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This book presents a new theory of what happens at the very early stages of innovation. It describes how a new technology is transformed into an entrepreneurial opportunity and becomes the origin of economic growth. The surprising answer is cooperation. The origin of innovation begins in the commons.

The creative industries are key drivers of modern economies. While economic analysis has traditionally advanced a market-failure model of arts and culture, this book argues for an evolutionary market dynamics or innovation-based approach. Jason Potts explores theoretical and conceptual aspects of an evolutionary economic approach to the study of the creative economy. Topics include creative businesses and labour markets, social networks, innovation processes and systems, institutions, and the role of creative industries in market dynamics and economic growth.

AbstractThis paper analyses the origin of innovation using institutional economic theory. Because of distributed information and fundamental uncertainty, an efficient institutional context for the economic organization of innovation in its early stages is often that of a common pool resource. The theory of theinnovation commonsdraws upon Hayek, Williamson and Ostrom to present the innovation problem as a combined knowledge problem, implicit contracting problem and collective action governance problem. Innovation commons theory also implies that Kirzner's model of entrepreneurial opportunity discovery extends to higher-order groups, suggesting a multilevel selection model of economic evolution.

One interpretation of complexity science is that it distinguishes two types of science—an equilibrium science of forces, as begun by Newton, and a complexity science of rules, as exemplified by Wolfram (2002). If you accept that argument, then there are also two types of economics—an equilibrium economics in which forces move resources around the economy, and a complexity economics in which generic rules structure knowledge in an economy (Dopfer & Potts, 2008). However, this also implies two types of economic policy—a policy framework based on reallocating resources and a policy framework based on redesigning rules (Colander & Kupers, 2014). Modern economic policy generally engages in both, but we argue that this reflects the idea that modern economic policy has not caught up with complexity science. We illustrate how this difference plays out in the particular domain of innovation policy.