Creative Economy and Culture in the Innovation Policy Publications of the Ministry of Education, Finland 2010:13 Distribution and sales Helsinki University Print Bookstore http://kirjakauppa.yliopistopaino.fi/ books@yliopistopaino.fi P.O. Box 4 (Vuorikatu 3 A) FI-00014 HELSINKI UNIVERSITY, FINLAND Tel +358 9 7010 2363 or 7010 2366 Fax +358 9 7010 2374 ISBN 978-952-485-870-0 ISBN 978-952-485-871-7 (pdf) ISSN 1458-8110 ISSN 1797-9501 (pdf) Helsinki 2010 Opetusministeriö Undervisningsministeriet Ministry of Education • Department for Cultural, Sport and Youth Policy • 2010 Opetusministeriö • Kulttuuri-, liikunta- ja nuorisopolitiikan osasto • 2010 Creative Economy and Culture in the Innovation Policy Publications of the Ministry of Education, Finland 2010:13 Ministry of Education Department for Cultural, Sport and Youth Policy P.O. Box 29, FIN-00023 Government Finland www.minedu.fi www.minedu.fi/OPM/Publications Cover: Plugi Layout: Yliopistopaino Printed by Helsinki University Print, 2010 ISBN 978-952-485-870-0 (pbk) ISBN 978-952-485-871-7 (pdf) ISSN 1458-8110 (pbk) ISSN 1797-9501 (pdf) Publications of the Ministry of Education 2010:13 Contents To the reader 4 Creative economy and culture at the heart of innovation policy 6 Antti Hautamäki Self-directive culture and strategic regional development work 26 Kimmo Kainulainen Local management of creative knowledge and economy 36 Torsti Hyyryläinen, Marko Nousiainen, Päivi Pylkkänen The creative economy can only develop by linking creative centres and the potential of regions 50 Teppo Turkki Creating a sustainable basis for co-operation between workplaces and the cultural sector: Case TILLT in Västra Götaland 55 Pia Areblad Bridges between artists and regional development to promote welfare 62 Cecilia von Brandenburg 4 To the reader The creative economy and culture have emerged as an important element in regional competitiveness and innovation activities. This can be seen in the strategies and pro- grammes of the European Union as well as Finland’s national strategies and programmes and as practical measures. Developing the creative economy and creative industries features strongly in the cur- rent Government Programme. The Ministry of Education enhances the creative economy through the framework of cultural policy. At a practical level, activities are financed through, for example, the Development Programme for Business Growth and Interna- tionalisation of the Creative Industries 2007–2013, co-financed by the ESF. The meas- ures under the Cultural Export Promotion Programme 2007–2011 are implemented by the Ministry of Employment and the Economy and the Ministry for Foreign Affairs in addition to the Ministry of Education, and thus represent a cross-sectoral approach. The Cultural Theme Group of the Rural Policy Committee supports the strengthening of the creative economy and cultural entrepreneurship in rural areas. The Ministry of Education has strengthened the opportunities for growth in the creative economy through its strategic work. The operational programme for the regional develop- ment of culture, sport and youth policy, which was published in 2003, included cultural entrepreneurship as a theme for developing action strategies in regional policy. The creativ- ity strategy work carried out in 2005 and 2006 created the foundation for the development of the creative economy. The report entitled Creative Industries Business Development: A Networked Operating Model, published at the end of 2006, set out the direction for many measures to develop business activities in the creative industries and cultural entrepreneur- ship. This publication acts as a continuation to previous publications by the Ministry of Education and provides, in particular, perspectives on the strategic development of the creative economy in different regions within programme and strategy work. The creative economy as part of the cultural industries is an important sector. Accord- ing to the Culture Satellite Account, over 102,000 people worked in the cultural indus- tries in 2006. This figure represented 4.19 per cent of Finland’s entire employed labour. According to Eurostat, the share of the cultural labour force of the entire labour force in Finland in 2005 was the third largest in the EU countries after Holland and Sweden. The added value to the national economy produced by the cultural industries was around EUR 4.6 billion (3.2%) in 2006. 5 Globally, the international trade in products and services in the creative industries in- creased annually from 2000 to 2005 by 8.7% according to the UN’s Creative Economy report. The share of exports rose from 1996 to 2005 from USD 227.5 billion to USD 424.4 billion. The share of services increased annually by 8.8 per cent. The world is currently experiencing a global recession, so employment in the cultural sectors is important. The sector involves not only public and third sector companies but also many micro-companies and SMEs, craftsmen and freelancers, who are self-employed in spite of the recession. The production of intangible services constitutes a significant part of the activities in the cultural industries. There is a particular need to strengthen service production and innovation because they can meet the challenges posed by the decline in the consumption of goods as a consequence of climate change and sustainable development. Many traditional sectors are currently in difficulty. The challenge for Finland is to find a new direction for innovation policy at the national and regional level. The creative economy and culture offer one opportunity for new initiatives to strengthen Finnish in- novation activities. With this publication, the Ministry of Education and Cultural Theme Group hope to offer new perspectives on the sector to those working in the creative econ- omy and especially regional developers. At the end of the articles, the different authors present their opinion on development proposals that could be implemented in various development activities. The Ministry of Education and Cultural Theme Group wish to thank all the article authors and the individuals that have participated in preparing this publication. Pirkko Liisi Kuhmonen Development Manager, Ministry of Education Chair, Cultural Theme Group Kirsi Kaunisharju Counsellor for Cultural Affairs, Ministry of Education Expert responsible for the Development Programme for Business Growth and Interna- tionalisation of the Creative Industries 2007–2013, co-financed by the ESF 6 Creative economy and culture at the heart of innovation policy Antti Hautamäki Research Professor, University of Jyväskylä 1  Introduction The global economy has entered an innovation-led phase. For companies, a capacity for constant innovation has become a prerequisite for competitiveness. Companies operate in an utterly international sphere, where the marketplace and resources are global. The world has flattened in the sense that national boundaries have become or are becoming irrelevant. This does not, however, mean that it would be inconsequential for companies where they operate. On the contrary, companies consider even more carefully than before where they locate their operations. Production plants are established in areas with grow- ing markets and inexpensive labour. Developing economies have been able to attract investments, and a significant part of world production has moved to China, India and other growing economies. But the real scarce resource in the world is skilled workers and professionals, and creative, well-educat- ed citizens. Although skilled workers and professionals are dispersed all over the flattening world, the most likely locations where they are to be found are creative environments, world-class knowledge clusters. It is these competent professionals and knowledge clusters that companies thirsting after innovations are looking for. In the choice of location for knowledge-intensive operations, the price of labour and the proximity of markets are not the only decisive factors. Recent innovation studies have often arrived at the conclusion that innovations flour- ish in special interactive environments, which I call innovation ecosystems. In natural ecosystems, certain species flourish because they have optimal living conditions and the food chains are complete. The ecosystem metaphor stresses fruitful interaction between different factors and actors, as well as their interdependence. Being capable of self-regula- tion, an ecosystem does not need external guidance to be viable. 7 The innovation ecosystem can be examined in terms of both idea generation and the execution of ideas. A good ecosystem contains numerous factors that together provide a fertile soil for the generation of new ideas and their execution in the form of products, services and new paradigms. Roughly speaking, idea generation requires knowledge, skills and, above all, creative individuals, whereas the execution and exploitation of ideas re- quires effective organisations and companies. Innovations are new, practical things that are put to use. The innovation ecosystem is the very environment for the generation and commercialisation of ideas. The significance of culture for innovation and innovation environments has been increasingly highlighted in recent studies. It is no longer a mere attraction factor but di- rectly relates to innovation. Culture is important for the success of innovation for various reasons, which are discussed in this article. At this point we can mention the significance of creativity for innovativeness in general and the transition towards user- and demand- led innovation policy. The article looks at innovation, starting with the concept of ‘innovation ecosystem’, and in this context addresses regional success factors. Another point of departure is the nature of innovation as a combination of different forms of knowledge. This leads to the conclusion that the creative industries and culture are at the heart of innovation. It is from this premiss that innovation policy and innovation strategy are examined. Finally, there are certain recommendations for integrating the creative economy and the knowl- edge within in it more closely into innovation policy. 2  The world is flat and thorny Thomas L. Friedman describes the newest globalisation phenomena in his book aptly titled The World is Flat. The world is flatter; all regions have a level playing field in terms of commerce and competition (Friedman 2005). According to Friedman, the dynamic force of Globalisation 3.0 is the individual’s power to collaborate and compete globally. Globalisation is taken forward by individuals who understand the flat world, swiftly ac- climatise themselves to its processes and technologies and start to march forward. More than finance ministers, the global world is shaped by the spontaneously explosive energy of “zippies”. Zippies are young, well-educated and urban disciples of the information era. The term was coined in India to denote the first free, post-socialism generation. Friedman’s ”zippies” are convincingly supported by Richard Florida’s research. In his book The Rise of the Creative Class Florida argues that people’s creativity is a basic re- source for the economy (Florida 2002). The ability to come up with new ideas and better procedures enhances productivity and raises the standard of living. The creativity of a society is manifested by the number of creative people, “the creative class”. The creative class comprises those who create for a living: researchers, engineers, teachers, journalists, artists, musicians, designers, etc. According to Florida, it also includes professionals work- ing in management, business and financing, law, health care and technology, and senior salespeople. In industrialised countries, the creative class comprises some 30%, the work- ing class 26% and the service class 43% of the employed. In this definition, the service class is considerably smaller than is traditionally understood. 