Development and Preservation of Human Capital Under the Conditions

of the Creative Economy

NATALIYA KUZNETSOVA1, VIACHESLAV TKACHUK2, SVITLANA OBIKHOD3, TETIANA

VLASENKO4, OKSANA SAMBORSKA5, LYUBOV CHORNA6

1Department of Economic, Entrepreneurship and Marketing, Cherkasy State Business College,

Cherkasy, UKRAINE

2,3 Department of Digital Economics and International Economic Relations, Zhytomyr Polytechnic

State University, Zhytomyr, UKRAINE

4Department of Production and Investment Management, National University of Life and

Environmental Sciences of Ukraine, Kyiv, UKRAINE

5Department of administrative management and alternative energy sources, Vinnytsia National

Agrarian University, Vinnytsia, UKRAINE

6Department of Tourism Studies and Local History, Vasyl Stefanyk Precarpathian National

University, Ivano-Frankivsk, UKRAINE

Abstract: - The transformation of the world economy is characterized by a change of emphasis from an

industrial society to a society of knowledge and intelligence. This leads to the emergence of a new segment of

the economy – the creative economy, which is essentially a symbiosis of culture, art and economy and it is

based on creative human capital. The purpose of the academic paper is to study the features of the process of

intellectualization, the role of human capital and its creative functions in a new type of economy based on

intellectual activity. The basic methods used in the present research are as follows: statistical analysis, index

and analytical methods, methods for estimating structural dynamic shifts, the method of comparisons. Results.

The importance of the creative economy in the development of the European countries and the role of human

capital in the context of the formation of this economy sector has been updated. The essence of the category

“development of human capital under the conditions of a creative economy” has been defined and its

components have been specified. The features of the creative economy’s structure in the EU have been

analyzed through the study of the dynamics of the number and structure of enterprises operating in the creative

sphere. The number and the relative share of the population employed in the creative sector of the economy

have been studied. The basic features of human capital development in European countries through the

dynamics of the following indicators have been illustrated, namely: the coefficient of age dependence, life

expectancy of the population, the risk of poverty, fully representing the social standards of the EU member

states. In order to study the mutual interaction of the creative economy and human capital, a regression analysis

has been performed. The basic components of development and preservation of human capital under the

conditions of creative economy have been outlined.

Key-Words: - Creative Economy, Economic Advance, Sustainable Value, Human Capital, Investing in Human

Capital, Creative Industry

Received: May 24, 2021. Revised: March 14, 2022. Accepted: April 23, 2022. Published: May 10, 2022.

1 Introduction

A special place in the national economy belongs to

the creative industries, which are based on cultural

activities, the development of which is confirmed by

the gradual transition from an industrial society to a

society of knowledge and intelligence. A new

segment of the economy is being built – the sphere

of creative industries, which has arisen on the basis

of a symbiosis of culture, arts, and economy, and

they are established on the interaction between

government policy, social policy, and art policy.

The key value of the creative economy lies in its

intellectual capital, which is divided into subspecies,

namely: human, organizational, and consumer.

Human capital is characterized by the level of

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knowledge, creativity, experience, moral values, and

work culture, and health state. The development of

human capital under the conditions of the creative

economy is important due to the fact that it forms

the structural or organizational capital of the

industry, which determines the market position of

the creative industry and the development of the

creative industry as a whole. After all, it

characterizes the set of established and developed

productive abilities, as a result of investment in

education and health care, personal traits, and

motivations of individuals who are in their

possession, which are used in the creative industry,

promoting productivity and, thus, affecting the

value-added generated in this area of the national

economy. Therefore, an important issue is studying

aspects of the formation and use of human capital

under the conditions of the creative industry.

2 Literature Review

The development of the creative economy and the

gradual formation of its sectoral structure were

caused by the provision and intellectualization of

social development, which took place under the

influence of global external factors (international

economic integration processes, internationalization

and globalization of social development).

Information and communication technologies

(including the Internet) have contributed to greater

transparency of the labor market, as well as helped

create better educational conditions, which allowed

gaining new knowledge and becoming more mobile

in the professional space of potential employees. In

the modern business environment, the creative

human resource and its new qualitative

characteristics (creativity, originality, criticality,

speed of decision-making) are highly appreciated;

consequently, there is a tough struggle between

employers for such specialists (Kuznetsova, 2016).

The creative industry can be defined as a set of

economic activities related to the creation or use of

knowledge and information [1].

