ABRI/KIN workshop June 23rd 2011, Amsterdam

1. ABRI/KIN workshopJune 23rd 2011, Amsterdam The Dynamics of Creativity in Innovative Territories Patrick Cohendet HEC Montréal (Mosaic)

2. Montréal and the creative industries …

3. References • Storper, M., Venables, J. (2004) : “Buzz: face-to-face contact and the urban economy”, Journal of Economic Geography, vol. 4, n°4, pp.351-370. • Bathelt, H., Malmberg, A. and Maskell, P. (2004): “Clusters and Knowledge: Local Buzz, Global Pipelines and the Process of Knowledge Creation”. Progress in Human Geography, vol. 28, pp. 31-56. • Feldman, M. (2003): “The Locational Dynamics of the US Biotech Industry: Knowledge Externalities and the Anchor Hypothesis”, Industry and Innovation, Vol.10, Issue 3, pp. 311 - 329 • Grabher, G. (2001). Ecologies of Creativity: the Village, the Group, and the HeterarchicOrganisation of the British Advertising Industry. Environment & Planning A, vol. 33, pp. 351-374. • Rullani E. (2001), The Industrial Cluster as a Complex Adaptive System as published in “Complexity and Industrial Clusters : Dynamics and Models in Theory and Practice, Physica-Verlag, 2002. • Asheim, B. T. and Gertler, M. (2005) The Geography of Innovation: Regional Innovation Systems, in Fagerberg, J., Mowery, D. and Nelson, R. (eds.), The Oxford Handbook of Innovation, Oxford University Press, Oxford, pp. 291-317. • Andy Pratt , Paul Jeffcutt (2009), Creativity, innovation and the cultural economy, Routeldge 2009 • Landry, C (2008) The Creative City: A toolkit for urban innovators, London, Earthscan • Feldman, M. P., Audretsch D.B. (1999) : “Innovation in Cities: Science-based Diversity, specialization, and Localized Competition”, European Economic Review, vol.43, pp. 409-429 • P. Cohendet;  D. Grandadam; L. Simon “The Anatomy of the Creative City” (2010), Industry and Innovation, , vol7, n1, pp 91 – 111 • Scott, A.J. (2005) : “Creative Cities: Conceptual Issues and Policy Questions”. OECD International Conference on City Competitiveness. Santa-Cruz de Tenerife, Spain. 3-4 March 2005. • R.Florida (2002) , the Rise of the creative class.

4. Selected personnal references • Cohendet.P; Héraud. J.A; Llerena P. (2011) : «Microdynamics of innovation», in M. AKRICH et al. (eds), Débordements. Mélanges offerts à Michel Callon, Presses des Mines, Paris. • P. Cohendet;  D. Grandadam; L. Simon (2010), “The anatomy of the creative city” Industry and Innovation,, vol7, n1, pp 91 – 111 • P.Cohendet; D. Grandadam; L. Simon., (2009) “Economics and the ecology of creativity: Evidence from the popular music industry”, International Review of Applied Economics, vol23, n6, pp709 à 722 • P.Cohendet; L.Simon, (2007) “Playing across the Playground: Paradoxes of knowledge creation in the video-game firm», Journal of Organizational Behaviour,, p 587-605 • A. Amin; P.Cohendet (2004) Architectures of Knowledge: firms, capabilities and communities,, Oxford University Press, Oxford UK.

5. Some main issues 1. Innovation vs Creativity 2. The role of communities in creative processes 3. « Creative firms ». 4. « Creative territoires ».

6. 1. Innovation vs Creativity

7. The Creative Economy “The interface amongcreativity, culture, economics and technology,as expressed in the ability to create and circulateintellectual capital, has the potential togenerate income, jobs and export earningswhile at the same time promoting socialinclusion, cultural diversity and human development” (Creative Economy Report – UNCTAD 2008)

8. The Creative Industries Advertising Architecture Arts Crafts Design Fashion Movies Music Performing arts Publishing Software Games & Toys TV & Radio Video games Since the beginning of the 90s, the economic growth of creative industries is two times bigger than the growth of service activities and four times bigger than the growth of manufacturing industries . The ONU – UNCTAD « Creative Economy Report» (December 2008)

9. From inventive processes… Design Marketing Business Model Environment Social Responsability Generation of ideas=science Processes of innovation Invention