8 Central to innovation policy is Florida’s observation that innovation activity is higher than average in tolerant places. This is due to the fact that tolerant places attract crea- tive people and are open to new ideas. Florida sees that economic growth is depend- ent on three T’s: technology, talent and tolerance. Florida measures technology by the number and output volume of high-tech companies and talent by the number of people employed in creative jobs. Florida’s main finding is that regions where the three T’s are strong are the most creative. Some of the most creative and innovative places in the USA are Austin, San Francisco, Seattle and Boston. Florida has also applied his research method to a comparison of certain countries (Florida & Tingali 2004, see also Himanen 2007). According to the study, the ten top countries according to the creativity index are Sweden, the US, Finland, the Netherlands, Denmark, Germany, Belgium, the United Kingdom, France and Australia. Florida’s re- search and books have engendered an extensive debate on regional development. The capacity to attract creative people has become a fundamental asset in inter-regional com- petition. In this view, culture is a key attraction factor. Although the references above are mostly to Florida’s work, it must be pointed out that innovation environments and their success factors have been studied extensively and from differing angles. It has been shown that Florida’s Three-T model does not explain the suc- cess of all regions. Secondly, the concept ‘creative class’ is problematic. In fact, all people belong to the creative class but are not all in a position to put their creativity to use in the same way, for instance because of differences in education and training (see Muutoksen Suomi report, Hautamäki 2008). 3  Innovation ecosystems Innovation environments and innovation ecosystems constitute the framework for innovative business. According to Florida, creative processes flourish in places which offer a comprehen- sive ecosystem that feeds and supports creativity and channels it into innovations, new com- panies and, ultimately, economic growth and a rising standard of living (Florida 2002). In the division of work in global knowledge production, it is innovation clusters that succeed. They have some special knowledge and skills that companies need and which are not available elsewhere at the same cost. At its best, this convinces companies to set up their research facilities or production plants there or to purchase a local company. In this sense, the companies make a strategic investment. Finland is not a country where invest- ments are made because of markets, they are made for strategic reasons. Recently it has transpired that Finland’s technologically aware population can in fact function as a special trial market or a living laboratory for new-generation technology products, mobile appli- cations in particular. Matters look different from the viewpoint of a domestic company. For it, the place is the home base, from which it reaches towards the international marketplace. As a result of the global division of work, companies seek to locate their operations in places which offer the most favourable conditions for them. For instance, production is transferred close to the growing Asian markets, where labour is cheap. The home base specialises in strategic operations, design and product development. This is what many Finnish tech- nology companies are doing. 9 This means that urban areas must be examined in terms of foreign companies’ strategic investment and domestic companies’ home base. Attracting foreign investment demands long-term, relatively costly measures for making Finland and the place known in the world (Foreign Ministry, Invest in Finland, promotion by cities themselves). Keeping the home bases in Finland again demands catering for the headquarters and strategic opera- tions, such as product development (taxation, legislation, the innovation environment, etc.) and ensuring effective logistic connections abroad (air routes, freight routes). There is a great variety of components that need to be present in innovation ecosys- tems (Figure 1), notably: • World-class universities and research institutes produce new knowledge and educate skilled professionals for the needs of companies and society at large. • Organisations financing R&D and capital investors secure funding for product develop- ment and for the establishment and growth of knowledge-based companies. • Specialised business services support the start-up and success of companies (legal is- sues, marketing, management, realty services, design, business accelerators, etc.) • Sufficient supply of specialised labour, both accomplished intellects and capable hands, secures the establishment and growth of companies. • The international companies operating in the region help new companies with pulling force. These factors relate to the generation of knowledge and ideas, their commercialisation and business activities. But these are not all the success factors in innovation ecology. The re- gion itself and the culture prevailing there are crucial factors in an ecosystem. The dynam- ics of the innovation ecosystems are largely dependent on the attitude climate. For instance the Silicon Valley ecosystem is characterised by a very strong business culture encompassing creativity, risk-taking, work orientation and cooperative exchange. In a culture like this, en- trepreneurship comes naturally. At the same time, the ecosystem supports business start-up and cooperation. Risk-taking also means the possibility of failure, but failure is always seen to promote the development of the ecosystem as a whole, and those failing are not left out in the cold. The innovation ecosystem in itself is a huge laboratory for testing new ideas. Global collaboration Innovative markets Customers Universities R D institutions Skilled labor Knowledge intensive business services Financing Venture capital Business angels Network and collaboration among small firms and large corporations Creative culture Infrastructure Flexible mobility Figure 1: Innovation ecosystem and sustaining creativity culture 10 The success of the Silicon Valley escapes explanation without reference to the contribu- tion of surrounding cities like San Jose, Santa Clara and Palo Alto to the level of amenity, services and general business prerequisites. It is the action of these cities that determines whether the region can offer a smoothly-running community structure, where housing, services, jobs and leisure activities are in balance and easily accessible. Also, the eco- logical sustainability of the community structure will be a major value in the future. A well-designed community structure and quality services gain importance in a knowledge- intensive innovation economy. Modern cities compete with amenity and quality of life. These are things that professionals appreciate. Entrepreneurs can turn ideas into money. As Schumpeter expresses it: The inventor produces ideas, the entrepreneur ‘gets things done’. Enterprise culture is substantially dif- ferent from corporate culture, in which owners are somewhere far away and the employ- ees are like civil servants. The business owner takes risks, staking everything. The success of the Silicon Valley is largely explained by the strong enterprise culture. It is imbued with a pioneering spirit, which embodies hard work, enthusiasm and doing things well. Failure does not destroy an entrepreneur’s career; it is taken as a learning experience. In the Silicon Valley ecosystem, starting and closing businesses is part of a grand adjustment process for testing if ideas carry or not. AnnaLee Saxenian (2006) calls this experimenting business culture. The short life of many businesses turns into a sustainable success factor for the region and contributes to its innovative capacity. Competition between compa- nies, the birth of new companies and bankruptcies also constitute an important mecha- nism raising productivity (see also Hyytinen and Pajarinen 2005). The role of culture in the attractiveness of regions has been constantly growing. In the modern economy, culture has many dimensions. Culture comprises the values and attitudes prevailing in society, as well as arts and cultural industry, the creative economy, which draws on them. The creative economy and culture are always robustly local, and at the same time part of a wider interaction sphere. The following will look at urban areas as seats of innovation and creativity. 4  Urban areas as seats of innovation and creativity My basic idea is that the enhancement of innovation ecosystems entails a new kind of regional thinking and the development of urban areas into “creative cities”. Cities must be seen multi-dimensionally in innovation policy (see e.g. ISOCARP Review 2005). Ur- ban development only in one dimension, for example in terms of industries, may lead to problems in areas like culture or to the deterioration of the public space (e.g. congestions or withering city centres). According to studies, the following dimensions are crucial in the development of cities into competitive actors in the global economy: • Creativity and culture • Public services • Housing • Public space • Logistics. 11 The development of these dimensions should have two basic aims, namely the quality of life and entrepreneurship − the sources of contentment and prosperity. 