Abstract: This paper presents a three-stage hypothesis on the development of creative industrial clusters, which includes stages of agglomeration, interfacing, and network development. In the first stage, micro-entities concentrate geographically in a creative industrial cluster in search of resources. The second stage reflects the need for building identity. Finally, the third stage is the outcome of multi-dimensional expansion. As a creative industrial cluster develops, its focus moves from geographic concentration to division of labor and the creation of novel systems. Using this three-stage framework, this paper conducts an empirical study on Beijing’s 798 District ( “798”). Our study finds that the “self-destruction” phenomenon (which appeared after 798 had reached the stage of network development in a low-level capacity) is essentially the product of a squeezing effect of commercial prosperity on art production. Our study further examines four models of art-commerce integration and explains the ways in which creative industrial clusters are different from conventional industrial clusters: a creative cluster is a platform of integration for culture, commerce, and technology. Its course of development is characterized by novelty, emergence of identity through interfacing, and network cooperation.
Key words: creative industrial cluster, path of emergence, development mechanism, integration with culture, commerce and technology
JEL: L8, B52
1. Introduction
The term “creative industrial cluster” refers to the geographic concentration of one or more creative industries. Against the backdrop of globalization, creative industrial clusters have appeared in large cities and across the world (A.Scott, 2005). International scholars have studied creative industrial clusters from a geographic perspective (T.Hutton, 2000; J.Howkins, 2001; J.Hartley, 2005; Doris et al., 2006; M.Michael, 2010). Most scholars believe that creative industrial clusters tend to appear in cities and regions that offer favorable business environments, public services, transport, ease of access, and a culture of leisure. Some Chinese scholars have also used the analogy of a symbiotic relationship to study creative industrial clusters. Chen Qiuling (2006) examined the agglomeration effect of 18 creative industrial clusters in Shanghai using the symbiosis model and identified a positive correlation between mutually beneficial symbiotic relationships and benefits for a creative industrial cluster. Approaching the topic of creative industrial clusters from a geographic or symbiotic framework, however, fail to provide a detailed explanation on how creative industrial clusters come into being and evolve. This paper offers a three-stage hypothesis on the development of creative industrial clusters and takes Beijing’s 798 District (“798”) as a case study. Finally, 798’s “self-destruction” is examined in detail to draw lessons on the development and sustainability of creative clusters.
2. Creative Industrial Clusters’ Three-stage Development
Industrial clustering is a process by which firms become geographically concentrated and interact with one another to form a stable system (Weber, 1909; Ottaviano and Thisse, 2002). This definition also applies to creative industries. We identify three stages for the development of creative clusters according to the general process of industrial clustering characterized by agglomeration, interfacing, and network-building. These stages appear sequentially: individual firms first establish their presence in a creative industrial cluster, then interact with one another, and finally develop complex structures for interaction.
In Figure 1, the horizontal axis denotes the different stages of creative industrial cluster development. The vertical axis denotes the degree of evolution, which increases with the level of information sharing and strength of cooperative ties. These two factors are referenced from relevant studies on symbiotic systems (Boons and Baas, 1997; Wang Zhaohua, 2007), where level of information sharing refers to the broadness of information communication among micro-entities and strength of cooperative ties refers to the duration and frequency of cooperation among micro-entities. As creative industrial cluster development progresses, these indicators increase.
2.1 Agglomeration stage
Firms of the same type are the first to concentrate in a cluster, preceding the arrival of upstream, downstream and supporting firms in the same geographic region. In addition, due to the relatively high flexibility of labor in creative industries, consumers have a greater opportunity to take part in co-creation (Ross, 2009). Thus, agglomeration in the broad sense also includes the agglomeration and participation of consumers.
In this stage, micro-entities are attracted to a creative industrial cluster by what we term the “economic factor” and the “identity factor”. The economic factor refers mainly to low cost and other external economic opportunities, while the identity factor refers to the mechanism for determining market value in creative industries. The significance of identity to micro-entities in creative industries is a product of public perception that the value of creative products is more uncertain than that of general goods (Potts, 2011). Creative firms employ various techniques to denote their goods’ realistic or potential value, and identity with similar firms, as well as the exclusivity that comes with identifying as part of a creative cluster, are important indicators. In this way, the identity factor is fundamentally a social attribute that influences micro-entities’ choice of location
The agglomeration stage, which is characterized by short-lived cooperation and relatively limited transactions, mean that micro-entities can have only a low level of technological and knowledge exchange. Hence, we may think of this stage merely as geographic concentration.
