| The plethora of research on Creative industries speaks to the importance of this sector of the knowledge-based economy.Creative industries worldwide have witnessed rapid growth in the past decade and this has prompted more interest in this sector.Research on innovation in creative industries on the other hand has been rather limited,although several studies have indicated useful approaches to the management and organization of innovation relevant to the creative industries,however empirical studies in this respect are still far from comprehensive,hence prompting this empirical research on the impact of innovation on productivity in Creative Industries with a focal point on China Online Game Industry.“Creative industries are those activities,which have their origin in individual creativity,skill and talent,and have the potential for wealth creation through the generation and exploitation of intellectual property”(DCMS,1998).Although creativity is not an absolute distinguishing characteristic of creative industries,it is however a core concept of such industries.It is noteworthy that the dynamic nature of the creative industries is heavily reliant on constant innovation.The terms innovation and creativity are intertwined but not interchangeable,hence they both relate to the same core concept of new creations and originality.Innovation is accepted as the prerequisite for change(technological),ergo it is the foundation of long-term economic growth(Edquist 1997:1/Freeman 1997:316/Fischer 2001:200).This research work to a large extent also constitutes an empirical exploration into the composition of creative industries.In as much as it dwells on the empirical analysis of the innovation-productivity link,it also provides a discussion on the trans historical progressions of the subject matter,providing perspectives on the origins,political and economic dimensions of creative industries,as well as subjective constructions that shape the intricate set of practices and discourses that make-up the creative industries.To accomplish this task,this research work explores policies,plans,econometric models and regulations that have been designed and implemented to facilitate the transformation of cultural activities into economic activities that have commercial value.This research work not only delves deep into analyzing the nature of various sources of knowledge and concepts that serve as inputs into the creative industries,but also analyses the relationships that define them in the context of the Chinese online game industry.The rather complex relationship that exists between innovation and creative industries(service industry)is a significant area that this research work devotes effort to analyze.The role of innovation in creative industries and the role of the innovation process as a service activity have yet to be fully explored and understood.Literature in this area of research is quite limited.William J.Baumol in his foreword in <The Handbook of Innovation and Services> echoed a similar train of thoughts by stating: “Microeconomics is plagued by two major gaps: the absence of appropriately full treatment of either the services or of entrepreneurs.In each case,the evident importance of the subject is inversely proportionate to the space it is assigned in the literature”.He goes further to state,“ the entrepreneur,as a vital component of the process of innovation and growth,is often listed as a fourth ‘factor of production’ and having once been noticed by name,is often not even mentioned again in the discussion that ensues”.Extant literature tends to have a lopsided perspective,leaning more towards the manufacturing industry,this phenomenon is commonplace,an instance is the innovation metrics,its a metric system designed to suit the manufacturing sector,thus rendering it incapable of capturing the core dynamics of innovation in the creative industries.On the issue of the lopsided representation and the omission of the service sector from innovation related discourses,William J.Baumol goes further to propose that authors’ bias towards the service industry emanates from the fact that “they have at their disposal relatively sophisticated models of the roles of land,labor,and capital,but none of the entrepreneur.They have inherited discussions of production functions steeped in their agricultural origins,with some game-theoretic depictions of manufacturer oligopolists,but they do not feel comfortably possessed of anything comparable that is explicitly directed to the services.So the source of the omission is indeed easy to identify,but its identification is no excuse”.Innovation is a universal paradigm that deals with novelty,creativity,economic contribution and diffusion of inventions.Innovation,which is mostly defined as the application of new ideas to products,processes,or other aspects of the activities of a firm,which include marketing and organization,that lead to an increased value,is a major driver of growth and economic development.This “value” is defined in a broad way to include higher value added for the firm and also benefits to the consumers or other firms(Greenhalgh and Rogers,2010).The role of innovation in creative industries cannot be overemphasized.According to Karol ?ledzik,Schumpeter “viewed the occurrence of discontinuous and revolutionary change as the core stimulus for economic development which breaks the economy out of its static mode(“circular flow”)and sets it on a dynamic path of fits and starts”(Sledzik,2013).Schumpeter further argued that economic change revolves around innovation,entrepreneurial activities,and market power.He sought to prove that innovation-originated market power could provide better results than the inviable hand and price competition.Schumpeter also argued that technological innovation often creates temporary monopolies,allowing outfits that would be soon be competed away by rivals and imitators.Schumpeter stated that the competition created by new products is far more valuable than the marginal changes in the prices of existing products.In as mush as innovation is a driver of growth and economic development,it however should be noted that economic development does not occur in a regular,well-defined fashion,instead