds.), Media industries: History, theory and methods. Oxford: Blackwell.

  34. Heilbrun, J. (1991). Innovation in arts, innovation in technology and the future of the high arts. Journal of Cultural Economics, 17, 89–98.

    Article  Google Scholar 

  35. Heilbrun, J., & Gray, C. (2000). The economics of art and culture. Cambridge: Cambridge University Press.

    Google Scholar 

  36. Hesmondhalgh, D., & Pratt, A. (2005). Cultural industries and cultural policy. International Journal of Cultural Policy, 11, 1–13.

    Article  Google Scholar 

  37. Higgs, P., Cunningham, S., & Bakhshi, H. (2008). Beyond creative industries: Mapping the creative economy in the UK. London: NESTA.

    Google Scholar 

  38. Howkins, J. (2001). The creative economy. London: Penguin.

    Google Scholar 

  39. Jacobs, J. (1969). The economy of cities. London: Penguin Books.

    Google Scholar 

  40. Kauffman, S. (1993). The origins of order: Self-organization and selection in evolution. Oxford: Oxford University Press.

    Google Scholar 

  41. Kirman, A. (1993). Ants, rationality and recruitment. Quarterly Journal of Economics, 108, 137–156.

    Article  Google Scholar 

  42. Kretschmer, M., Klimis, G., & Choi, C. (1999). Increasing returns and social contagion in cultural industries. British Journal of Management, 10(1), 61–72.

    Article  Google Scholar 

  43. Leadbeater, C., & Miller, T. (2004). The Pro-Am revolution: How enthusiasts are changing our economy and society. London: Demos.

    Google Scholar 

  44. Lee, R. (2007). Cultural studies, complexity studies and the transformation of the structures of knowledge. International Journal of Cultural Studies, 10(1), 11–20.

    Article  Google Scholar 

  45. Metcalfe, J. S. (1998). Evolutionary economics and creative destruction. London: Routledge.

    Google Scholar 

  46. Nelson, R., & Sampat, B. (2001). Making sense of institutions as a factor shaping economic performance. Journal of Economic Behaviour and Organization, 44, 31–54.

    Article  Google Scholar 

  47. Newman, M. E. (2003). The structure and function of complex networks. SIAM Review, 45, 167–256.

    Article  Google Scholar 

  48. Ormerod, P. (1998). Butterfly economics. London: Faber & Faber.

  49. Ormerod, P. (2005). Why most things fail: Evolution, extinction and economics. London: Faber & Faber.

  50. Ormerod, P. (2007). Extracting deep knowledge from limited information on evolved social networks. Physica A, 378(1), 48–52.

    Article  Google Scholar 

  51. Ormerod, P., & Roach, A. (2004). The medieval inquisition: Scale-free networks and the suppression of heresy. Physica A, 339, 645–652.

    Article  Google Scholar 

  52. Pelikan, P., & Wegner, G. (Eds.). (2003). The evolutionary analysis of economic policy. Cheltenham: Edward Elgar.

    Google Scholar 

  53. Postrel, V. (2005). The substance of style. New York: HarperCollins.

    Google Scholar 

  54. Potts, J. (2000). The new evolutionary microeconomics: Complexity, competence and adaptive behaviour. Cheltenham: Edward Elgar.

    Google Scholar 

  55. Potts, J. (2006). How creative are the super-rich? Agenda, 13(4), 139–150.

    Google Scholar 

  56. Potts, J. (2007a). Why the creative industries matter to economic evolution. Paper presented at STOREP workshop on innovation and complexity, Pollenzo, Italy, 3rd June.

  57. Potts, J. (2007b). Art and innovation: An evolutionary view of the creative industries. UNESCO Observatory e-Journal, 1(1).

  58. Potts, J. (2008). Creative industries and innovation policy. CCi Working Paper, QUT.

  59. Potts, J., & Cunningham, S. (2008). Four models of the creative industries. International Journal of Cultural Policy, 14(3) (forthcoming).

  60. Potts J., Banks J., Burgess J., Cobcroft R., Cunningham S., Hartley J., & Montomery L. (2008). Consumer co-creation in digital media and the dynamics of situated creativity. CCi Working Paper, QUT.

  61. QUT, Creative Industries Research and Applications Center, and Cutler & Co. (2003). Research and innovation systems in the production of digital content. http://www.cultureandrecreation.gov.au/cics/.

  62. Roodhouse, S. (2001). Have the cultural industries a role to play in regional regeneration and a nation’s wealth? Proceedings AIMAC, QUT.

  63. Sassoon, D. (2006). The culture of the Europeans from 1800 to the present. London: Harper Collins.

    Google Scholar 

  64. Schelling, T. (1973). Hockey helmets, concealed weapons, and daylight saving: A study of binary choices with externalities. Journal of Conflict Resolution, 17(3), 381–428.

    Article  Google Scholar 

  65. Shy, O. (2001). The economics of network industries. Cambridge: Cambridge University Press.

    Google Scholar 

  66. Simon, H. (1962). The architecture of complexity. Proceedings of the American Philosophical Society, 106, 476–482.

  67. Strogatz, S. (2001). Exploring complex networks. Nature, 410, 268–276.

    Article  Google Scholar 

  68. Surowiecki, J. (2004). The wisdom of crowds: Why the many are smarter than the few and how collective wisdom shapes business, economies, societies and nations. NY: Random House.

    Google Scholar 

  69. Swedberg, R. (2006). The cultural entrepreneur and the creative industries: Beginning in Vienna. Journal of Cultural Economics, 30(2), 243–261.

    Article  Google Scholar 

  70. Throsby, D. (1994). The production and consumption of the arts. Journal of Economic Literature, 32, 1–29.

    Google Scholar 

  71. Throsby, D. (2001). Economics and culture. Cambridge: Cambridge University Press.

    Google Scholar 

  72. Vega-Redondo, F. (2007). Complex social networks. Cambridge: Cambridge University Press.

    Google Scholar 

  73. Watts, D. (1999). Small worlds. Princeton: Princeton University Press.

    Google Scholar 

  74. White, H. (1981). Where do markets come from? American Journal of Sociology, 87(3), 517–547.

    Article  Google Scholar 

Download references

Acknowledgments

Authors Potts, Cunningham and Hartley acknowledge the support of the Australian Research Council. This research was conducted at the ARC Centre of Excellence for Creative Industries and Innovation (project number CE0561908). John Hartley is the recipient of an ARC Federation Fellowship (project number FF0561981). Special thanks also to Bridget Rosewell and Kate Morrison for useful comments on earlier drafts, and to the insightful comments of referees, which have improved this article considerably. All remaining errors are of course due to global warming.

Author information

Affiliations

Authors

Corresponding author

Correspondence to Jason Potts.

Rights and permissions

Reprints and Permissions

About this article

Cite this article

Potts, J., Cunningham, S., Hartley, J. et al. Social network markets: a new definition of the creative industries. J Cult Econ 32, 167–185 (2008). https://doi.org/10.1007/s10824-008-9066-y

Download citation

Keywords

  • Social networks
  • Creative industries
  • Innovation systems