2.2 Interface stage
As interaction increases, micro-entities begin to develop interdependencies, and their interface becomes more stable. Higher levels of cooperation and exchange enhance information sharing and cooperative ties, elevating what was previously geographic concentration to work sharing and collaboration.
For creative micro-entities, interfacing is also a process of identity building. According to Akerlof and Kranton (2000), identity depends on mutual interactions between individual actors and behaviors. Through interfacing, micro-entities develop firm identity and form stable ties of specialization and collaboration. The interface (or identity), moreover, is built through both formal and informal mechanisms. Formal mechanisms refer to official agreements, contracts, or other public relationships with outside firms concerning design, development, production, and/or marketing processes. Informal mechanisms refer to the informal or non-contractual relationships developed through interactions among micro-entities over time and based on their common social and cultural backgrounds.
Interfacing thus takes shape through formal and informal mechanisms and can build several types of identity, including dotted identity, intermittent identity, and continuous identity. Dotted identity refers to unstable connections between micro-entities. Such connections are random and exposed to larger opportunistic risks. As interactions increase, micro-entities may develop an intermittent identity, which refers to non-continuous interconnections. From this stage, interactions may begin to build continuous identity. In this stage, interfacing becomes continuous, and opportunities for cooperation are characterized by stronger mutual assuredness, selectivity, and stability, with fewer opportunistic behaviors. Micro-entities may form strategic alliances when developing an integrated identity. Among the four types of identity, continuous identity is the most desirable, as dotted identity and intermittent identity involve great transaction costs, and integrated identity has a restrictive effect on innovation (Feng Delian, 2000).
2.3 Network-building stage
J.Potts et al. (2008) argue that the nature of creative industry is a social network market in which producers and consumers adapt to novel ideas. Network development, therefore, is key to the industry’s agglomeration. When network development reaches a certain level, transactions involving technology and knowledge among creative entities increases, and sharing and cooperation are conducted in a broader and richer space. In this stage, identity develops from a simple linear relationship to a complex network relationship, forming a social network full of novel ideas. Generally speaking, the earliest creative entities in the cluster may develop a competitive network, but as upstream and downstream entities and consumers join and collaborate, a network with supply better responsive to demand will come into shape. Entry of supporting firms will improve the network and enhance its complementary features. In a creative cluster, many such networks will coexist with at least one dominant network that determines the future orientation of the creative cluster.
In short, as shown in Figure 1, the development of a creative cluster is marked by three stages, each of which is driven by micro-entities whose behaviors are based on their own interests. In a cluster’s early stages, individual entities become geographically concentrated in order to secure resources. This is followed by the emergence of a common identity and preliminary collaboration. Lastly, a creative network emerges that is characterized by a high level of information sharing and strong cooperative ties among its members1.
3. Case Study: 798 Art District
Located within a construction area of 230,000 square meters in Dashanzi in Chaoyang District of Beijing, 798 is home to numerous creative micro-entities such as studios, galleries, performance spaces, fashion boutiques, restaurants, and bars. This paper explores the three-stage development hypothesis using 798.
The 798 creative industrial cluster first appeared in 20002. We argue that the following factors motivated artists with weaker market share to locate to 798 (See Figure 2):
(1) Cost. Bauhaus buildings in 798 provide
ample studio space. Additionally, as an abandoned former factory compound located at the outskirts of Beijing, at its inception 798 offered comparatively low rent.
(2) Public support. Beginning in 2006, the 798 creative cluster received vigorous support from the Beijing municipal government. The municipal government created a special fund for the development of culture and creative industries, which had the effect of improving 798’s infrastructure. With improvements in both hard and soft environment, 798 expanded, and public support replaced cost as the primary attraction for larger and more well-known artists and creative firms.
(3) Identity. As the artistic atmosphere grew, identity became another attractive feature for prospective firms. Prospective firms could look to both the recognition of certain artists and firms in 798, as well as to the recognition by the public of the district as a whole as a creative hotspot. Identity factor not only reduces the psychological cost for the entry of micro-entities in a creative cluster but also enhances utility of the entry.
When 798 emerged, cooperation and information sharing was relatively limited. Attractive cost opportunities, public support, and an increasingly identifiable brand, however, brought 798 to the second stage of development.
