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An Examination of the Agglomeration Economies Reinforcing Creativity in the Cultural Industry HANZAWA Seiji Meiji Gakuin University The recent rise of the cultural industry, resulting from the continuous economic growth in the world economy, and the increasing diversification of media has attracted enormous academic attention. However, most researchers have underestimated the nature and importance of uncertainty in the cultural industry. It has been recognized that in the cultural industry there are conflicts between distribution and production sectors caused by their different objectives : the former pursues economic profits, whereas the latter set a high value on creation itself. On the basis of this notion, this article scrutinizes the factors of agglomeration in the production sector which produces cultural products. The agglomeration mechanisms of the cultural industry have been discussed from these points of view : the convenience for production attained by the proximity of firms and/or specialists ; flexible specialization to deal with the uncertainty of the market and the industry ; the environments preferred by creative workers, and the cultures and the institutions that stimulate their creativity. These studies, however, have rarely shed light on the following points : 1 that production in the cultural industry is an R&D activity that emphasizes cultural values ; 2 the importance of the production process ; 3 the fact that highly creative cultural products do not always lead to good sales. Therefore, this article analyzes the conditions under which creative innovation for the cultural industry can be achieved by a close examination of previous studies on innovation, creativity, knowledge, and agglomeration. The growth of the cultural industry arises from the worldwide penetration of aesthetic reflexivity, which virtually makes it impossible for providers of cultural products to predict and grasp the behavior of consumers. In the cultural industry there is a high level of uncertainty and it is creativity, not efficiency achieved through imitation, that increases the commercial value of cultural products ; therefore the learning concept, which considers the diffusion of best practices as agglomeration economies, is an inappropriate method of analysis. Additionally, aesthetic reflexivity also requires the value of certain knowledge to be judged in the knowledge creation process by inputting cultural products into the market. To release cultural products in which this knowledge is embodied requires great cost because most of these products are usually unprofitable due to the reflexivity or uncertainty of the market. Hence, firms need to have a tolerance for redundancy which means an inevitable inefficiency in the process of producing and selling products. The individual firm s tolerance for redundancy, which is the source of creativity, heavily depends on location and the degree of the distribution sector s power of control over the industry. On the basis of this notion, a creative place can be defined as one where the tolerance for redundancy can be augmented. It can be concluded, therefore, that an agglomeration is a creative place if the agglomeration economies can strengthen firms tolerance for redundancy in which the power relationships between the distribution sector firms and production sector firms do not greatly impair the latter s creativity. Key words : cultural industry, industrial agglomeration, innovation, creativity, redundancy