Ph.D. Candidate / Poznan, Poland the Effect of Culture and Design on a Nation Brand

ACEI 14TH CONFERENCE VIENNA 2006 Session 8C, Sat, July 08, 2006

the effect of culture and design on the value of a nation brand

MAREK BANCZYK ph.d. candidate / university of economics / poznan, Poland e-mail: [email protected] phone: (+48) 508019 650

ALL COMMENTS, SUGGESTIONS, PRAISES AND NASTY CRITIQUES VERY WELCOME

Abstract:

Despite several descriptive stipulations, quantitative research has not yet been successful in documenting the strength and causal mechanisms of the impact of culture upon a nation brand (NB). National culture is believed to be among predominant factors influencing personality and value of a nation brand. The paper points to a new theoretical framework for NB analysis and reveals the so far neglected proximity between cultural economics and nation branding. It reinterprets the nation brand valuation through the cultural economics methodology and shows how certain nation branding problems could be solved with a help of cultural valuation methods. The paper examines and compares the role of culture against the role of design as potential NB value drivers. The basic hypothesis is that the cultural impact upon the value of a nation brand can be trivial, and even potentially negative. The impact of design is more stable and practically always beneficial to the NB value. The paper concludes the need of further joint research by experts in both fields (nation branding and cultural economics) in order to create a fusion methodology capable of measuring the total value and explaining its dependence on particular assets as well as the causal mechanisms of nation brand value phenomenon. MAREK BANCZYK ACEI 14TH CONFERENCE VIENNA 2006 ph.d. candidate / poznan, poland the effect of culture and design on a nation brand

THE INTRODUCTION: WHY THIS? WHY HERE? WHY NOW?

This paper has one main goal: to challenge the often repeated thesis on a inextricable and positive association between the brand and the culture of a country. We will also try to prove that out of so-called creative sectors, design might be more critical to the nation brand than culture. At the same time, the paper points at similarities between cultural economics and place branding and advocates closer cooperation between the two arenas in establishing universal analytical tools.

The field of place branding has been growing increasingly over the past years. Even though first attempts of something we now coin ‘country positioning’ date back to as early as the 1950’, the ultimate popularity of place branding is the matter of the last ten years or less1. Now, with at least 40 countries commissioning works on their ‘nation brands’, Simon Anholt and Wally Olins being interviewed or quoted in every other magazine and images of natural beauty and cultural riches of countries and regions becoming a staple clips of CNN’s and BBC’s commercial breaks, we have to conclude the term ‘place branding’ is joining its XXI century hall of fame, locating just next to ‘sustainable development’, ‘knowledge-based economy’ or ‘creative sectors’.

The reason for taking up this issue here is not only its popularity. Nation branding actually does refer to cultural economics in many ways, some of them are obvious while the other ones do not seem evident even to the major nation branding wizards.

The first type of references is well exemplified by one of the nation branding corner stone ideas, namely: that culture is central to and indivisible from nation branding 2. This early statement originally appeared just as an attempt to divert attention of governments from overstressing the importance of ‘hard’ prerequisites for foreign investment (such as highways, airports and tax exiles and so on) and to give some hope to the so-called developing countries, culturally rich though unable to compete in terms of entrepreneurship and business infrastructure. Nevertheless, due to its accuracy at first glance (typical for common wisdoms) and political attractiveness, this sort of ‘culture goes first’ arguments has recently developed into a full scale

1 The term ‘nation brands’ was used by Simon Anholt in The Journal of Brand Management, July 1998 2 Simon Anholt, Foreword to The Journal of Brand Management, vol. 9, No. 4-5, April 2002

2 MAREK BANCZYK ACEI 14TH CONFERENCE VIENNA 2006 ph.d. candidate / poznan, poland the effect of culture and design on a nation brand dogma. It wouldn’t be far from true to proclaim ‘culture is the key asset and positioning criterion’ as the unspoken 1st commandment of place branding.