Human capital, according to the viewpoint of

Becker, one of the creators of the theory of human

capital, is storage of knowledge, skills and

motivation available to everyone [2]. The required

amount of effective human capital is a key source of

scientific and technological progress and the

transition to a new model of technological

development in the country [3].

According to the viewpoint of Florida, the

founder of the “creative class” theory, creativity

depends on the environment that supports it, as well

as on a wide range of social, cultural and economic

factors [4]. Creative class helps attract new

principles both to work and to everyday life.

Members of this class uphold the new values of the

younger generation. Representatives of the creative

class are distinguished by mobility, flexibility, self-

education, “new” workplace, and leisure as work,

social participation, active recreation and interest in

street culture [4]. Throsby draws attention to the fact

that along with assessing the contribution of the

creative class to the development of the creative

economy, the issue arises of determining the

contribution of creative industries to GDP [5].

Creative goods have no monetary value, although

they certainly have intangible value to the society.

The author has also proposed the structural

construction of the creative industry on the basis of

substantiation of the concentric model with four

circles, the core of which involves classical cultural

activities (music, literature, performing and visual

arts) [6]. According to the opinion of Harrison &

Huntington, cultural differences are the reasons for

the underdevelopment and prosperity of countries

[7]. Some cultural features contribute to the

modernization of the society, while others, on the

contrary, hinder the economic development of the

country. Thus, in order to build a creative economy,

investments should be made in culture and art and

towards increasing the country’s human capital.

Kalenuk & Kuznetsova have identified the basic

features of human capital development, the

formation of its new quality in the creative economy

[8]. Versal & Tereshchenko interpret human capital

as the basic factor of the creative economy, the

development of which depends on the level of

development of education and science in the country

[9]. Shaulska, Karpenko & Doronina have proposed

a model of multilevel innovation policy in which the

creative economy is presented in the context of

capitalization of human potential based on the

principles of social responsibility (state, business

and the individual), innovation, regularity and

inclusion (gaining accessibility and stimulating an

increase in the degree of participation of all citizens

in the society [10].

Examples of policies designed for creative

industries are common occurrences in the world

[11]. Gasparin and Quinn have developed a new

policy model for creative industries in transition

economies INCITE (Innovation and Creativity in

Transition Economies), which includes four

components, namely: education and human

resources, infrastructure, intellectual property rights

and the freedom of expression [12]. Some scholars

have considered the features of human capital

formation in various subsectors of the creative

economy, in particular: architecture [13]; design

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[14]; batik [15]. They have come to the conclusion

that the educational factor is a determining one in

the formation and development of human capital in

the creative economy.

Sanchez-Serra examines the role of human

capital in the development of creative industries and

creative clusters in France [16]. In particular, the

importance of talent in local economies and

dependence of creative industries on the

specialization is highlighted. Comunian, Faggian &

Jewell [17] and Abreu & Grinevich [18] have

conducted a more detailed analysis of “creative

human capital”. Munteanu, studying the impact of

human capital and creative industries on economic

growth in the Romanian regions, has concluded that

economic advance is influenced by the share of

enterprises operating in the creative industry and the

availability of secondary education [19].

One of the central aspects of human capital

formation is the idea that human capital (including

natural talent) is developed through conscious

investment. Schultz includes the following measures

here, namely: school education, on-the-job training

and health promotion [20]. He also notes that

investing in human capital is a way to overcome the

country’s poverty. Londar, Lytvynchuk & Versal

proposed basic directions for human capital

investment in the creative economy [21].

Thus, scientists have confirmed the thesis that

the development and preservation of human capital

in the creative economy is based on investing in

education and health care, mobility and access to

information. On the whole, the analysis of scientific

sources confirms the hypothesis of the

interrelationship between investing in human capital

and the development of the creative class and the

creative economy, which in general leads to

economic advance. However, the issues of

development and preservation of human capital in

the creative economy have remained insufficiently

disclosed in scientific investigations.

3 Methods

In order to analyze the basic aspects of development

and preservation of human capital in a creative

economy, the European Union has been chosen as

the basis of the research, forasmuch as the

experience of development of this sector in the EU

countries is indicative and one of the most

successful in the world.