10. Inventive or creative? • (Weak) Scientific Creativity: Combination of pre-existing elements (e.g. mp3 players, hard drives, LCD screens,...) with very few real novelties (software - iTunes). + (Strong) Artistic Creativity: Aesthetic design, elegant ergonomy, user friendly + (Very Strong) Business Creativity: “Apple negotiated a business model with the music industry that allowed everybody to get what they want -- the music industry to get their royalties, Apple to sell downloads and the iPod itself, and the customer to be able to select the songs they want rather than putting up with the compilations the industry offered because of its previous business model,” (Midgley 2009) It changes the rules of the game of buying and listening to music! Steven LEVY. The Perfect Thing.

11. ..to creative processes…. Generation of ideas: science, arts, local culture, etc. Processes of innovation Creative processes Invention Creative identity Design Business model

12. Different categories of knowledge (Asheim, Gertler)

13. 2. The role of communities in creative processes

14. 1. Penicillin: the discovery 1928 After the war, Fleming actively searched for anti-bacterial agents having witnessed the death of many soldiers from septicaemia resulting from infected wounds. Fleming was already well-known as a brilliant researcher, but quite careless lab technician; he often forgot cultures that he worked on, and his lab in general was usually in chaos. Source: Cohendet, Héraud, Llerena (2011).

15. 2. Facing general indifference: Trying to Convince/translate and looking for allies • Fleming published his discovery in 1929 in the British Journal of Experimental Pathology, but little attention was paid to his article. • In the 1930s, Fleming’s trials occasionally showed more promise. In particular he treated one of his assistants, Keith Rogers, who was probably the first patient to be treated clinically with penicillin ointment to cure severe conjunctivitis. However, Fleming faced considerable obstacles to replicate and extent his inventive ideas to an industrial stage. Many clinical tests were inconclusive, probably because he was thinking that penicillin should be used as a surface antiseptic.. • Facing scepticism, doubts, misunderstandings, refusals to consider the interest of his ideas from his own community of bacteriologists, he undertook considerable efforts to alert other communities (chemists, biologists, medicine, etc.) in order to convince them of the usefulness and potentials of their discovery

16. 3. The building of the “codebook” by the communities • Fleming continued, until 1940, to try and interest some chemists skilled enough to further refine usable penicillin. Florey (pathologist) and Chain biologist) took up researching and tried mass producing it with the funds of the U.S and British governments help. • Within Oxford Dunn School, Ernst Chain and his team worked out how to isolate and concentrate penicillin. He also correctly theorised the structure of penicillin. Shortly after the team published its first results in 1940, Florey Chain's head of department validated with Fleming Chain’s team results • In the same school, Norman Heatley’s team suggested transferring the active ingredient of penicillin back into water by changing its acidity. He suggested trying the fermentation route instead of the chemical one. This fermentation route produced enough of the drug to begin testing on animals.

17. 4. Results of the innovative process Fleming, Florey, and Chain jointly received the Nobel Prize in Medicine in 1945. Sir Henry Harris said in 1998: "Without Fleming, no Chain; without Chain, no Florey; without Florey, no Heatley; without Heatley, no penicillin.“

18. Revisiting the dynamics of invention • In Arrow’s perspective, the producer of knowledge acts in isolation: nothing is said about the complementary forms of knowledge necessary for the producer of knowledge to invent, and nothing is said about the community of agents who supported him in the process that lead to the invention. The main risk is the risk of being copied (at no cost). • Evolutionary view: The group of agents who succeed in expressing and formalizing an innovative idea is confronted to the risk of being misunderstood by others (including agents belonging to the same institution). It is therefore the risk that their procedures and experience will not be reproduced by others. • Without a collective effort to reach a critical mass of common understanding between the different actors committed in this emerging phase, the innovation process can not be viable. • The group of agents at the origin of an innovation must undertake considerable efforts to alert other actors or communities in order to convince them of the usefulness and potentials of their discovery

19. Revisiting the dynamics of invention. • In this emerging phase of production of knowledge, besides institutions and some talented individuals, the active units are the knowing communities of agents that are committed to the creation and accumulation of the new forms of knowledge: • The fundamental cognitive building of the codes and grammar that will equip the novelty requires the active functioning and interactions of knowing communities. They achieve a process of progressive codification of knowledge, starting from a phase where the actors do not know the characteristics of the novelty, do not know each other, and do not possess the capabilities to communicate in order to reach a phase where the novelty is equipped with sufficient shared understanding and codes to become economically viable. • Thus, the development of invention requires the progressive building of a common base of knowledge, a model and a “grammar” (a”codebook”) to be able to interpret tests, experiences and contexts of usage.