For quite a while, cultural economics did not respond directly to such a situation. It is easy to guess why. Pointing at economic aspects of culture in just another fast growing and very media-sensitive discipline brought our disputes over valuation of open castles or archaeological sites to a new public exposure. It seemed a convenient situation in a way. Yet, as I will further prove, these often very superficial references should be finally given a serious and honest response not only because we are all ultimately responsible to the truth and instead of popularity. It is also because an exaggeration in using culture as nation branding staple food can be harmful to both: nation branding and culture itself.

The other type of relations between place branding and cultural economics emerges when the first meets methodological challenges already met and to some extent solved by the latter. These situations distantly resemble early contacts between environmental and cultural economics. However, it was fully conscious process then and the cultural economists always paid well deserved tributes to the environmental economics when environmental methodology offered an option. It is quite surprising to find out then, that place branding appears to deal with very similar issues virtually without any relevant reflection on the existing debate in cultural economics and its present day methodology. If culture is nation branding’s key asset, then culture valuation methodology should be critical to nation branding as it determines the very basics. Yet this is not the only nor even the most striking link.

When we take a closer look on the very concept of ‘place brand’, without going into details we can easily state that ‘place brand’ derives its value from the properties that go over and above the physical characteristics of the place. Going over and above some functional properties already sounds familiar. But the very relationship between place branding and cultural economics can be even more direct. Unlike its commercial predecessor, place brand is definitely an economically valuable property that cannot be bought and sold. Nor can it be priced at the stock exchange. It is necessary to stress that we are not talking about business approach to government as such which is why government bond or, say, debt trading offer no valuation help.

3 MAREK BANCZYK ACEI 14TH CONFERENCE VIENNA 2006 ph.d. candidate / poznan, poland the effect of culture and design on a nation brand

We take the country as a whole complex organism. Its value will never be established in direct transaction. Just as the Canadian National Parks, Fez de Medina city or Napoli Musei Aperti. With regard to the need of non-transactional valuation methodology, the proximity of nation branding and cultural economics is therefore obvious.

Having said the above, it seems no longer strange that nation branding and cultural economics should co-operate to work out a common methodological framework. It is rather strange to see that it has not been worked out so far.

While suggesting several solutions, this paper will not attempt to provide the new synthesis of the two fields in question. Instead, I will focus on the culture – nation brand problematic relationship. This will be done in following order: main point presentation – definitions and description of key terms – existing and proposed framework recap – empirical research recap – hypotheses and arguments – conclusions – interpretation and future challenges.

THE PROBLEM: CULTURE-BASED BRANDING’S RISE TO POWER

Culture influences many aspects of our life, private and public, from foreign affairs to love affairs. It certainly influences also various factors that on various levels and through separate mechanisms contribute to create a phenomenon known as place brand. Unfortunately, such an uninteresting and round statement is about all we can say on role culture in nation branding. At least – if we are to stick to the existing empirical data and logical conclusions.

Even though many authors stressed the importance of culture in place marketing 3, the culture-centering point of view has been brought to power by the nation branding

3 Philip Kotler and David Gertner,. Country as a brand, product and beyond: A place marketing and brand management perspective. The Journal of Brand Management, vol 9. no 4-5, April 2002.

4 MAREK BANCZYK ACEI 14TH CONFERENCE VIENNA 2006 ph.d. candidate / poznan, poland the effect of culture and design on a nation brand icon Simon Anholt, in several works4, among others – in his best-selling opus Brand New Justice5.

Anholt regards culture in triple role: source of value, communicator of value and revenue earner. He argues that culture provides or even constitutes the “third dimension” to otherwise flat and commercial-like nation branding. In other words, he claims nation branding is ALL ABOUT the culture as without it the arena shrinks and fades to resemble merely a ‘normal’ commercial branding. He also calls for focusing on culture in country promotion and opposes the relegated status of culture as ‘not- for-profit activity, kind of charitable obligation within the overall promotion of a country’6 Starting from this point, it is no surprise to see his statements drift even farther. As a natural consequence of the ‘culture wins it all’ theorem, Anholt unveils the politically correct face of place branding which is: that developing nations, being more often than not also culturally rich, can use country branding as their promotion shortcut in global wealth redistribution hierarchy. This assigns nation branding with a new task which in fact is sort of social responsibility or in other words: a potential to bridge the gap between the poor and the rich.