Beginning in 2003, upstream and downstream firms such as galleries and mass media institutions began moving to 798, giving rise to interfacing. As the number of firms, especially internationally renowned art centers and creative agencies, increased after 2006, 798 was characterized by higher levels of interaction for identity perception, information sharing and cooperation, clearelier-defined identities, all of which had cultural and economic spillover effects. Development in this stage was characterized by the following mechanisms:
(1) Interfacing. As in most creative clusters, formal interfacing in 798 is carried out through contract mechanisms. Interface between galleries and artists in 798, for example, is established through contracts. Under this formal mechanism, galleries act as artwork agents who serve both artists and collectors. Galleries sign contracts with artists to sell, publish, and market their artwork. For collectors, galleries provide a mechanism that indicates a piece’s level of artistic quality and value. Informal interfacing, on the other hand, is a non-contractual mechanism of comication based on social identity rather than direct transactions. In 798’s early history, artists, gallery owners, and other key players often met outside of the workplace, usually over dinner or coffee, to exchange ideas. Later, more coffee houses, bars, and restaurants opened in 798 with the aim of providing spaces for such informal interfacing to take place. In reality, this informal mechanism may have been more important than formal mechanisms in shaping identity in 798 because it acted as a way to shape artists’ identities in relation to other artists.
(2) Identity coalescence. As artists and firms interfaced, identities changed along with the level of interaction. In the early years of 798, communication among the creative artists was casual, and identity creation was spontaneous. As more and more creative agencies purchased space in 798, there appeared intermediaries and support agencies who stepped up such interactions. As cooperation became more frequent and information exchange more vibrant through these intermediaries, many complementary micro-entities in 798 gradually established stable, exclusive, and continuous identities.
As 798 was officially recognized among Beijing’s first culture and creative clusters in the advent of the 2008 Beijing Olympics, the cluster took on the competitive, supply-and-demand, and complementary features of a social network system. Examples include: the competitive Pace Gallery and Tokyo Art Project networks, as well as the 798 Space and White Space networks and, finally, the Ullens Center for Contemporary Art and Iberia Center for Contemporary Art networks. Other examples include supply-and-demand networks between agents and artists and complementary networks among coffee houses, bars, and restaurants and the galleries and art centers they serve. Such a mixed network system, however, is still in its early stages: linear identities between individual micro-entities still hold sway; trust and cohesion between upstream and downstream entities is weak, and collaborative creation with consumers is lacking. Despite increased sharing and cooperation, 798 has yet to develop into a stable, self-evolving, and highly integrated network system.
Most importantly, however, this low-level network failed to continue evolving. The Olympic Games brought not only an influx of art agencies but also rising rents and a commercial atmosphere. Many artists relocated to other regions. This relocation, in some cases involuntary, affected the identity interface of creative workers. The creatively-oriented identity interface that had taken shape in 798 was replaced by a consumption-oriented identity. Since it takes time to build a new identity through interfacing, it is fair to say that 798 has returned to the second stage of development.
We use Figure 3 to depict the evolution of 798. Stage I (agglomeration) occurred roughly around 2000; stage II (interfacing) occurred in 2003; and stage III (low-level network development) appeared after 2006. Due to 798’s diverging identity, indicated by A, the consumption-oriented creative industry took center stage while the creative-oriented industry declined. This caused the cluster to return to the late identity interface stage.
4. “Self-destruction”
R.Richard Caves’ study (2000) of New York art centers shows that the geographic distribution of the modern art market has an element of “self-destruction”. A life cycle that “begins with art and ends in commerce” is universal to creative clusters. In the 1980s, New York’s East Side experienced this cycle of boom and bust in less than a decade. In a similar fashion, 798, after ten years of development, has now entered a period of self-destruction.
4.1 Are commerce and art mutually exclusive? Or can art and commerce coexist?
Conventionally, commercial success has a natural squeezing effect on art creation, which is explained using the long-term mean production cost curve (Figure 4). LAC in Figure 4a indicates the long-term mean production cost curve of general goods. For general goods, the downward curve of LAC indicates the reduction of average production cost due to economies of scale and technological advances despite rising property prices and rents. However, this situation does not apply to art. Conventional artwork, such as oil paintings and sculptures, is made by individual artists and their costs are not subject to economies of scale and technological advances. In this case, rising property prices and rents will inevitably increase the long-term mean production cost of artwork. As shown in Figure 4b, the upward curve of LAC indicates the rising long-term average production cost of art over time. Although commercial prosperity in a given region can drive artistic creation initially, rising costs will ultimately squeeze out artists, thus illustrating how a creative cluster’s life cycle “begins with art and ends in commerce”.
