Economic complexity and firm performance in the cultural and creative sector: Evidence from Italian provinces

Abstract

Several studies have detected a positive relationship between the spatial dynamics of cultural and creative industries (CCIs) and their social and economic outcomes. In this article, we draw upon the Economic Complexity Index (ECI) as a proxy to capture the social interactive nature that characterises CCIs and the way this affects firm performance. Our assumption is that more complex locations, endowed with different types of more sophisticated production capabilities, allow CCI firms to perform more strongly. This can depend on the higher opportunities of complex knowledge sharing and cross-fertilisation processes among different types of CCI firms or with non-CCI firms. The focus is on Italy, a country with a long-standing historical tradition in culture and creativity. We draw upon an original panel database at firm and province level (for the period 2010–2016) to compute two different ECIs, one for the CCIs and another one for the rest of the economy. Moreover, we analyse the effects these two types of complexity on the performance of firms within sectors with different levels of cultural and commercial value. We find that economic complexity of CCIs but not economic complexity of the rest of the economy matters for CCI firm performance. However, the effect is relatively weak. The same finding applies to all CCI firms, irrespective of their type of sector. Policy implications and directions for future research are discussed.