Such sort of idealism was long present in many economic actions seen in the contemporary world – from several embargos on nasty countries proclaimed every now and then to Lonely Planet appeals on where to go and where not – but for the first time it has entered the arena of marketing theory. Moreover, it has entered the fastest growing shiny part of marketing that almost everyone is interested in – place marketing. This is basically how nation branding made its rise to power: from small label on the product meant to inform the customs on the appropriate tariff rate, to the realization of Michael Jackson’s “Heal the world, make a better place, for you and for me and the entire human race”.

Holding back the irony, we must observe that the issue is both important and complex. And with no doubt Simon Anholt is a brilliant thinker no matter how critical to some of his views we might become. The problem is complex since we deal with a

4 The role of culture in national branding in Fladmark, M (ed.) heritage and Identity, Donhead Publishing, Shaftsbury, UK 5 Simon Anholt, Brand New Justice: The Upside Of Global Marketing, Butterworth Heinemann, 2003 6 ib, p.235

5 MAREK BANCZYK ACEI 14TH CONFERENCE VIENNA 2006 ph.d. candidate / poznan, poland the effect of culture and design on a nation brand couple of distortions that combined together might produce a picture at first glance very close to what can be mistaken for real. Notwithstanding, the issue is also highly sensitive.

We are all more or less bound to our cultures and we like to hear our cultures are precious and that they give us the remedy to all miseries. Which is admirable yet if this is really about to happen, above all we should be bound to the truth. Otherwise, place branding based on unverified and unconditional power of cultural drives will end up as a conceptual clock bomb. The bomb will be ready to explode when the first government finds out that 50 years of spending fortune on culture has not resulted in anything close to a strong nation brand. Especially, if the same government finds itself obliged to face a fierce competition from a neighboring country that with similar starting conditions somehow succeeded to build a brand twice as strong at half costs and over the same period of time.

THE FAMILY: CULTURE &. NATION BRAND - TROUBLED RELATIONSHIPS

In order to dismantle the bomb described above and distinguish brilliant observations from flawed rules, let us divide the issue into several basic questions:

BQ1: Does culture always strongly influence the nation brand? BQ2: Does culture always positively influence the nation brand? BQ3: Is culture the only factor that can be at once source of value, value communicator and revenue earner for the nation brand?

I believe the answer to all the above stated questions is: NO.

At this point, before we move forward with key points to each question and propose hypotheses of counter-theorems, it seems indispensable to agree on several definitions and bring more terminological discipline to the considerations. Such a step, even though tedious for both Author and Readers is needed because we deal with terms that very often have well established generic meanings which are not necessarily identical with the ones marketing theory uses.

Brand is a brand, term, sign, symbol or design or a combination of them intended to identify the goods and services of one seller or group of sellers and to differentiate them form those of the competition. This definition is borrowed form the American Marketing Association7. It could be challenged of course but it is not the point. For our consideration it is good enough and it has enough recognition to be referred to as sort of standard.

With regard to functions of the brand, the case is not so straightforward. In classical approach presented by Philip Kotler8, the brand serves two major purposes: it differentiates the product and offers a value promise. We need a short comment here.

Apart from any specifics, explaining the term by its definition and functions while one of two functions directly repeats the definition will not lead us far. The exposition of the first function named by Kotler needs finishing. It is not only the question of finding synonym to the fashionable word “differentiate”. It assumes silently that all situations in the markets are explainable by Michael Porter’s competitive advantage theory. This is the source of “differentiation” career in marketing and overall business disputes. It could be easily argued that competitive advantage based on differentiation is neither timeless nor universal. It is rooted in contemporary world dominated by Western cult of individuality. In a hypothetical and highly unlikely event, humanity might turn to radical Confucianism and differentiation might become a burden.

