Creative Spillovers: Do the Creative Industries benefit firms in the wider economy?

This report presents the results of new empirical work to estimate the impact of the creative industries (CIs) on wider firms’ innovation and activity. The findings add to the growing body of evidence that there are knowledge spillovers from the CIs that have a beneficial impact on the innovation of firms in the wider economy.

The creative industries are a force for innovation in the UK economy. Firms in the CIs are considerably more likely to engage in innovation-generating activities and to have introduced product or process innovations than firms operating in other service sectors.1 In addition to these measurable outputs, a significant amount of innovation in the creative industries is believed to be generated through day-to- day activities, rather than as the result of specific investments.

Anecdotal evidence supports the idea that the CIs generate knowledge ‘spillover’ benefits, i.e. that new ideas, innovations or processes created by creative industry firms are picked up by firms in other industries, improving those wider firms’ performance at little or no cost. The existence of such spillovers would imply that the knowledge and innovation generated by CIs is under-valued by the creative businesses themselves. This is important for policymakers, as it implies that creative innovation may be under-produced if creative businesses are left to their own devices.

But solid quantitative evidence of knowledge spillovers from the CIs is still sparse. The main exception is Bakhshi and McVittie (2009), which examined how the innovation of firms in the wider economy is associated with how much they buy from or sell to the creative industries.2 They found that firms that spent more on creative products were significantly more likely to produce product innovations, supporting the argument that spillovers from the CIs exist.

This report builds on that previous research to estimate the impact of the creative industries on wider firms’ innovation using the most recent data available. We also investigate the mechanisms by which knowledge spillovers occur, and explore whether there is any local dimension to spillovers, given growing interest in creative clusters. Finally, we use additional data to examine whether the CIs have any discernible impact on wider firms’ output.

Read full report here


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