20. Revisiting the dynamics of invention (4) • An essential part of the process of production of knowledge can be interpreted as resulting from the dynamics of interactions between knowing communities. These interactions can be approached through the principle of ‘translation/enrolment’ (Callon, Latour, 1991). The innovative diffusion of ideas can be seen as a process of progressive contagion of communities, where each community makes efforts to ‘command the attention’ of other communities to convince them of the relevant interest of the knowledge it has elaborated. • This essential process of progressive codification is not a linear one. It generally involves an early phase during which the innovators encounter misunderstandings, conflicts and difficulty to convince. The first steps in the emerging phase can be long and painful. It generally requires boundary spanners, boundary objects, etc. to facilitate the dialogue between knowing communities. • It is only at the end of the process, at a stage which can be described as the “phase of stabilisation”, when the characteristics of the novelty are fully understood, and described in codes and procedures that every agent can access and use, that we reach a situation which corresponds to the traditional context of production of knowledge as described by Arrow.

21. The process of creation of ideas = “Self-organised RD consortium”, Cassier and Foray (2002, p.124) - The dynamic process of creation of ideas the precedes the innovation process is often characterised by stronger economic motives to pool and share knowledge than to delineate private domains of knowledge and keep secrecy • It allows agents to develop concerted actions by organizing the division of labour to explore a certain domain and providing an institutional framework to assemble divided and dispersed knowledge. • It creates spaces for sharing knowledge, in which there is a break from technological secrecy and the retention of knowledge by private agents. It generates a new economic category of knowledge called collective or pooled knowledge, which is shared among participants during the period of research. • It can enable agents to create a more consistent and coherent initial endowment of intellectual property rights, which does not fragment the knowledge base. When the knowledge is initially fragmented (anticommons property), the consortium provides a space in which rights can be exchanged at a low cost, because partners are well identified and some collective learning can occur.

22. The social dynamics of innovation Knowledge Creation Innovation Individuals Communities Organisations Science – Technologie - Société – Usagers - Milieu Markets Cohendet, P., Grandadam, D. et Simon, L  «Réseaux, communautés et projets dans les processus créatifs», Management international, vol. 13, no 1, 2008.

23. Properties of knowing communities (1) • 1) Members of the community accept to exchange voluntarily and on a regular basis about a common interest or objective in a given specialised field of knowledge. • 2) Through their repeated interactions and common practice, members build progressively a shared identity and social norms « The shared identity does not only lower the costs of communication, but establishes tacit and codified rules of coordination  ». • 3) Communities have no clear boundaries. • 4) There is no visible or explicit hierarchy at the top of them that can control the quality of work or the respect of any standard procedure • 5) The notion of contract is meaningless within the members of the community. Traditional incentives do not apply. But reputation matters (Lerner and Tirole, 2002).

24. Benefits of K communities for the organisation • Support (at negligeable costs) the fixed costs of building and accumulating knowledge in a given domain (common language, methods, models, etc..) • Help drive strategy, build core capabilities and knowledge competencies (local units of competence). • Brings on a permanent basis ideas from the outside world (units of absorptive capabilities). Transfer best practices.Support faster problem solving both locally and organisation wide • Aid in developing, recruiting and retaining talent. Helps knowledge workers stay current.

25. Benefits from communities of practice at http://www.youtube.com/watch?v=mNCb7QsAb3I

26. Limits of K communities • Risk of parochialism • Risk of emergence of a « guru »  • Risk of lack of interactions between communities • Risk of conflicts between communities • Fragility: risk of destruction • Risk of « leakeages » of strategic corporate information • etc.

27. Different types of K communities

28. Types of communities(Amin and Roberts, 2008)

29. Bowles, S., and Gintis H. (2000). ‘Social Capital and Community Governance’, Working Paper 01-01-003, Santa Fe Institute,www.santafe.edu/sfi/publications/Working-Papers/01-01-003.pdf. • ‘Community’ better captures the aspects of governance that explain the popularity of ‘social capital’, as it focuses attention on what groupsdo rather than what people own. • …. By community we mean a group of people who interact directly, frequently and in multi-faceted ways. People who work together are usually communities in this sense, as are some neighborhoods, groups of friends, professional and business networks, gangs, and sports leagues. The list suggests that connection, not affection, is the defining characteristic of a community.