This is just to show that differentiation is not a ultimate goal of a brand. It is merely a mechanism that works in our times. The ultimate goal is to obtain a competitive advantage. It should not be forgotten while describing the functions of a brand. Moreover, the competitive advantage in vast majority of cases should mean some

7 MAREK BANCZYK ACEI 14TH CONFERENCE VIENNA 2006 ph.d. candidate / poznan, poland the effect of culture and design on a nation brand financial benefits in the long term. The only exceptions are brand meant for non-profit establishments. In that case instead of financial benefits we would have to construct another performance indicator on case-to-case basis.

Coming back to brand functions, we would define the first function of a brand as follows: to help achieving competitive advantage through differentiation. It doesn’t have to be a product that is branded. It might be the company itself. Nevertheless, it all comes down to be better than others. In a monopoly, this function of brand is dead. Doesn’t exist. As this is the function of brand aimed at earning some advantages for the subject being branded (product or company), the arrow of benefit transfer is pointed to the within. We will call this function an internal function of a brand.

The second function mentioned by Kotler does not require ‘lifting’, however it is advisable to add short update. As the number of brands increased dramatically over the past 20 years, the promises of values are everywhere, always, and all the time present in our lives. We can no longer judge which choice is best. Nor we want to. In recent times, brand turns more into sort of insurance policy, a guiding light in an ocean of images and market beings bred fairly over necessity. It offers us time saving and escape way from getting lost and making bad choices. Therefore, in the exposition of the second function of brand, we will say: to offer a promise of value and justification of choices. Since this function is directed towards those who receive the branded item, we will name it an external function of a brand.

If we go beyond definitions, there is an opinion that contemporary brands became almost independent beings. Like the selfish gene, a brand once successfully created and positioned lives its own life. They are best analyzed in terms of personalities and companies try the make these personified brands befriended with the customers. For good reasons, of course. You may not like you friend’s new hair color but you don’t look for another one anyway. The comparison of brands to personalities and brand- customer relationships to acquaintances or friendships seems very right to the point. This is on the customer side. The external function drifts toward more of an abstraction.

The opposite happens to the internal function. It becomes more and more structured and measured. Value of brands is no longer multidimensional or psychedelic impression. The time when brand was a fascinating psychological phenomenon earning companies extra ‘soft’ credits are long gone. Brands are traded between parties in the market. They became a financial matter, an intangible yet regular asset which is accounted for. Value of brand quite often exceeds accumulated value of all other assets of a company. There are certain approaches to brand valuation. One can compare the book value with the stock exchange value or analyze what part of annual cash flow is attributable to the brand or calculate how much the license of a given brand would costs in the free market. Nevertheless, one ends up with a value expressed in certain amount of money.

There are three important implications from the remarks above: 1) brands must serve as advantage generators to their owners, 2) brands valuation refers to their internal function, 3) brands valuation eventually must translate into financial means.

NATION BRAND

There is no common standard for the definition of nation brand. Nevertheless, we continue to call it a ‘brand’. Bearing that in mind, in order to make this line of arguments internally consistent and cohesive, while defining a nation brand I will remain possibly close to the brand concept represented by AMA approach. However, it requires few modifications.

First of all, we do not know what is the logotype or design or a combination of it for Switzerland. And we all feel what Switzerland is. Place brands in general, and nation brands in specific do not always use logotypes. Joan Miro’s Espana logotype made a lot of impact. Some 10 following national logotypes that tried the same cut – didn’t. We have to conclude that even though a logotype and slogan helps position a nation brand, especially the - nomen omen - brand new one, it is not indispensable for defining the very term.

Secondly, we cannot rely on the indication of ‘goods’. In fact, the reference to ‘goods’ and not to ‘product’ is already quite unfortunate solution in AMA definition of brand.

The term ‘goods’ does not encapsulate services. The term ‘product’ would be much more appropriate, since it covers also the area of intangible products – services. This remark however, is not sufficient, since it only improves the definition in terms of commercial market. In case of a nation brand, the differentiating function is not limited to goods, not even to products meaning goods and service. The differentiation through a nation brand may radiate on all aspects of commercial life and – which is new – all aspects of international competition. This includes: foreign investment, tourism revenues, attracting of talented individuals, winning international contests, winning the rivalry of influences, setting standards in culture, science, sports and all other arenas of international interaction.

