ENTREPRENEURSHIP AND INNOVATION August 2005 185 Cultural diffusion: a formative process in creative entrepreneurship? David Rae Abstract: Cultural diffusion is a distinctive approach to running a creative enterprise through applied creativity, shared discourse and social construction, going beyond the conventional understanding of ‘cultural production and consumption’. The concept is used to explore the social and creative processes of interaction between the creative enterprise and the audience. A framework for the analysis of creative enterprises and a set of questions based on the five processes of cultural diffusion are proposed for use by practitioners. Keywords: entrepreneurship; enterprise; culture; creative industries The author is with the Centre for Entrepreneurial Management, Derbyshire Business School, University of Derby, Kedleston Road, Derby DE22 1GB, UK. E-mail: d.rae@derby.ac.uk. Tel: +44 1332 591420. So how do you go about turning your creative ideas into a business? It’s not as if you’re just making a product, is it? How do you attract people to creativity and make some money out of it? (Val, nascent creative entrepreneur) *** How to transform ideas into enterprises is a distinctive challenge for entrepreneurs in the creative and cultural industries. This article explores the role of cultural diffusion in creative entrepreneurship. The concept of ‘cultural production and consumption’ is an established position in the literature on creative enterprise (Du Gay, 1997). However, the phenomenon of creative entrepre- neurship is more complex than is suggested by this industrial metaphor, and a conceptual understanding of cultural diffusion, which may be applied in education and by practitioners, is proposed. The article first outlines the historical development of the creative economy and the emergence of enterprise in the ‘creative industries’. The need to move from talking in terms of ‘cultural production and consumption’ to a conceptualization of how the creative enterprise works through social interaction is then proposed. The concept of cultural diffusion in creative enterprises and its five key processes are outlined, and the following section summarizes the methodology used to develop the four cases of creative enterprises included in the study. A framework is used to analyse and compare these, and the section on using the cultural diffusion model features illustrative material and questions based on the five processes of cultural diffusion. These are offered for use by educators and practitioners working with stu- dents and early-stage businesses. In conclusion, the enaction and management of cultural diffusion is proposed as a significant and critical factor in the survival and success of creative enterprises. The emergence of enterprise in the ‘creative industries’ It has been argued that the ‘creative industries’ are of growing social and economic significance within the UK (Leadbeater and Oakley, 1999). The Department for Culture, Media and Sport estimated that they generated a revenue of £112.5 billion in 2000, and employed almost 1.9 million people in 2003 (Creative Industries Task Force, 2001; DCMS, 2004). Although the DCMS