30. The ideal-typical organizational forms

31. Historically, the focus on communities has changed • Early 90’s Communities of practice (Brown, Duguid, Wenger, Lave, Boland, Mc Dermott, etc ..), then on epistemiccommunities (Knorr-Cetina, David, Foray , Cowan, etc.). • Mid 90s, early 2000s: Virtual and open communities (Rheingold, von Krogh, vonHippel, Tirole, Lerner, Lakhani, etc.) • Fromearly 2000s, communities of users (von Krogh, Dahlander, Magnusson, Jaeger, etc.)

32. Brown, J. S., and Duguid P. (1991). ‘Organizational learning and communities of practice: toward a unified view of working, learning and innovation', Organization Science, 2, 1: 40-57.

33. 3. « Creative firms ».

34. The Drivers of the Economy of Creativity: The Creative Industries The creative industries comprise advertising, architecture, arts &crafts, design, fashion, film, music, performing arts, publishing, software, toys and games, TV and radio, and video games (Howkins, The Creative Economy, 2001, p. 88-117). They integrate science, technology and arts, and use creativity and intellectual capital as primary inputs.(Creative Economy Report, 2008. p. 13.) • Few intensive formalized R&D activities, very small R&D unit/laboratories • No subsidiary dedicated to R&D • Few direct contracts with universities or academic research centers • Very little involvement in international research alliances, consortia…

35. Conceptual research issues and challenges • The established economic theories of the firm (Agency, Transactional, Evolutionary, Knowledge-based approach, etc.) and organizational theories have been significantly inspired by the manufacturing industries. • To what extent can they offer pertinent and consistant frames of interpretation of the creative industries? • In particular, could creative industries be seen as mere «nexus of contracts» (Williamson, Aoki, etc..) as the traditional industries ?

36. A Stylized Case: Ubisoft Montreal • Firm’s ID: Ubisoft: French basedvideo-gamesdeveloper (80%) and publisher (20%), established in 1985. Ranked: 3rd independantpublisher in the US (2008, 7,2 % marketshare), 2nd in Europe (2008, 9.5 %). Results: euros 1, 058 M ., net cash position: euros 155 M. (2008-9). • Montreal Studio (established 1997, localized in the Mile-End area) • 1800 + employees (2009), 1600 of which in the same building • Demographics : Employeesaverageage : 27, management averageage : 32 • Most of them active as cultural creatives and consumers of creativity • Projects portfolio : 20 + productsdeveloped in parallel / 10+ new products a year • Blockbusters (2 to 3 / year), casual, licenses • Main Mtl. brands: SplinterCell, Assassin’sCreed, Prince of Persia… • Montrealvideogame cluster: 5500 gamedevelopers, 10000+ employees (Gvt. grantsfrom 1997). Historicalplayers: Softimage, DiscreetLogic, Kutoka Interactive, DTI … • Main players: EA, Activision, Warner, Eidos, A2M, Ludia… • Empirical sources: - Organizational ethnography (Simon, 2002, PhD dissertation) • Regular updates through constant interactions with managers and employees.

37. Organization of the Ubisoft Montreal Studio • Formerly a functional matrix structure (97-98) and balanced matrix structure (99-00) • Projects-led firm, (since 2000) based on interdisciplinary, modular projects, involving diverse creative communities (or communities of specialists in Ubisoft jargon) :Script writers, game-designers, graphic artists in 2D and 3D, sound designers, software programmers, testers, etc..(Crosby, 2000). • Intensive informal connections/knowledge flows between employees / communities members: - with the other project team members • - inside the main building, with other employees from different projects • - outside the firm, in the local area, with employees from different projects • - outside the firm, with the Underground, and other creative individualsé • - outside the firm, in Montréal with other employees from the video-game • cluster, with other creative groups

38. Projects/Creative Communities at Ubisoft CEO Artistic/creative direction Production & process Marketing & Sales HR R&D Finance Intensive knowledge flows, under project constraints Project ‘Loose’ knowledge flows Creative slack Knowledge flows inside a community Community Accumulation of specialised knowledge