1. A high quality of life, which is particularly influenced by culture, housing, the public space and services; 2. Good prerequisites for business, which are particularly influenced by the innovation envi- ronment, public services, and traffic and communications. Creativity and culture The future city will offer an urban space for creativity. Creativity underpins innovative- ness, but in itself is something quite different: continuous creation of new things and ideas, experimentation and joy, whatever the living sphere. While the innovation eco- system and the innovation environment relate to innovation in companies, the creative milieu is a more universal creative environment. In his book The Creative City (2000), Charles Landry defines the creative milieu as follows. A creative milieu is a place that contains the necessary requirements in terms of ‘hard’ and ‘soft’ infrastructure to generate a flow of ideas and inventions. The creative milieu is a physical cluster (of buildings, spaces and people) • where a critical mass of entrepreneurs, intellectuals, social activists, artists, officials, policy-makers and students can operate in a liberal, international setting; • where face-to-face interaction generates new ideas, artefacts, products, services and institutions; and • which, as a result, contributes to economic success. According to Landry, the ”hard” infrastructure is composed of • the built environment • institutions (i.e. research institutes, educational establishments, cultural institutions) • supportive services (i.e. transportation, health care). The ”soft” infrastructure is composed of groupings and social networks, communications, and human interaction, which create and sustain the flow of ideas between people and institutions. In a creative milieu, institutions are located close to each other, densely. But mere prox- imity creates neither a flow of ideas nor interaction, this demands a special climate. Accord- ing to Landry, the construction of institutions and flexibility help create a climate condu- cive to interaction. At this juncture, it is worthwhile to bear in mind that institutions are mostly norms and mores. This was evident already in the case of the Silicon Valley. The term ‘culture’ has various meanings. The discussion above looked at culture as values and attitudes, as the prevailing climate. The other basic meaning of culture encom- passes arts: music pictorial arts, theatre and performance. A high-standard, creative art life is an inalienable constituent in the quality of life. Many cities are known for their art life in particular: New York for music, Paris for art, London for theatres, San Francisco 12 for performance, etc. Notable cultural buildings also exert attraction power. The best known is perhaps the Guggenheim Museum designed by Frank Gehry, which attracts millions of tourists to Bilbao, Basque Country, every year. Along with the museum, the whole region has started to flourish (the ”Guggenheim effect”). In the same spirit, it has been suggested that skyscrapers be built in Pasila, Helsinki. Another interesting project is a new hotel designed by the world-renowned architects Herzoc and De Meuron which will be built in Katajanokka, Helsinki. Public services In efforts to create a setting for creativity and innovativeness, public services are of the utmost importance. Public services build up the common good, which benefits everyone. Especially crucial are schools and social and health services. These have different roles. Schools create a foundation for citizens’ success and working life. Social and health serv- ices, on the other hand, restore functional capacity and ensure that day-to-day matters run smoothly (day-care centres). A special feature of the universal model in Finland is that these services are provided free of charge, or strongly subsidised, and thereby acces- sible to all those who need them (see also Himanen 2004). Public services are necessary in operations in which markets do not create services. Public services gain their justification from market deficiencies. This becomes under- standable from the situation in cultural services. Cultural services give everyone access to high-quality culture, which in market prices would be out of reach for many people. Publicly subsidised cultural production sustains a diverse supply of culture and enlarges the freedom of expression, which is easily curtailed in market-driven supply. In the spectrum of public services, leisure-time services are easily overlooked. Sports pitches, swimming halls, gyms, cycle paths, outdoor tracks and lit ski tracks are of great importance in quality of life terms. They are not particularly costly but have a consider- able external impact. A physically active person stays healthier and copes better with work and life. Life management improves when physical exercise becomes part of daily routines. Housing The housing standard is an important quality of life factor. In Finland houses and flats are rather small and relatively expensive. The scarcity of plots in zoned areas and a short supply of new housing in relation to the growing demand keep prices up. This under- mines the development of service industries and culture because the pay level in these does not allow purchasing or renting a flat in city centres. Public housing production is an important balancing factor, especially if it turns out enough affordable houses and flats. When residential areas are located far from services and jobs, it increases commut- ing and environmental loading.In the growth centres all over the world, the price of housing in better areas is manifestly rising out of the reach of the middle class. Good schools often add to the desirability of a residential area. By maintaining the standard of all schools as high as possible, it is possible to control many incidental phenomena relat- ing to housing, such as segregation or rising prices. 13 Many attractive urban areas offer modern, pleasant and safe living environments close to jobs. Similarly, old city centres are being refurbished and revitalised. Families with children prefer new residential areas, whereas students, childless couples and singles prefer an urban environment with services and night life close by. In the innovation economy, good housing is an important factor determining the choice of domicile. Public space A functional and beautiful public space is a significant public commodity, providing a place for people to meet and relax. It encourages interaction and gives a sense of security. Public spaces are mainly market places and squares, parks, streets and public buildings. How to build new public space is one of the key questions in innovation policy. Func- tional, pleasant and interaction-enhancing public space is needed to provide meeting places for people. A lively debate is going on in urban planning concerning the preservation of small shops close to people. They seem to thrive in city centres, but otherwise shopping malls and new mega centres are destroying corner shops. This trend is difficult to reverse. In terms of the development of the urban space, one possibility would be to build “alterna- tive” shopping malls, for instance artisan lanes or publicly subsidised centres of creative activity, such as the old cable factory (Kaapelitehdas) in Helsinki or the old broadcloth mill (Verkatehdas) in Hämeenlinna. These characteristically have a compact structure, with services, shops, events and so on at close quarters forming a cluster (see ART MUR- MUR in Oakland). Mobility The modern city is full of movement. People are in constant movement between home, work, services and hobbies. Goods are transported and refuse taken out from the city. The car is a flexible and alluring means of transport. Yet, cars are the very source of many problems. Congestions are a major challenge. Cars use non-renewable energy – oil – and are often primary atmospheric polluters. Car traffic also emits particles that cause many illnesses. Further, car traffic is asocial in the sense that the poor cannot afford cars or fuel. This restricts their mobility and complicates their working life. Solutions are sought in public transportation. Trains take care of the main direc- tions. Shorter communications and routes can be handled with buses and trams. Creat- ing a community structure where there is no need for personal cars is a huge challenge. This means that housing, services, jobs and leisure activities are compactly located and served by excellent means of transportation. People make their purchases over the web and retailers transport them to their homes, which would make shopping unnecessary. Community structure development and communications arrangements in keeping with sustainable principles are no longer utopia but a matter of political will. They are also indispensable in terms of quality of life. 14 5  Innovation policy and the national innovation system The viewpoint underlying innovation policy is that technological development and in- novation are sources of long-term economic growth (Ylä-Anttila 2005). These again en- tail the production and diffusion of knowledge in regard of which the market functions imperfectly. Companies have neither resources nor motives for producing public utility knowledge. Especially basic research and education demand public funding. Left to the market forces, they would be limited in scale, and the priorities would be derived from the special interests of companies. The new growth theory emerging in economics (i.a. Lucas and Romer) stresses the sig- nificance of knowledge and innovations for economic growth. Knowledge and skills con- stitute new intellectual capital, capable of limitless growth and increasingly supplanting traditional capital. This capital is augmented by research, and it is disseminated through education and learning (Ylä-Anttila 2005). The concept of ‘innovation system’ was born in the 1980s to describe the significance of innovation for the national economy. The pioneer in the field, C. Freeman defined the national innovation system as a network of public and private sector institutions whose activities and interaction create, shape and disseminate new technologies (Freeman 1987). This definition highlights institutional networking and interaction, which form the dynamic structure of the system. On the other hand, the definition only mentions technologies, overlooking various processual, business and social innovations. Finland promptly embraced the concept of innovation system as the underpinning of innovation policy in the early 1990s. In keeping with the concept of national innovation system, innovation policy was emphatically technology policy. The focus was on R&D, and the GDP share of national R&D investment rose from 2% to 3.5% in ten years (1991-2001). This world record is all the more noteworthy as the early 1990s were a time of deep economic recession, during which Finland systematically invested in R&D in support of economic growth. The concept of national innovation system is receding into the back stage. Today’s concept is ‘innovation environment’, in which the focus is on the general and local con- ditions for innovation and business. To succeed in a given area, business needs favourable conditions. Mere capital and investments are not enough if the region does not have a sufficient supply of competent workforce, necessary services, research institutes, structures for knowledge transfer, subcontractors, even competitors, and so on. Similarly, taxation, statutes governing competition, copyright and many other national-level factors influence the innovation environment. The backdrop to the concept of innovation environment is observations of the benefits accruing for companies operating in the same sector from proximity to each other. This accumulates knowledge, and knowledge spreads easily from one entrepreneur to another, as Alfred Marshall already noted in the late 1800s. Regional economics has long stressed the advantages of location, accumulation and the scale advantages of centralised