it occurs in bursts,or waves of activity,thereby signaling the important effect of external forces on it.Evidently one of such external forces is innovation.Marx made the proposition that innovation could be associated with waves of economic growth.With this proposition as a backdrop,Schumpeter(1934,1939),Kondratieff(1935/51),Abernathy and Utterback(1978)have argued the long-wave theory of innovation.The point of departure of this empirical research work is to elucidate the following points:1)Creative industries are a fundamental source of innovative ideas,and as a significant component of the knowledge based economy,it impacts the innovative potential of an economy through the production and diffusion of novel products and services.2)Creative industries do not solely adopt innovation and technology;creative industries also provide ideas and services that become inputs to the innovative processes in other firms or enterprises situated in other industries.3)Creative industries stimulate innovation waves by being intensive users of technology.Due to the intensive utilization of technology in the creative industries,more often than not,modifications and adaptations are required in order for the technologies to better suit the needs of the industry.This way more innovation is stimulated.This dissertation empirically studies the links between innovation and productivity at the firm level in Creative Industries using Chinese Online Game Industry as the focal point of its analysis.This dissertation bases its analysis on the recommendations of the Oslo Manual,this approach provides a way to achieve a high level of comparability within the Industry,it also provides standard definitions and indicators of innovation.The dissertation went further to adopt the scoring matrix approach in order to capture and delineate the various dimensions,dynamics and key features of online gaming enterprises in China.Indicators adopted in the analysis were selected based on literature review and statistical analysis.The scoring matrix adopted is based on data obtained from descriptive innovation indicators utilized in an innovation survey that outlined innovation in the Chinese online game industry.It ranks the firms in the industry based on their innovation intensity as deduced from the indicatorsThe empirical approach is based on data obtained from enterprise-based surveys of innovative activity in Chinese online game firms.The dissertation applied an econometric model of Research and Development,innovation and productivity interrelations at a firm level similar to that of Crépon,Duguet,and Mairesse(1998)for France,to the micro data obtained for China online gaming industry.The econometric model consists of three stages:Stage 1: Innovation input equations.These equations explain a firms’ decision to engage in innovation activities and innovation expenditure intensity.For a given probability to innovate,the second equation of the first stage models an innovation expenditure intensity equation.The dependent variable of the first equation is the probability to innovate,while the dependent variable for the second equation is the logarithm of innovation expenditure per employee.Stage 2:Innovation output equations.This equation deals with product innovation output intensity and process innovation output intensity.It models the knowledge production function.Stage 3: Productivity equation.This equation explains the impact of innovation output on productivity.It estimates the innovation output productivity link using an augmented Cobb-Douglas production function.The methodology comprises of :(i)An econometric model comprised of recursive equations that explains productivity by innovation output,and innovation output by research investment;(ii)Micro data of Chinese Online Game firms;(iii)Estimation of the model with econometric methods which corrects for selectivity and simultaneity.Through the course of the empirical analysis it will become evident that the biases that arise from simultaneity and selectivity should be corrected for together because they tend to interact.Results and conclusions obtained from the empirical analysis conformed to generalized results from extant empirical literature.The major findings are as follows:(i)The probability of a firm to engage in R&D activities is proportional to the following variables: firm size(logarithm of employees),firms’ market share and diversification,and the demand pull and technology push of innovation indicators:(ii)A firm’s research efforts is correlated positively to its market share and diversification as well as the demand pull and technology push of indicators;(iii)A firm’s innovative sales increases with increase in Research and Development capital intensity as well as with the demand pull and technology indicators: and finally there is a proportionality between firms’ productivity and innovation output.The contributions of this dissertation are as follows:1)This dissertation is one of the foremost documented full-length empirical studies that investigate the relationship between innovation and productivity using a model similar to the CDM model in the Chinese online game industry.2)It explores and investigates core innovation determinants which have been extensively studied in other industries3)It delineates potential determinants of innovations in Online Game Industry4)It provides a descriptive comparative analysis of online game industries in China and Korea.5)It provides industry-wide research undertaking the analysis of Creative Industries with a focal point of China Online Gaming Industry in an integrated and systematic manner.6)It empirically identifies firms that have a high likelihood of engaging in innovation.7)It empirically identifies firms that are more likely to invest more in innovation.8)It identifies firms that tend to have a higher turnover from innovation products.9)Finally,based on empirical results,it identifies the characteristics of firms that have that tend to have high labor productivity.This research work reached some significant conclusions,prominent among these conclusions is:1)Firms situated in the creative sector are among the most innovative.These firms are both intensive creators of innovative