The research has been carried out on the basis of

indicators posted on the Eurostat website [22-25],

namely: the number of enterprises in the creative

sector of the economy, the number of people

employed in the creative sector of the economy, life

expectancy of the population, level of GDP per

capita for the period 2014-2018 and 2019. Statistical

methods have been used for data analysis from the

simplest (descriptive statistics) to regression

analysis, which has made it possible to determine

the impact of the creative economy on the

development and preservation of human capital. The

regression analysis has been performed on the basis

of the constructed regression equation, which has

made it possible to determine the influence of each

independent variable in the variation of the studied

dependent variable. In the aggregate, regression

analysis involved the following stages: selection of

linear regression model and formation of initial

data; implementation of regression analysis using

Excel tools; obtaining results and their analysis.

4 Results

Diagnostics of the development and preservation of

human capital under the conditions of the creative

economy should be based on studying the basic

trends in the functioning of the creative industry and

an analyzing the features of human capital in the EU

countries. In order to study the dependence of the

creative economy and human capital development,

it is advisable to perform an appropriate regression

analysis (see Tables 1 and 2).

Table 1. Initial data for regression analysis

Years

GDP per capita, USD

(у)

Number of enterprises in

the creative sector of the

economy, units (х1)

Employment of the

population in the

creative sector of the

economy, pers. (х2)

Life expectancy of the

population, years (х3)

2014

38026,8

1101722

68117

80,8

2015

38862,18

1088088

6833,5

80,5

2016

39573,58

1119280

69641

80,9

2017

40592,56

1142268

71817

80,9

2018

41384,25

1182257

72706

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Table 2. Intermediate results of regression analysis

Regression statistics

Multiple R

0,956504966

R-square

0,91490175

Normalized R-square

0,659607

Standard error

780,0417635

Observations

Significance F

Regression

6541683,673

2180561,224

3,583707652

0,3661

Residue

608465,1528

Total

7150148,826

Coefficients

Standard error

statistics

P-

value

Lower

95%

Upper

95%

Lower 95,0%

Upper

95,0%

Y- intersection

-563156,965

1314998,403

-0,428

0,742

-17271795,9

16145481,97

-17271795,9

16145481,97

Variable X 1

0,026

0,0353

0,735

0,596

-0,4231039

0,475

-0,4231039

0,475094228

Variable X 2

-0,048

0,082

-0,582

0,665

-1,096

0,1

-1,095727164

0,999782148

Variable X 3

7131,024

16782,459

0,425

0,7442

-206110,339

220372,388

-206110,339

220372,388

Thus, the theoretical equation of linear

regression will look as follows:

         

   (1)

From the results obtained, it can be concluded

that an increase in the number of enterprises and life

expectancy of the population contribute to an

increase in the level of GDP per capita, while the

interrelationship between the performance indicator

and the employment of the population in the

creative economy sector is inverse.

The value of the multiple correlation coefficient

R indicates that the econometric model adequately

describes this economic dependence. 91% of the

variations in the change in the effective feature

depend on the indicators selected for the analysis,

and the remaining 9% - on random factors.

Thus, according to the results of the research it is

advisable to identify the following components of

development and preservation of human capital

under the conditions of the creative economy,

namely:

 implementation of an effective state policy

towards supporting the development of the creative

sector of the economy;

 expansion and intensification of investment

in the development of the knowledge economy;

 expansion and activation of professional

networks and associations;

 creation of business incubators, clusters and

development of hubs in the creative sector;

 internationalization and globalization of the

creative sector of the economy.

The outlined steps will ensure the progressive

development of the creative sector of the economy

and minimize the negative impact of environmental

factors on this area of activity, which will certainly

have a positive impact on human capital.

5 Discussion

The creative economy focuses on such symbolic

sources as creativity and culture forasmuch as they

have been created in the creative sector. Due to this

fact, the qualifications of creative professionals’

increase, and a gradual formation of sustainable

value occurs. Thus, according to the results of the

research conducted, it should be noted that the

development of the creative sector significantly

affects the economic situation of countries,

including the EU.

Furthermore, as in the study of Dindire [26], we

also note that in a knowledge-based society and in a

creative economy, to which all the EU countries

aspire, also guided by the norms of the European

Commission through the Europe 2020 Strategy, the

nation’s human capital acquires new values,

representing a powerful comparative advantage for

countries that invest in this direction.

The proposed economic category “development

of human capital under the conditions of the creative

economy” fully takes into account the content of the

creative industry, laid down by Hesmondhalgh [1].

After all, this area allows implementing the personal

traits of professionals, whose value is growing.