produc- tion (see e.g. Sotarauta & Kosonen 2004, Lemola 2005). The cluster theory set out by Michael Porter in the early 1990s takes cluster formation and associated national competitive edge under close scrutiny (Porter 1990). Later Porter also addressed regional innovative clusters as dynamic engines of the national innovation 15 system (Porter 2001). Apart from Porter, several researchers have put forward their own concepts to describe regional environments (innovative milieus, learning regions, etc.). Regional economics and globalisation theories have similarly highlighted the role of regions and especially urban areas in the global economy (see e.g. Castells 1996). Certain successful regions and urban areas draw competent professionals, entrepreneurs and finan- ciers like magnets. It is not nations that compete in the global economy, but regions. For companies, it is a question of the advantages a given location offers for their operations. Since the competitiveness of companies increasingly rests on their innovativeness, the basic question in innovation policy is how to develop innovation environments which generate new business and towards which new business gravitates. Finding an answer to this question is the key challenge facing innovation policy in the years to come. The an- swer is sought in many directions. I have analysed the basis of innovation policy in several articles and books and put forward ‘sustainable innovation’, ‘innovation ecosystem’ and ‘innovation cluster’ as new basic concepts (see e.g. Hautamäki 2006, 2007 and 2008). In sustainable innovation the foundation of innovation is the promotion of welfare and good life, instead of economic growth (see Figure 2). Industrial capital Nature capital Intellectual capital Reproduction Sustainable innovation Well-being Good life Cultural capital Figure 2. Sustainable innovation in promoting good life and renewing capitals In this paradigm, innovation utilises, and at the same time maintains, all forms of capi- tal. An innovation policy geared towards economic growth easily destroys nature capital (emissions, waste of non-renewable natural resources), intellectual capital (people burning out) and culture capital (polarisation of society, see Muutoksen Suomi, Hautamäki 2008). In my book Kestävä innovointi (Sustainable innovation), I used the term social capi- tal, but culture capital, being a broader concept, is more descriptive (see also Himanen 2007). Culture capital consists of the following: • values and attitudes • shared responsibility and communality • trust and cooperation • education and culture. Culture capital is a vital precondition for networking, which in turn is absolutely crucial for innovation (open and public innovations, combinatoriness, consumers). 16 6  Creative economy and culture in the innovation context In his epoch-making book Luova talous (Creative economy), Markku Wilenius describes creative economy as follows (Wilenius 2004, 11): We are moving over to an economy in which culture knowledge and human and organisa- tional creativity springing from it are a critical engine. Culture knowledge includes all the human abilities and organisational factors enabling culture capital to be utilised in human interaction and in production. A Ministry of Education report on creativity (OPM 2005), has interesting definitions of the concepts ’creativity’, ’innovation’, ’culture’ and ’creative industries’ worth repeat- ing here: • Creativity is an ability to do or produce something new and surprising and is manifested for instance in the form of new ideas, meanings, interpretations, practices and products. • Innovation is a new invention, product, service or action model of commercial or eco- nomic significance. Innovations are developed from the level of ideas to practice within the economy or in society. • Culture is the soil for creativity and one of its manifestations. Broadly taken, culture is a reality created by human beings with all its manifestations (culture vs. nature and biol- ogy). Narrowly taken, culture refers to historically and regionally diverse cultures (mores, means of production, beliefs, etc.). Thirdly, it is possible to speak of culture as the intel- lectual sphere of society (ideas, values, etc.). • Creative industries refers to sectors of creative production. Creative production in turn is exchange of cultural meanings. Copyright constitutes the backbone of the creative economy. Creative economy is also called copyright economy. Earlier the concept used was ‘culture industry’, but it has its own encumbered history in the culture critique of the Frankfurt School (see Irmeli Hautamäki 1999). Similarly, the term ‘creative industries’ must be treated with care, as all innovations (from the wheel to the computer) require creativity. The most characteristic feature of the creative industries is that the services and products are immaterial and involve “immaterial consumption”. The term content production is widely used, especially when the focus is on the content as compared to technology (computers, information networks). The creative economy comprises music, film and games industries and, broadly taken, the media (print and digital media). These represent a substantial proportion of the na- tional economy, especially in the Anglo-Saxon countries. Industrial design can also be seen to belong to the creative economy in that it adds value to a material product (e.g. a mobile phone) in the form of a cultural component. The significance of the creative economy and culture for innovation can be described by means of Figure 3. In it, innovations are created by creative and competent individu- als, using science and art outputs (see also Edwards’ interesting book Artscience). Innova- tions relate to business and industry, public administration and civil society. Innovations are new products, services and procedures. 17 Science Art Creative and competent individuals Innovations Business and industry Administration Civil society Figure 3. Creativity and the economy (OPM 2005, 64) This figure can be deepened. We must differentiate “creativity culture” from culture in its narrow sense. Creativity culture involves developing society as a whole in terms of crea- tivity and innovativeness. It is characterised by a wealth of ideas, openness and courage. These characteristics are central to both culture (incl. art) and innovation. Art and other sectors of culture are of the utmost importance for the enhancement of creativity culture and for innovation. Innovation and its paradigms in turn shape culture and influence the commercialisation of cultural output. Innovation and culture overlap to some extent: the creative industries - the creative economy - exist in the interface of culture and innova- tions. It has been estimated that the creative industry will grow, which will expand the interface, and an ever greater part of innovations will be ”culture-oriented” or contain a strong cultural component (e.g. design). When corporate innovation is examined from this point of view, culture is in the heart of production. In a Finnish working group on the future of business, we analysed this change, seeing it as the “intellectualisation” of production, that is, the value of the cul- tural component will increase in relation to the material component (Figure 4. see Arvot, työ ja vastuu, Hautamäki 2008). Time Intellectual component in production  (innovations, services, knowledge, meaning) Material component in production (raw materials, machinery and plants) Figure 4. Growth in the value of the cultural component in production. 18 This enables us to describe the interconnection of culture and the economy by means of four factors (Figure 5): • Creativity culture : culture that values creativity, courage, risk-taking, etc. • Art and culture as an expression of and inspiration for creativity • Creative economy: commercial production based on art and culture • Added value brought by culture to all innovation (e.g. design, brands) Creative culture Art Creative Economy Innovation Figure 5. Creativity culture and the creative economy Cultural knowledge is gaining importance in all business. The following are key dimen- sions, in which the common denominator is the role of the human being in business, or the human factor (see e.g. Antola and Pohjola 2006): • Management: Leading people with visions and values • Motivation: workers’ commitment, incentives • Plurality: multicultural work communities and activity in a multicultural environment • Markets: fashions, trends and demand factors in a constantly changing marketplace • Consumers: consumer choices highlight lifestyles, identity, meanings • Brands: corporate image, quality and trust are key success factors for companies • Ethics: companies’ social responsibility and corporate citizenship. This list already shows that business cannot be successfully pursued or develop without strong cultural knowledge (see Muutoksen Suomi report, Hautamäki 2008). To this list naturally belongs innovation, which will be discussed next. 7  Innovation processes: combinatoriness,   serendipity, imagination The nature of innovation processes is much better understood today than in the 1990s, when the development of the national innovation system began. At the time, the thought process still went linearly: from research to product development and ultimately to the market. Now it has transpired that the central factor is the combinatoriness of innova- tions, in other words, that innovations are created through an amalgamation of different 19 kinds of complementary knowledge and skills. This is why innovations entail a com- munity in which people from different backgrounds work together. From this nature of innovation processes follows a need to find complementing knowledge and skills, which often are not found within the organisation. Therefore innovations are increasingly cre- ated through networks. A strong trend is work in open networks in which skilled pro- fessionals living in different parts of the world work together via information networks (so-called open and public innovations, see Hautamäki 2008). This kind of networked, open innovation entails an ability to combine various bits of information and understand different standpoints. Looking from this perspective, innovation processes take place dia- logically in networked communities. In the current view, innovation processes are open processes involving multiple parties. They are seen to follow an open innovation paradigm, in which ideas and innovations are sold and bought on an ”idea market”. Since the open paradigm relates to commerce in ideas and inventions, at least in the terminology of Henry Chesbroug, who launched the term open innovation, I have adopted the term ‘public innovation’ to denote voluntary work taking place outside market relations. The best known of these is obviously the cre- ation of the Linux operating system. This kind of communal creation and innovation fol- lows a particular end-to-end architecture, in which the end-users directly work together in a common forum (see Figure 6, Weber). The work goes via information networks and the results are commons accessible to all, which can also be used by others (“free-riders”) who do not contribute to the development. Cooperation forum Public good Coordinator (firm) User Contributor Visitor User Contributor User Contributor User Contributor Voluntariness “Free-riders” Network connections Figure 6. The end-to-end architecture of open innovation Another characteristic describing innovation processes is surprise. Innovation is a seren- dipity (see Roberts 1989) that comes along unexpectedly. It is possible to feed serendip- ity by creating conditions and spaces where different kinds of people meet. Similarly, a change of jobs may bring surprising finds to the surface, which then lead to innovations. 