4.2 The future of art in a commercial environment
Art can have a beneficial relationship with commerce and technology. Multi-media and software technology can lead to cost reductions in animation production, for example. Integration between art and commerce can also be achieved through organizational change. Figure 4a shows the long-term production cost curve before economies of scale and technology reach their bottlenecks, after which cost increases (4b). Under cost pressures, firms will relocate production lines to low-cost regions and keep R&D and marketing departments in prosperous commercial regions. High-tech and high-value products may still be made in expensive regions, while lower-end products will be moved to low-cost regions. Similar organizational changes should also apply to art production.
Specifically, we observe four applications of the integration between art and commerce. Technical integration: creation of new art products and services through the application of modern technology. Continuous integration: strategic cooperation between artists and businesspeople who share a continuous identity, so that business interest will induce commercialization in the art market. Comprehensive integration: artists develop into businesspeople and have dual professional identities (i.e., film directors who hold shares in media groups). Regional integration: labor to produce artwork should be redistributed geographically between expensive commercial districts and low-cost regions as described in the preceding paragraph.
4.3 Main problems affecting 798 in the post-interface period
Commercial prosperity has a squeezing effect on art production. In addition to cost pressures, although the number of art agencies increased rapidly in 798 after 2006, identity interactions and network development fell short due to limited competence and genuine interest of new players.
Moreover, existing formal and informal mechanisms failed to properly adapt to the newly commercialized environment, aggravating the disintegration between art and commerce. Finally, in the agglomeration stage, the region’s industrial chain developed gaps due to uneven distribution of micro-entities. These gaps impeded mutual cooperation and establishment of continuous and integrated identity.
4.4 Recommendations
After the split of creative-oriented and consumption-oriented industries, 798 requires steps that will return it to a high level of development. In the course of our research, we observed that many of 798’s older creative agencies moved to locations not very far from the 798 cluster. The Beijing municipal government should develop a strategy to create a Pan-798 creative cluster that integrates these relocated art agencies. Under this strategy, the old district will be consumption-oriented, while its adjacent regions will be home to art production.
798 should establish access criteria to encourage innovative micro-entities that have close connections with the market and apply technology in art production to join the cluster. Furthermore, the aforementioned Pan-798 creative cluster should develop a strong atmosphere of creativity and innovation to encourage pursuit and tolerance of novel ideas in order to integrate commercial activities with art production.
Actors should also create a multi-tiered mechanism for interfacing and establish formal and informal mechanisms for commercial development within 798.
Finally, a successful strategy for reviving 798 will involve promoting the development of complementary network systems. Supply-and-demand networks should be developed in addition to currently existing competitive networks. Technological and financial instruments should also be harnessed to develop the creative industry chain. Finally, consumer participation will further the goals of creating a larger creative cluster that features an expansive network, commercial prosperity, and complementary art creation activities.
5. Creative Industrial Clusters and the Broader Economy
Compared with cultural industrial clusters, which have only a cultural spillover effect, and with conventional manufacturing clusters, which have economic and technological spillover effects, creative industrial clusters have both cultural and economic spillover effects. As the model of art-commerce has revealed, technology also has a growing impact on culture, and technology spillover exerts a significant effect on creative industrial clusters. Creative industrial clusters are platforms of integration between commerce and technology, as well as the cultural and economic fusion of products, firms, industries, and regions. They provide an important avenue for culture and technology to merge.
Notably, novelty is a key driver for the development of creative industrial clusters. Without novelty, any creative cluster is doomed to failure. Identity is another unique attribute. It constitutes the utility function of creative entities and represents the relationship of recognition at the creative interface. Without identity, the ability to create novel ideas will diminish. Compared with other industrial clusters, creative clusters stress the importance of collaborative creation.
Based on these analyses, the following policies should be adopted for the development of creative clusters:
Integration: policies must try to integrate creative industry with commerce and technology. Without such integration, the region will be a manufacturing cluster or a cultural industrial cluster, but never a creative industrial cluster.
Tolerance: in a creative cluster, creative industry must pursue a path of inclusive development.
Openness: as a platform of cooperation among numerous entities, a creative cluster is distinguished by less distinct spatial boundaries than those of a manufacturing cluster or a cultural cluster. As the Queensland creative model has revealed, creative space, community space, and learning space merge with and extend into one another (Michael, 2010). Thus, policies of creative industry agglomeration must be open.
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