Innovation in Creative Cities: Evidence from British Small Firms

Creative cities are seen as important sites for the generation of new ideas, products and processes. Yet, beyond case studies of a few high-profile cities, there is little empirical evidence on the link between local creative industries concentration and innovation. This paper addresses this gap with an analysis of around 1,300 UK small- and medium-sized enterprises. The results suggest that firms in local economies with high shares of creative industries employment are significantly more likely to introduce entirely new products and processes than firms elsewhere, but not innovations which are simply new to the firm. This effect is not exclusive to creative industries firms and seems to be largely due to firms in medium-sized, rather than large, cities. The results imply that creative cities may have functional specialisations in new content creation and so firms are more innovative in them.