20 Serendipity does not mean that anyone is able to create an innovation based on a surprise find. One has to be prepared, to have mulled over certain problems and to have tuned one’s brain, as it were, to scrutinise subconsciously all new phenomena or observations (chance favours those prepared). The famous Newton’s apple is a case in point: it is said that Newton invented the law of gravitation sitting under an apple tree and being awoken by a falling apple. This discovery entailed years of thinking about the principles of physics. The third characteristic of the innovation process is imagination. Alexander Manu defines imagination as the ability to form images and ideas in the mind, especially of things never seen or never directly experienced. Creativity is an ability to make use of imagination to create new ideas or goods, in an artistic context in particular. One has to use creativity to straddle the divide of imagination obtaining between current knowledge and future opportunities. We cannot see everything we could do on the contemporary basis, for example with current technologies. We have to find the “question”, or the need and use to which we already have the answer, or the capacity to satisfy the need. I have dwelled on the innovation process for this long because the understanding of it is the key to the hybridisation of culture and innovation. 8  National innovation strategy and creative industries In a quest to develop innovation policy, the Finnish Government launched a process for a new innovation strategy in 2007. The process was the responsibility of the then Minis- try of Trade and Industry, current Ministry of Employment and the Economy. The draft strategy was completed in spring 2008, and in the autumn of the same year the Govern- ment submitted its innovation policy report to Parliament. Both the draft strategy and the report look at innovation and its development through four strategic choices, which are 1. Innovation activity in a world without borders: Connecting and positioning Finland in the global knowledge and value networks requires ability to participate and influence these networks, international mobility of experts and determined development of the at- tractiveness of the Finnish innovation environment. 2. User and demand-led innovations: Innovation steered by demand, paying attention to the needs of customers, consumers and citizens in the operations of the public and private sectors alike, requires a market with incentives and shared innovation processes between users and developers. 3. Innovative individuals and communities: Individuals and close innovative communi- ties play a key role in innovation processes. Innovation capabilities and incentives for individuals and entrepreneurs are critical in the future. 4. Systemic approach: The exploitation of the results of innovation activities also requires broad-based development activities enhancing structural renewal and determined man- agement of change. The innovation strategy notes that special challenges for the extent of innovation arise from the fact that several low-production branches and public sectors have not yet made systematic use of innovation in the development of their operations and productivity. Finnish innovation is largely concentrated into manufacturing industries and too nar- 21 rowly focused on the use of scientific-technological knowledge. The strategy stresses that innovation is based on the amalgamation and use of diverse – both technological and non-technological– knowledge, skills and know-how. A overly narrow conception of in- novation means that some of the innovation potential is left unused. According to these precepts, creative and cultural fields should have a central place in the strategy. Yet the creative industries do not feature very prominently in the strategy recommendations. They are mainly only mentioned in Recommendation 4.1.2: Incentives enhancing the broad-based nature of innovation will be built up, which has two points: • Incentives will be developed to encourage business, management, procedural, design, creative contents and social innovations (Ministry of Employment and the Economy, Tekes) • New incentives will be explored and created, where needed, to initiate innovation in com- panies in fields where innovation may play a key role in improving operations and produc- tivity. (Ministry of Employment and the Economy, Ministry of Finance). The recommendations talk about incentives, but the report to Parliament goes further: Incentives and development measures targeted at business management, operating methods, design, creative industries and service and social innovations will be strengthened. The construction of a creative economy is one of the major innovation policy challenges. Responding to it requires a systemic approach and broadly based cooperation within the Government and in the regions (local authorities, regional consortia, local state agencies, companies, cultural organisations, etc.). 9  Strengthening the status of the creative economy   in innovation policy Based on the observations concerning innovation and innovation policy, we are looking to respond to three challenges: 1. How to include the creative economy more robustly in innovation policy on the national and international levels? 2. What are the roles of the public, private and third sectors in the linkage of the creative economy and culture with innovation policy? 3. How to integrate knowledge of the creative economy and cultural actors into the core of innovation policy? Creative economy as part of innovation policy The national innovation strategy records the role of the creative industries, as well as the importance of creativity culture. It is urgent to proceed from these general policy lines to concrete action. A starting point for this is the key notion of the decisive significance of user- and demand-led innovation which permeates the whole strategy. This is a major de- 22 parture from the more traditional technology-based innovation policy (see von Hippel). Here the consumer takes the central stage and the consumer’s experience of the product ultimately decides the demand for it. The consumer’s or user’s experience is not solely based on the technological properties of the product but on design in a large sense. To be born, a product needs all the components of the triangle, one being the physical proper- ties − design − of the product, which comprises usability and the consumer’s experience of the product (Figure 7). For the consumer, the product is a bearer of meanings. Consumer´s experience Material component in the product Compatibility Design Meaning Functionality Quality Pleasingness User-friendliness Product Figure 7. Product as a combination of technology and design From this starting point, we can present some ways of strengthening the place of the creative economy and culture in innovation policy. 1. The promotion of user- and demand-led innovation will be taken as a key aim in all pub- licly funded innovation projects (Tekes, Academy of Finland, centres of excellence and regional centre programmes; industrial and employment districts), with emphasis on the participation of companies and actors in the creative industries. 2. New instruments will be adopted in the development of creative industry companies (incubators, venture capital, growth entrepreneurship and internationalisation; cf. cultural exportation). The traditional instruments designed to support technology companies have not worked very well in regard of culture-based companies. 3. Research projects will be undertaken to find out the underpinnings of user- and demand- led innovation and especially the role of creative industries in the innovation process. We know all too little about the role of users in product development and testing and how to integrate the user’s knowledge and skills into innovation processes. 4. Measures will be taken to consolidate cooperation between the Ministry of Education and the Ministry of Employment and the Economy in the definition and implementation of innovation policy with a view to increasing the relative weight of culture and creative industries. The Ministry of Education has a great deal of knowledge that has not yet been fully used in innovation policy. 5. Local (urban area) forums will be created to put creative industries in touch with other industrial sectors. These forums can be organised by higher education institutions, tech- nology parks, business incubators and local authorities, among others. The forums will help strengthen networking between companies operating in different branches of indus- try, which is a prerequisite for successful innovation. 23 Role of different sectors in integrating the creative economy into innovation policy By its nature, innovation policy is policy geared to create conditions conducive to innova- tion. The essential thing is, however, to enhance the knowledge and innovation capacity of the business field. Innovations are born in companies, but innovation processes involve and are influenced by many other actors as well. Innovation strategy stresses systemic changes, which refer to cooperation between various actors and to the removal of bound- aries between administrative sectors. Systemicness is possible only in processes which involves all the crucial parties and which combines national objectives and priorities with the actors’ own strategies (bottom up). Systemicness entails innovation democracy, in which all parties are heard and initiatives put forward by different parties are appreciated in the implementation of reforms. In the definition of innovation policy, the voice of creative industry and culture rep- resentatives has not been very loud. In contrast, a large number of people working in creative industries contributed to the drafting of the creativity strategy. The knowledge of organisations and foundations in the culture sector could be used to a much larger extent in the planning of concrete measures. As concrete measures, I propose the following: 1. The Ministry of Education will appoint a committee to explore measures which a) strength- en innovation in the creative economy and b) enhance cooperation between the creative industries and other industrial sectors. The members should represent creative fields in higher education institutions, organisations, cultural institutions and the business sector. 