In such a maze of vectors, a behavioral economist with cultural economics background is tempted to find one ratio or indicator explaining it all. For instance, a national pride index or a WTBON (willingness to belong to other nation). This is, however too steep shortcut. Professor Noam Chomsky would probably say America is the worst nation brand on the planet and he’d swear he’d felt much better off should he have been born in, say, Magnitogorsk. Yet somehow he does not migrate. At least from the times of George Bernard Shaw it is quite clear that admiring some bizarre countries from far does not mean we would really move there. The admiration of Che Guevara by contemporary youth is much more the issue of pop-culture icon, or indeed: a very successful design of a T-shirt, than a real conviction that the revolutionary communist ideas would work. Declarative national pride can be quite elusive. By no means it should be considered the only, nor even – the main - measurement of a nation brand. Coming back to the topic: nation brand does not only differentiate the goods, or products. It is supposed to help the nation achieve the competitive advantage in all fields of international rivalry.

For the use of this paper, we will define nation brand as a cohesive set of properties promoted to be associated with a nation and aiming at achieving competitive advantage in any field of international rivalry.

There is only one oversimplification here we do not intend to rectify. It is the term ‘nation’ Since there are multi-ethnic state brands, like Marca Expana, non-state ethnic brands like Scotland The Brand, or ethnic state brands like Hrvatska, we will

10 MAREK BANCZYK ACEI 14TH CONFERENCE VIENNA 2006 ph.d. candidate / poznan, poland the effect of culture and design on a nation brand not differentiate between state, country or nation and wil use all these three terms as synonyms. Place brands have three general levels: city, region and nation/state/country. We are mostly interested in the highest level. Therefore, the obvious and indisputable difference between state country and nation will be neglected in the course of this paper.

The functions of a nation brand have been defined on several occasions. As mentioned before, early nation brand concepts pointed at export enhancing function making it almost identical to ‘origins marketing’. Philip Kotler defines country (brand) equity as ‘the emotional value associated with the country of origins of the product’ 9 We can easily add three more functions, and arguably – another two. These are: ability to attract investment, ability to attract tourists, ability to attract talented or active immigrants in the easy part plus: ability to win international contests and (reluctantly) sense of national pride and cohesion at the tougher other part.

There are several serious differences between a commercial product or company brand. We will focus on those critical to valuation. The strength of product brand is represented by higher margin and higher sales. This translates into higher profits. After all, we are able to link a commercial brand (no matter how complex it is) to one simplistic measure of profits. Contrary to this, nation brand covers a complex area that stretches beyond commercial activities which makes it impossible to focus on profits of a given industry. Commercial brand is also clearly connected to company’s tangible and intangible assets stated in the balance sheet. There is no balance sheet of the state. It is hard to imagine valuation of all assets in the country .

When the value of something cannot be established, there is no possibility to establish value of shares in it either. That is possibly one of the reasons why no country stocks are traded. State bonds (as mentioned before) are no equivalent of shares and their value refers to interest rate and credibility of the particular government (if not – just a minister) and not to the complexity of nation brand.

All three differences between the commercial and nation brand have major impact on possibility of valuations. The direct references of commercial brand to profits enables valuation through methods based on discounted cash flow. Brands is considered a revenue generator in this case. The other two properties of commercial brands – association with company’s assets and access to stock exchange – make it possible to apply methods based on balance sheet. These are the major methodologies of commercial brand valuation.

In case of nation brand the first approach would be the most appropriate given the definition of a brand as such. However, there is no single cash flow to be discounted. This makes nation brand valuation seriously difficult. The second option is virtually impossible because of the complexity of country’s assets. Notwithstanding, a correlation between the value of a nation brand and the values of selected assets the brand is based upon should and should be determined.

We will consider here two relevant sectors a nation brand can be built on : culture and design. In order to define them, we will refer to the broader groups of sectors known as creative industries and culture industries.

