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Starving the golden goose? Access to finance for innovators in the creative industries

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posted on 2023-06-10, 04:45 authored by Salvatore Di Novo, Giorgio Fazio, Jonathan Sapsed, Josh SiepelJosh Siepel
This paper extends research on innovating firms’ access to finance in the creative industries. While we know that entrepreneurial firms experience barriers to applying for funding and difficulties in securing positive outcomes, prior studies have shown that firms may use patents to signal innovative quality to potential investors. Yet these studies typically focus on R&D-oriented innovation in ‘traditional’ technological sectors. Creative industries firms have different innovation characteristics that may influence the funding process, including the uncertainty of content-based product markets, the highly-imbalanced information asymmetries between creative entrepreneurs and conservative investors, and the symbolic and intangible nature of their innovations. Using the UK‘s Creative Industries Council‘s unique cross-sectional survey data of 575 firms we analyse the extent to which innovating firms seek to apply to and achieve funding from a wide range of potential sources. We find little evidence that prior innovative activities provide a meaningful signal, positive or negative, to potential funders for creative industries firms. This suggests that the highly intangible and symbolic nature of innovation in creative industries businesses is unreliable as an indicator of quality. The reliance of owners on personal capital is congruent with recent literature on the high levels of social and personal capital among workers in the creative industries. We suggest that the specific challenges creative firms face may be addressed through new financial and policy instruments to feed and sustain these high-growth, innovating industries.

History

Publication status

  • Published

File Version

  • Published version

Journal

Journal of Cultural Economics

ISSN

0885-2545

Publisher

Springerr

Volume

46

Page range

345-386

Department affiliated with

  • SPRU - Science Policy Research Unit Publications

Full text available

  • Yes

Peer reviewed?

  • Yes

Legacy Posted Date

2022-09-16

First Open Access (FOA) Date

2022-09-16

First Compliant Deposit (FCD) Date

2022-09-15

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