2. A wide debate will be initiated to explore the place and role of copyright in innovation policy, based on the work of a copyright committee set up to devise guidelines for leg- islative work, assess the need to amend copyright legislation and prepare guidelines for the Ministry in view of social, economic, technological and international development. 3. Regional and local (even municipal) plans will be drawn up regarding ways to implement innovation strategy and to enhance local ecosystems. With a view to concrete results, it is indispensable to anchor innovation policy into the local and regional levels. Innovations come about locally in local cooperation and therefore the development of innovation ecosystems is the only way to secure the impact of major innovation policy inputs. 10  Integration of knowledge of the creative economy and cultural actors into innovation policy I see two levels in this challenge: integration of creative economy knowledge a) into cor- porate innovation and b) into innovation policy. Since this challenge has already been treated in the previous proposals, I’ll take up only a few supplementary viewpoints here. Developing creative industries requires seeing to art and culture actors’ own knowledge and skills and sufficient funding. A report on artists in Finland gives a fairly alarming picture of the conditions for artistic work in Finland. 1. General long-term artist funding will be increased (apart from project funding) with a view to strengthening the economic prerequisites of artistic work. 24 2. Open and public network-based innovation environments will be created with the pur- pose of integrating creative economy knowledge into corporate innovation. Examples abound, such as the social media company Tori.In, to mention only one. 3. In higher education and continuing professional education, management training and working life training will include introduction to creative industry themes and use repre- sentatives of cultural life as teachers. 4. Creativity and cultural knowledge will be integrated into all education and training. In the longer term, education is the vehicle for combining different kinds of knowledge in a natural way and at a sufficiently early stage. What this involves may even be a question of prioritising general knowledge. 5. The research and innovation council to be established must also include the representa- tion of the creative economy. 11  In conclusion My own view is that there is not enough sufficiently profound and comprehensive un- derstanding of the essential nature of the creative economy and culture in Finland. This is why stronger input is needed to study these questions. Another challenge is to boost cooperation across administrative boundaries. Especially innovation policy should be seen as a strategic issue for the government, which spans all the administrative sectors. On the concrete level, cooperation between the Ministry of Education and the Ministry of Employment and the Economy should be deepened. Although the recommendations put forward in this article naturally require further elaboration, they may provide guidelines for better integration of creative industries and culture into innovation policy. Bibliography Antola Tuula ja Pohjola Jukka (2006): Innovatiivisuuden johtaminen. 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Helsinki: ETLA (sarja B 214), Taloustieto Oy, 245–257. http://www.sitra.fi 26 Self-directive culture and strategic regional development work Kimmo Kainulainen Research Director, Mikkeli University of Applied Sciences 1  Introduction The position of culture, or expressed more broadly the creative industries, has strength- ened within regional development work in recent years. One explanation for this is the idea that cultural activities have an impact on the creation of regional competitiveness. According to numerous reports and analyses, the creative industries constitute an emerg- ing economic sector, although the discourse on the subject has been closely tied to the manner in which the statistics are compiled, and is thus conflicting. The stronger strategic position of cultural activities has partially indicated a shift in the priorities of cultural policy, which has resulted from increased interaction among ac- tors in regional development work and cultural administration. In the context of regional development, art-based cultural policy has made way for a commerce- and entrepreneur- ship-based development policy. This trend has also been reflected in the need to reform cultural administration. Alongside industrial policy, the emphases of innovation policy have begun to influence the logic of development work within the creative industries. Cultural activities are seen to have wide-ranging effects on innovation environments, which are important to acknowledge in strategic development work. Moreover, a debate on values with regard to the commercialisation of culture and the culturisation of the market has been ongoing in the background of the development processes. Alongside art-based cultural activities, a range of new professions has emerged in connection with regional development works, which are embodied by the term creative industries. The main characteristics of the creative industries include bolder cooperation across sectoral boundaries in practical development work and product development proc- esses. Within this framework, professionals in the fields of culture and art constitute an increasingly ambiguous concept. However, instead of an accurate definition of the cultur- al industries, what is essential for examining the changes in the labour market or regional educational requirements is an ability to make use of cultural competence in more crea- 27 tive and multifaceted ways in so-called atypical industries or contexts, such as in welfare services or in designing residential areas. Cooperation across administrative and sectoral boundaries, new professional roles and decentralised decision-making in cultural policy have led to new ways of defining the position of culture in regional development work. This article examines regional develop- ment work, which faces the challenge of reconciling economic aspects related to cultural activities and the creative industries with a more conventional art and cultural policy. The aim is to provide a comprehensive overview of the position of culture in regional develop- ment work and in transforming regional administration structures. 2  Strategic planning of cultural activities and regional competitiveness Planning and adopting new service production models in the cultural and leisure-time sectors have given rise to the need for strategic planning and management also in mu- nicipalities. This development has demanded a new type of flexibility and development orientation from cultural administration. Producing new service concepts requires munic- ipalities to adapt to changing conditions in a new way, which in the discourse of regional studies is referred to as self-renewal ability. Municipalities that are the most able and ready to change are the most successful in reorganising cultural services. The self-renewal process takes place halfway between sys- tematic and unsystematic activities. In other words, not only must new service concepts and products be created in connection with strategic regional development work, but an enabling development policy must also be implemented. In this way, the main feature and basic principle of cultural activities – their emergent, inherent and uncontrollable character – is integrated with systematic and rational regional development work. At its best, regional development work helps establish and attract new cultural activities to the region, creates opportunities for constructing competence clusters in the creative indus- tries, and improves regional competitiveness. Regional competitiveness cannot be defined unambiguously, as the interpretation de- pends on the context. According to Sotarauta et al. (2001) and Linnamaa (2004), regional competitiveness comprises the following dimensions: regional infrastructure, business activ- ities, human resources, the quality of the living environment, institutions and an effective development network in the region, the image of the region, and an atmosphere of creative tension. The significance of culture and creative industries in regional development work can also be examined from the standpoint of the dimensions of competitiveness. Multidisciplinary business activities Infrastructure as a dimension of regional competitiveness refers to the physical operat- ing environment essential for business activities (water, air, road and railway transport, telecommunication connections). The cultural infrastructure can be understood to com- prise the adequacy and quality of cultural premises, for instance. The composition of the business field is another basic requirement for creating regional competitiveness, and is affected, for example, by the size and industrial structure of enterprises, the export ori- 28 entation, knowledge intensity as well as the proximity of subcontractors and other busi- ness partners. With respect to culture and the creative industries, the issue concerns the number and quality of cultural enterprises as well as the creation of competence clusters within the creative industries. The driving forces of the cultural industry traditionally include film, music and television, which are connected to the key earning logic. In 2003, an average of 86,000 people was employed by the cultural sector. It is im- portant to note that a significant number of professionals in the fields of culture and art were employed in non-cultural sectors. (Kanerva & Lehikoinen 2007, pp. 8-9). Indi- viduals educated in the fields of culture are increasingly finding employment in so-called knowledge-intensive business services, i.e. KIBS industries, which can include advertising and business management consultancy services, as well as architecture, marketing, and industrial design (Lagerström & Mitchell 2005, p. 44). A key challenge in the regional development of cultural business activities is the increase in multidisciplinary job profiles. How can enterprises and competence clusters in the creative industries, which operate across different sectors, be supported and promoted systematically? It is likely that the number of cultural and art professionals employed in atypical in- dustries will continue to rise. At the same time, the applied use of art and diversification of professional roles will continue to increase. This change is difficult to track statistically, as the increase in art-related professions (e.g. game and web-design industries) cannot be established through industry and sector-specific scrutiny. It would be more important to examine the creation of innovation environments and competence clusters as a whole, in other words, as new types of interdependencies between different fields rather than as sector- and industry-specific statistics. Cultural intellectual capital Human resources as a dimension of regional competitiveness are connected with the region’s intellectual capital and especially with the effectiveness of the