Does the innovativeness of creative firms help their business clients to innovate?

This paper aims to enlarge our understanding of how the creative industries affect an economy’s innovation activities both by developing and introducing innovations as part of their business activities and stimulating innovation in other sectors. It applies a two-stage analysis. As to the first stage, it attempts to identify the innovation determinants of creative firms considering several characteristics of their founders and employees and different types of knowledge sources. In the second stage, the paper seeks to explore whether and how creative firms’ innovative output helps their business clients from other (creative or non-creative) industries to innovate accounting for endogeneity issues. Our analysis is based on more than 1000 firms operating in various creative industries in 5 European countries (Italy, UK, Sweden, Denmark, Greece). The main findings in the first stage of the analysis suggest that younger founders and employees with creativity expertise are significantly associated with an increased probability of creative firms introducing both product and process innovation. In the second stage of analysis, we provide strong empirical evidence that creative industries support innovation in the wider economy. We show that the innovation output of creative firms constitutes a crucial input for the innovativeness of their business clients from other (creative or non-creative) industries.