39. Main observations at Ubisoft Montreal Studio • “Dual” dynamics • Classical innovation process based on projects, mostly managed by the hierarchy • Ideas management process fed by the “creative slack”, mostly fed by communities • « Both mechanisms of exploration and exploitation are inherently shared between a component that is internal to the firm (and control by it) and a component that is not only largely external to the firm, but also essentially informal (which implies that the classical means of control, such as contractual schemes are irrelevant)…. • Exploitation and exploration tend to be unfolded in an organically intricate and complementary way where they constantly fuel each other “ (Cohendet, Simon, 2007).

40. Creativity in “Traditional Industries” • Ideas generation and the management of innovative project tend to be sequential. • Once the project is decided by the hierarchy, the process of idea generation is launched. • It mixes ideas from R&D, diverse forms of absorptive capacity (market analysis), brainstorming sessions… • Priority is given to the « cristalization » of the concept. • As it unfolds, the project dynamic supposes a progressive reduction of the variety of avalable options (traditional «stage-gate») • When the project is over, the accumulated knowledge is difficult to assess and to transfer to future projects.

41. Classical Stage-Gate process (Cooper, 1988) Idea Generation Development Build business case Testing & valuation Launch Gate 3: Go to tests Gate 4: Go to launch Gate 2: Go to development Gate 1: Idea screen

42. Sustained Creativity in “Creative Industries” Idea generation and the management of projects are « parallel processes». They feed and fuel each other. The process of idea generation assures the sustained creativity of the firm. It is essentially nurtured by the creative communities. The fundamental component of idea generation is the « creative slack ». The creative slack fosters complementarities and mutual fuelling between explorative and exploitative activities. The creative slack is distributed partly in the formalised codified knowledge base of the firm but mostly in the cognitive activity of the communities.

43. Projects and ideas generation at Ubisoft Process of Idea Generation Creative community Project

44. Sustaining Creativity through Creative Slack The remarkable characteristic of the process is the formation of a creative slack viewed as a “repertoire of creative opportunities” which contribute to guide the choice of future project and beyond the growth of the firm. The creative slack is shaped by the culture of the firm and is essentially understandable through the jargon of the organization. In line with Penrose’s vision, the firm which has accumulated a creative slack is better prepared than any other organization to derive a benefit from the creative potential of the slack. Because of these idiosyncrasies, it is much cheaper to valorize the slack within the firm which holds it than through any other organization (including through any isolated communities). Some may argue that the creative slack appears as a cushion of redundancy which is costly to maintain. The specific conditions of formation of the creative slack in videogames companies (which relies on the functioning of quasi autonomous communities which naturally take in charge at negligible costs the production and conservation of knowledge in their domain of specialization) offer strong guarantees of the efficiency of maintaining the creative slack at low costs. The slack is not “possessed by the firm”. It is essentially “delegated” to the communities.

45. 4. « creative territoires ».

46. On Creative cities.

47. Elbeuf, France, XIXth Houston, Texas, XXth Creative projects in Chicago, XXIth 47

48. Industrial clusters. Territories of industrial concentration between firms, R&D units and related institutions. (Marshal, Weber, Glaeser, Jacobs, Porter, etc.). The main creative forces are located at the articulation of science and industry (“invention paradigm”, Arthur, 2006).

49. Two main types of industrial clusters • The main distinction between different industrial clusters is related to the nature of economic externalities arising between institutions • On the one hand (Marshall, Arrow, Porter, Glaeser) knowledge is predominantly industry-specific and the spillovers may arise between firms within the same industry (localisation externalities). Cluster based on « Specialization »: Cluster based on « Diversity»: • On the other hand, Jacobs (1969), argues that knowledge may spill-over between complementary rather than similar industries since ideas developed by one industry can be applied to others.

50. The City and the Creative Class • Florida (2002): for cities to develop, they need to attract a creative class of workers by providing, through investment in cultural facilities and other related amenities, a fertile place for this population to imagine new products, technologies, or processes.. • Severe criticisms: Malenga (2004); Peck(2005), Scott (2006), etc. pinpointing some major weaknesses. • Our view (Cohendet, Grandadam, Simon, 2010): Florida considers who these creative people are, but he does not explain and analyse what they really do.