education system. In other words, cultural competence refers to the teaching of culture and art, and art education, etc. In Finland, education in art and culture refers to the teaching provided by comprehensive schools, upper secondary education (including vocational education and training, and general upper secondary education) as well as polytechnics and universities. In addition, there are upper secondary schools that have specialised in art and culture as well as basic education in the arts. It is impossible to quantitatively measure or demonstrate the importance of cultural competence to regional development and competitiveness. There are no general indica- tors for measuring the intellectual capital of people educated in the field. On the other hand, attempts have been made to measure intellectual capital in light of narrow param- eters (patents, licenses, copyrights). A general feature that has been observed with respect to education in the fields of culture and art is that interest towards education in the sec- tor has increased over the last decade, and the number of degrees in the field of art, for example, has soared. At the same time, educational content has diversified and vocational skills requirements broadened, which has posed a challenge for providing foresight and defining educational needs. (Lagerström & Mitchell 2005.) The competence requirements in the fields of art and culture can be divided into three areas: artistic work, cultural production and cultural services, as well as so-called associat- 29 ed fields that have shared content with artistic work and cultural production based on it. Changes in the labour market take place in the mutual relations and focus areas of these fields. A more diverse interface between jobs and the labour market of related and associ- ated fields is vital for increasing employment and the creation of new business activities in the future. In addition to individual artistic creativity, the labour market focuses on establishing links between cultural competence and industrial production and growth ar- eas in the service sector. The trend is evident, for example, in the potential for the applied use of new media and art and in service concepts in the tourism and welfare industries. (Lagerstöm & Mitchell 2005, pp. 193-196; Kanerva & Lehikoinen 2007, p. 13). There has been considerable debate about the increasing need for entrepreneurship and business skills among cultural actors in recent years. The key challenges for entre- preneurship training are considered to be the commercialisation of creativity and com- petence: conceptualising, productising and marketing ideas and export competence. The need was partially addressed in Finland in 1998 with the implementation of courses for cultural producers at polytechnics. This training offers teaching in the arts disciplines as well as strategic and operational teaching (e.g. financial administration, copyright, legisla- tion, project management and marketing) (Halonen 2004, p. 32). Education for produc- ers constantly seeks a balance between art and strategic subjects to meet the requirements of the labour market. Quality of the living environment The quality of the living environment as a dimension of competitiveness refers to the physical, operational, social and financial environment as a whole, which affects the satisfaction and living conditions of the ‘competent’ labour force in the region. From a cultural viewpoint, this may involve the vitality of urban centres, a range of cultural and leisure time services, the local identity, heterogeneity, tolerance and cultural diversity. The connection between a comfortable and attractive living environment, regional competitiveness and cultural policy was particularly highlighted subsequent to the study on the creative class by Richard Florida. According to Florida (2002, pp. 223−224), a di- verse range of entertainment and cultural services makes an area attractive and enhances lifestyles, and this affects decisions taken on where to live and move by those working in creative professions. In Florida’s thinking, the cultural diversity and creative atmosphere of a region become entwined in a multi-dimensional, imagery entity, on the basis of which the so-called creative class perceives the region as being either attractive or alien to them. The decision made by the competent labour force on where to live is affected by the labour market, cultural diversity, lifestyle, interaction, authenticity and identity as a whole, which Florida (2002, p. 231) groups under the term ‘quality of place’. Over the years, the quality of the living environment has received increasing emphasis as a dimension of regional competitiveness and attractiveness. As a result, many cities have given the cultural sector an increasingly important position in strategic development work. Florida (2002, p. 283) has underscored the importance of designing a ‘creativity strategy’ as part of a city’s industrial policy. Instead of direct aid to enterprises and ambi- tious, image-oriented construction investments, regions and cities seeking to raise their level of competitiveness and competence should increasingly focus their ‘strategic atten- tion’ on the development of an operating environment that fosters cultural diversity, new 30 and alternative lifestyle opportunities and the creation of an open atmosphere. Corre- spondingly, the debate in Finland has centred on the need for a comprehensive industrial policy, which, alongside direct subventions, emphasises the fact that the development of cities and regions should focus on factors that improve the operating environment. (Nup- ponen 2001; Kainulainen 2005a.) Creative industry networks and self-directive development The institutional structure and effective cooperation networks are other important fac- tors in the creation of regional competitiveness. The focus of attention in this respect falls on networks of regional development actors and the quality and dynamics of coopera- tion processes. Networks establish new investment capacity in regions, which enables the (self-)renewal of the regions. For example, the success of Silicon Valley in California is partially the result of dense social networks and an atmosphere that promotes entrepre- neurship and bold experiments. The development of Silicon Valley stems from coopera- tion between individuals and corporations as well as informal cooperation structures and associations. The development of the region has not been primarily based on planning or development projects by public administration, but rather on reciprocal dynamics be- tween private actors (Sutinen 2008, 7). Silicon Valley is a somewhat remote example when considering the organisation of cultural services in Finnish municipalities. Despite the differences in scale and opportuni- ties, the operating principles of Silicon Valley can be transposed to the everyday reality of Finnish municipalities. At present, municipal innovation policy must be implemented in an operating environment characterised by increasingly fast and complex changes. Thus, a capacity for continual self-renewal and strategic planning are of key significance (Kostiainen 2007, p. 2). Strategic planning can be defined as a resolve to steer organisa- tional development in the desired direction. At their core, however, cultural activities are spontaneous and endogenous, which is why the role of conscious development work and administrative steering is limited. It can be said that endogenous, emergent cultural ac- tivities lose part of their essence when they encounter external development measures or when incorporated into some form of instrumental or systematic activity (Ruokolainen 2008, p. 10). The danger of strategic planning is actually ‘over-developing’ cultural activities. The phenomenon has been discussed in Finland in connection with the development of the Dance Hall Lutakko in Jyväskylä and the cultural centre Kulttuuritalo Annis in Pori. Situated in the vicinity of Jyväskylä city centre, the graffiti-clad Lutakko youth centre has profiled itself as a rock concert venue. The venue has also provided young people and voluntary workers with opportunities to participate in activities. Kulttuuritalo Annankatu 6, i.e. Annis, provides a setting for independent cultural activities for children and young people in Pori. Activities focus on theatre, and the centre houses Finland’s biggest ama- teur theatre, Porin teatterinuoret, which has over 300 members. In both cultural centres, self-directive, independent youth activities and administra- tion-based, systematic development have strived to find a balance. In the case of Dance Hall Lutakko, EU project activities and the resulting ‘systematicness’ have been seen as a threat to the venue’s original character (spontaneous, independent band activities), meaning young people become estranged from opportunities to participate. The venue 31 becoming ‘too sterile’ and no longer attracting young people interested in rock music are considered potential dangers. According to participants, the venue must not be spoiled by trying to develop it. (Kainulainen 2005b.) The strategic revamp of Dublin city centre serves as an example of the tensions be- tween administration and a self-directed approach in an international context. The Tem- ple Bar Initiative, a culture-led regeneration project, was implemented to enhance the city’s competitiveness and improve the economy. The project’s starting point included a revamp of the city’s cultural quarter and increasing the number of cultural activities. The selection of Dublin as the European Capital of Culture in 1991 was the impetus for regenerating the Temple Bar district as the city’s cultural flagship. According to critics, the project’s investments and promotion of business activities resulted in a rise in prices, which led to gentrification. The rise in living, land and housing costs led to a number of artists and cultural actors being forced to move from the area. Critics add that the original, bohemian ‘cultural spirit’ of the area changed and lost some of its authenticity. Consequently, the project, which was originally focused on cultural development, was seen by some (McCarthyn 1998) to gradually become a top-down managed operating programme that worked against cultural activities and reduced opportunities. Developing cultural activities requires understanding and local sensitivity (Storey 1999, p. 308). In other words, directing resources or applying a top-down principle of management is inadequate. During the development process, sufficient attention must be paid to local cultural actors and special features. Cultural areas may be developed and productised in a short-sighted manner, concentrating on consumer and visitor prefer- ences. The region’s historical layers and diverse culture and ways of life can be forgotten in the process – in fact, the diversity may be destroyed intentionally, so that the tacti- cally selected themes clearly become the desired images and brands. For example, Chang (1998) sees that designers and ‘place tamers’ consciously or unconsciously suppress the opportunities for endogenous identity and organic development. The most challenging and perhaps most paradoxical aspect of systematic regional development work is that the richest, most attractive cultural content with the most sig- nificance for regional development is usually developed within the context of self-directed cultural activities or creative artistic activities. They are most likely to include different, new, surprising, divergent and unestablished forms of cultural activity, which result in multidimensional regional impacts. (Kainulainen 2004; Ruokolainen 2008, p. 72) Cultural Living lab How can endogenous regional development be supported in a controlled manner? How can innovative operating models based on a happy medium between being managed and self-directed and which support the region’s holistic development be created? The devel- opment of business activities within the creative industries requires a dynamic, interdis- ciplinarily networked, self-renewable (product) development environment, which estab- lishes new cultural capital and skills in the region. Recent studies have approached regional development work from the perspectives of innovative development platforms and open innovation. Innovative development plat- forms and dynamic product development environments enhance the self-renewal capacity of a region or organisation. (Saarivirta 2008, pp.1–2). 