Kuznetsova also notes that at the present stage of

economic development, the dominant features

determining the value of human resources are their

creative abilities [27]. Thus, it will require the

solution of new educational tasks in the society,

forasmuch as it is important not only to transfer the

accumulated knowledge, but to form a creative

personality. The fact that the development of the

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creative economy depends on the quality of higher

education and science is also noted by Londar et al.

[21].

The results of the research conducted to a certain

extent coincide with those given in the works of

Becker, who has noted that the basic source of the

development of scientific and technological

progress is a sufficiently effective human resource

[2]. Sharing the opinion of Kalenuk & Kuznetsova

[8] on the results of the research, it should be noted

that it is human capital that is the basis and driving

force for the development of the creative economy,

which is an extremely promising direction of

economic activity, forasmuch as it is based on the

use of an inexhaustible resource, which is human

capital.

In addition, the development of the creative

industry has a significant impact on the economy, in

particular, the unemployment rate, regional

development by expanding the boundaries and

opportunities for employment of people of all ages

and genders. This aspect is extremely valuable in

the context of a crisis caused by the Covid-19

pandemic, which is characterized by a number of

negative social phenomena, including rising

unemployment. However, as Jílková points out, the

Covid-19 crisis has changed the perception of the

benefit system by the employees and created

flexible benefits for work (distance work, flexible

working hours, payment for a healthy lifestyle, etc.)

[28]. All this has significantly affected the

development and preservation of human capital;

consequently, it will be relevant to further study

these changes.

By the way, our research is abstracted from the

conditions of globalization, under which there is a

threat that “cultural dumping”, in particular, from

the United States, contributes to the desolation or

destruction of local art. The thesis of

“McDonaldization” has been gaining attention in

recent years [29]. In addition, cultures (and arts) are

constantly being developed, advanced and borrowed

from each other. Therefore, the institutional memory

of human capital becomes an important issue.

6 Conclusion

The development of the creative economy involves

rethinking the role of man in the structure of

production factors. The human capital, characterized

by a high level and efficiency of use of intellectual

potential, is able to produce business ideas that, with

proper financial support, can ensure the profitability

of the creative sector of the economy. In addition,

this sector will reduce the social burden on public

finances, creating the conditions for expanding the

boundaries of employment and self-fulfillment of

the economically passive population.

The current stage of development of the

economic space is characterized by rethinking the

role and significance of economic resources in the

context of the growing importance of the human

factor, which is the driving force behind the

development of the creative industry. The creative

economy is an alternative sector; its functioning is

provided by an inexhaustible resource - human

capital – and it is implemented through the

interaction of intellectual (creative) potential of

mankind and intellectual property. Creative

economy is able to fully implement the creative,

intellectual, innovative potential of people and

create conditions for the full implementation of

human potential. This mainly explains the growth in

the share of the creative sector in the structure of the

economies of advanced countries. In this context,

the experience of the EU countries is significant,

which through the support of cultural heritage and

investment in human capital development maintain

their leadership in the field of creative economy

development.

An assessment of the number and structure of the

population’s employment in the creative economy

sector of the EU indicates that this area is quite

promising from a social point of view and provides

a significant proportion of people with workplaces.

The basic directions of human capital

development provide the effective application of

measures for carrying out state support of the

creative sector through targeted funding, stimulating

the implementation of creative business ideas and

expanding the geographical boundaries of

development of this sphere.

The present research has made it possible to

conclude that the creative economy has a fairly deep

meaningful content, which provides the preservation

of the cultural heritage of the European countries

and raising social standards through employment of

the population and the use of their knowledge, skills

and abilities, contributing to the population’s self-

fulfillment.

In order to assess the effectiveness of the creative

economy and the impact of human capital

development on it, the regression analysis has been

conducted which indicates a direct influence of the

number of enterprises operating in the creative

sphere and life expectancy on GDP per capita.

Herewith, the interrelationship between the number

of employees in the creative economy and the

performance indicator is inverse.

Subsequent investigations should be devoted to

establishing the mechanism of formation and

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development of human capital in a creative

economy and the study of the impact of the

pandemic, as well as the formation of a competence

model in order provide empowerment of managers

and employees in the creative economy.

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Oksana Samborska, Lyubov Chorna

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DOI: 10.37394/232020.2022.2.15

Nataliya Kuznetsova, Viacheslav Tkachuk,

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Oksana Samborska, Lyubov Chorna

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