The standard approach to industrial economics starts with the industry’s basic conditions, then runs through the structure–conduct–performance paradigm of industrial organization, and finally considers government regulation and policy. Most creative industries segments have been studied in this way, for example in Albarran (2002) and Caves (2000). These approaches use standard economic analysis to explain the particular properties and characteristics of a specific industrial sector. The overview presented here is different again. It focuses on the creative industries and examines their economic effect, specifically their contribution to economic evolu -tion. This is an evolutionary systems approach to industrial analysis, where we seek to understand how a sector fits into a broader system of production, consumption, technology, trade and institutions. The evolutionary approach focuses on innovation, economic growth and endogenous transformation. So, rather than using economics to explain static or industrial-organization features of the creative industries, we are using an open systems view of the creative industries to explain dynamic ‘Schumpeterian’ features of the broader economy. The creative industries are drivers of economic transformation through their role in the origination of new ideas, in consumer adoption, and in facilitating the institutional embedding of new ideas into the economic order. This is not a novel idea, as economists have long understood that particular activities are drivers of economic growth and development, for example research and development, and also that particular sectors are instrumental to this process, for example high-technology sectors. What is new is the argument that cultural and creative sectors are also a key part of this process of economic evolution. We will review the case for that claim, and outline purported mechanisms. We will also consider why policy settings in the creative industries should be more in line with innovation and growth policy than with industry policy
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