32 The self-renewal of a region or organisation requires cooperation, which is supported by the regional concentrating of operations, i.e. clusters. Furthermore, efforts should be made within the cultural sector and businesses in the creative industries to support the creation of regionally profiled competence clusters. Cultural clusters function as platforms and inspiring stimuli for creative thinking and the production of new ideas. The regional proximity of different operations enables endogenous social interaction and a collective learning process based on trust, stimulation and strategic partnership. As a cyclical proc- ess, a cluster of creative activities creates a dynamic development atmosphere, which pro- duces new institutions, innovations, attracts experts and makes companies more willing to investment. (Montgomery 1995; Turok 2003). The conscious, strategic planning of clusters of creative industries is a topical challenge in regional development work and cultural interaction. The Living Lab operating model, which has emerged as a topic of debate in recent years, provides an innovative starting point for strategic planning. The term Living Lab was created in the 1990s, when, along- side technological testing, genuine user environments were adopted for product and service development. There was an ever greater need for new, user-oriented information in living environments that were transforming in an evolutionarily way. (Rönkä & Orava 2007). Living Lab development platforms are innovation environments that integrate product and service providers, developers and end users. Product and service end users in genu- ine operating situations lie at the heart of Living Labs. The so-called Quadruple Helix concept is linked to the operating model, and refers to cooperation between the public sector, industry and commerce, research and users (citizens, consumers, inhabitants, em- ployees and recreationalists) in, for example, planning residential areas (Rönkä & Orava 2007, p. 29). The driving force behind innovative development platforms is the integration of the resources of various actors and experts. The aim is to increase knowledge, share informa- tion and distribute work between, for example, technological competence and artistic creativity. For example, designers, scriptwriters, producers and composers may work as service planners. Similarly, product development can take onboard the opportunities in fields such as information and media technology, architecture and interior design on the basis of user experiences. Examples of Finnish Living Labs include Arabianranta in Helsinki and to a certain extent Forum Virium Helsinki (Kostainen 2007, p. 11). Forum Virium Helsinki is of- ficially described as a cluster project for developing digital services and content, and is physically located in central Pasila in Helsinki. The project aims to unite key actors in the sector through a shared forum/testing platform that enables flexible and fast innovation and testing. The cluster project’s participants combine their individual competence and knowledge, and aim to jointly create innovations while productising services. The project aims to create an open innovation environment for companies and implement large-scale projects between actors. In the future, it would be appropriate to consider adopting the Living Labs concept on a broader scale in regional and provincial development work within the cultural sector. In ad- dition, the ways in which regional development measures could support the planning and implementation of Living Lab product development environments should be examined. The concept of innovative development platforms can also be applied to the design of cultural service concepts implemented by Finnish municipalities. The Paras project, for 33 instance, requires municipalities to be able to engage in self-renewal. Innovation does not come about by itself. Municipalities need strategic cooperation forums and development platforms for the innovation of new services. In organising municipal cultural services, a concrete view must be established on how the services will be financed and produced. The challenges in developing municipal cultural services include the creation of multidisciplinary service innovations and regional networking in service production. Multidisciplinary service innovations can be created for both local cultural services and the regional offering. In terms of the regional offering, theatres and museums have great potential for generating new forms of service production. With the increased cooperation among municipalities, theatres as art institutions face increased expectation by several municipalities to provide services. The type of regional cooperation that enables the fund- ing base of theatres to be expanded should be considered. What types of regional services should theatres provide in the future? To what extent can theatres produce chargeable services, for example as part of developing the tourism and welfare industries? In addi- tion, the basic task and values base of the theatre must be taken into account when de- signing new services; to what extent are the intrinsic value and new service role of art in conflict or in harmony? A steam ship park under discussion in the region of Savonlinna serves as a practical example. The idea was initiated by the Finnish Steam Yacht Association, which was of the opinion that valuable vessels owned by the association’s members should be placed on public display in the city centre. The aim is to preserve museum ships with national and cultural historical significance, to uphold the steam ship tradition, and to maintain ship-building skills for future generations. Another goal is to establish a commercially sustainable operating model that can be used in the provision of services within the tour- ism sector and its related industries. Examples include steam ship-related events, training, programme and cruise services, as well as presentations on ship-building and maritime skills. Such a concept has not been implemented previously in Finland, despite the fact that lake steamers constitute a significant part of Finnish history, especially in the region of Saimaa. Subsequent to the evaluation of possible sites, Riihisaari, which is adjacent to Olavin- linna castle and houses the Savonlinna Provincial Museum, proved to be the most suit- able location for the steam ship park. The museum is owned by the City of Savonlinna, and the city receives a statutory government contribution for its museum activities as well as a ten per cent increment for its regional tasks. Together, Savonlinna Provincial Mu- seum, the museum ships and Olavinlinna castle form a prestigious cultural tourist attrac- tion in Eastern Finland, which should be developed as the number of Russian tourists is on the rise, for instance. The innovativeness of the project to develop a service concept for the steam ship park is also associated with an administrative transformation, in other words, to increasing cooperation between the private and public sectors as well as an expansion in the fund- ing base for public cultural activities through an innovative service concept. Both sectors would reap rewards: the steam ship park would increase the amount of tourism and cre- ate opportunities for improving the capacity of the Provincial Museum to serve an in- creasing number of visitors. Similarly, the Provincial Museum could boost the attraction and customer base of the steam ship park. The Museum could also contribute content- related expertise on history and traditions to the development work. 34 In summary, the new operating models for cultural and leisure services need to take very different value bases and operating cultures into consideration. On the one hand, the issue concerns a principle that steers earnings logic activities, while on the other, de- velopment may be related to culturally and artistically ambitious content. 3  Conclusions All of the dimensions of competitiveness referred to in this article are reflected in the attractiveness and appeal of a region in terms of working, living, business activities and leisure time. At the same time, the development of cultural activities and the creative in- dustries is closely linked to a comprehensive regional development policy. The reformed regional administration should examine culture within a broad context as a resource contributing to regional (self-)renewal and development. From the perspective of regional competitiveness, development work in the cultural sector should consider the following aspects and development guidelines: • How can cultural expertise be supported and promoted in atypical sectors through con- scious development efforts? • How can regional, cross-sectoral competence clusters be developed and supported, so that new cultural expertise that supports the region’s special features becomes rooted and attracts other actors in the long term? • How can competence and education in the area of cultural production be implemented in connection with strategic development? • How is the cultural sector taken into consideration as a dimension of comprehensive industrial policy and in strengthening the preconditions for business activities? • How are the principles of rational strategic planning and self-directive cultural activity brought together? • How can the Living Lab operating model be implemented at a regional level as an inno- vative development platform for the cultural sector? • How can innovative forms of cooperation (which integrate the public, private and third sector), earnings models and multidisciplinary service concepts be created for the crea- tive industries in connection with public cultural services? 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