ideas,contents and products,which are mostly consumed by enterprises in other industries;they are also intensive consumers of technology.This intensive consumption leads to the modification and adaptation of said technology to better fit the requirements of the target firm or industry.Innovation performance in creative industries suffers a significant disadvantage when measured with traditional/standard measures of innovation performance,which were designed to measure innovation performance in manufacturing industries.Irrespective of this disadvantage,creative industries score high in aspects such as the share of enterprises introducing product,market,process and organization innovation as well as share of R&D performing enterprises.2)Survey results in this research work show that innovation plays a critical role in the Chinese online gaming industry.Innovation in the industry is so ubiquitous that it can be referred to as a commonality in all firms that comprise the industry.The varying degree of innovation cultivation and implementation remains the sole point of variance in terms of industry-wide comparison.The intense nature of innovation cultivation and implementation,which is manifested in all aspect of online gaming firm activities,promoted the transformation of the industry from a mere game importer/distributor to a giant hub of innovative online game development.The plethora and growth rate of genres of domestically developed games attest to the level of innovation being implemented in the industry.The innovative business models implemented by domestic game companies has strengthened the growth of the industry in general,and has to a large extent curbed piracy which is a factor that is inherently rampant in gaming industries globally.In the development period of the online gaming industry in China,domestic online game enterprises lagged behind their foreign counterparts in terms of innovative ideas technology required for the development of online games.However the catch-up period ended shortly with the entrance of innovation-oriented companies that have demonstrated a high level of success in utilizing modern technology in game development.The export of Chinese developed online games has risen phenomenally and continues to rise.Perfect World currently leads in the exportation of Chinese developed games.The monumental transformation of the Chinese online game industry is largely attributable to the radical innovations implemented by the firms situated in the industry.This research work identifies Tencent,Net Ease and Shanda as leaders of the industry in terms of innovation.Innovation performance measurement in the creative industries is an issue that is central to this research work.3)The use of R&D efforts,patents and other traditional innovation indicators in the standard innovations metrics approach is a practice that this study considers extremely limiting.Notwithstanding the fact that both indicators have several strong points,using them as core indicators limits the representation of the dynamics of innovation in the service sector.The strengths of R&D as an indicator include the fact that R&D data have been collected and compiled on a regular basis since the 1950 s,thereby providing a huge repository of data.This in turn enhances the empirical analysis of the impact of innovation at a firm level.Furthermore,R&D can be categorized into basic research,applied research and development work,therefore making the analysis of cross-sectorial technology feasible.Patents on the other hand are used largely as an indicator in measuring the output of innovation.Patent databases are comprehensive,and patent records are available for public access and are easily obtainable in digital format,thereby rendering citation analysis of patent data relatively convenient.It is evident that irrespective of the seeming advantages of traditional indicators,their weaknesses abound.R&D,which is a prominent traditional indicator,is not equipped to measure innovation performance,as it is an input into the innovation process,it is not concerned with the output of the innovation pipeline,therefore as an input it cannot be used to evaluate the output of the same process to which it is an input.According to Kleinnknechth.et al(May,2001)“R&D measurement tends to be ‘manufacturing biased’ and therefore tends to underestimate innovation in services.This ‘manufacturing bias’ certainly has contributed,during a long period,to a neglect of innovation in services,both in policy and in research”.In summary R&D does not satisfy the requirements needed to measure innovation performance in creative industries.The same applies to patents,because there are significant variations in the propensity to apply for patents across sectors(Arundel and Kabla,1998).Kleinnknechth.et al(May,2001)made the following summation with regard to using patents as an indicator in innovation measurement,“when using patents as an innovation indicator,we are likely to make four types of systematic mistakes.First,we underestimate innovations in low technological opportunity sectors.Second we overestimate innovative activity among firms that collaborate on R&D.Third,we underestimate the rate of small firms that innovate.And finally,we over-estimate the innovation intensity of small-sized patent holders”.This summation conforms to the conclusions reached in this research work.As a result the method of innovation survey and measurement used in research work is based on the recommendations of the Oslo Manual which provided the fundamental framework for measuring innovation in creative firms,this was done through the development of the innovation surveys.According to the OECD Innovation strategy(OECD,2009:11),in order “to harmonize and ensure the quality of innovation surveys,the Oslo Manual was developed by the OECD in 1992.Since then,on the basis of the experience acquired,the Oslo Manual has been updated twice,while it was initially designed for firms in the manufacturing sector,it was later modified to include the service sectors.At first it dealt with product and process innovation,but it was later extended to cover organizational and marketing innovations”. |
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