CREATIVE SECTORS AND CULTURE

Knowledge economy, as every other fashionable phenomenon, has several key sacral terms. Creative sectors os one of them. It is believed (and to large extent – empirically proven) that certain activities have in the long run more positive impact on the economy than the others. Sectors that involve creation of value mostly through intellectual, intangible operations and draw their progresses from the individual creativity and originality are commonly thought to be among the key arenas of the 21st century’s economy. The were coined creative sectors or creative industries and are more and more often assigned a flagship role in the economic development strategies throughout the globe.

The Department for Media Culture and Sports of the UK has created a special task force to take up the issue and map the creative sectors in the Great Britain’s economy. According to the findings of DCMS task Force, the category of creative

12 MAREK BANCZYK ACEI 14TH CONFERENCE VIENNA 2006 ph.d. candidate / poznan, poland the effect of culture and design on a nation brand sectors covers those industries which have their origin in individual creativity, skill and talent and which have a potential for wealth and job creation through the generation and exploitation of intellectual property. The list include as follows: Advertising, Architecture, Art and Antiques Market, Crafts, Design, Designer Fashion, Film and Video, Interactive Leisure Software, Music, Performing Arts, Publishing, Software and Computer Services, Television and Radio.

Culture industries are sometimes adjunct to the sectors above, however sometimes both terms overlap. The specifics of this category is clearly the arena of cultural economics. The sectors include: Cultural heritage (sites, buildings), Museums, Libraries, Performing arts (theater), Visual arts (multimedia, digital), Movie industry, Literature, Crafts.

In order to avoid overlapping and focus on the most important sectors, we need to extract the more craftsmanship- and utility-oriented sectors from the creative industries, which is design, and more pure-art-and –spirit-oriented sectors, which we will refer to as culture.

DESIGN

One of the most influential consultancy in the field of design, the UK’s Design Council, advises against editions of the very term. It argues that design is everywhere and trying to describe it might not offer better grasp of the phenomenon than just interacting with it, which is inevitable anyway.

We cannot rely on such a disarming simplicity in this paper even though we believe this approach may work. Due to the fact that this paper takes on a comparison between culture and design with regard to contribution to a nation brand, we must define clearly design and culture. Otherwise, there might be quite serious confusion since design definitely incorporates cultural elements, while on the other hand it may argued that culture in its broad sense refers also to the field of design. Another complication is posed by the double function of the word ‘design’. It may designate the act of designing and/or the outcome of such an act and in some case ‘to design’

13 MAREK BANCZYK ACEI 14TH CONFERENCE VIENNA 2006 ph.d. candidate / poznan, poland the effect of culture and design on a nation brand may also mean ‘to plan, project, create’ anything, with no direct reference to any physical representation.

We regard design in two senses: 1) special process, 2)the sectors in which this process is carried. Culture will be regarded analogically. The very comparison will apply to the strength with which the sectors of culture and the sectors of design influence the nation brand, specifically – its value.

As an act, design will be defined as an deliberate process of combining predominantly three areas: arts, technology and economics into an integrated sequence of actions resulting in a physical product meant for use in order to enhance competitiveness of a company and quality of life for all.

Under the concept of design sectors we will understand five usually listed, thus: graphic design, interior design, industrial/product design, multimedia design and fashion design, plus two arenas being clearly design by definition but usually classified separately, thus: advertising and architecture.

Under the concept of culture sectors we will understand: tangible cultural heritage (historic sites, archeological sites, buildings), intangible cultural heritage (traditions, national mindset, customs), museums, performative arts and visual arts.

Most sectors defined in such way will not pose difficulties. In such sectors like graphic design and visual arts the border is naturally much more subtle because the means and methods in both cases can be identical. The difference lies in the purpose. The purpose of design is always directed towards use, more often than not – mass production and distribution within the boundaries and in accordance with technology and market requirements. Contrary to this, the purpose of arts is to create a spiritual benefit in pure sense, with no utilitarian properties and no limitations posed by market, technology and rather of unique that mass characteristics.

Already at this stage it is possible to observe that the very concept of brand includes the term ‘design’. Even if we will not refer much to the brand as an outcome of graphic design process, this connection can be considered symptomatic. In order to

14 MAREK BANCZYK ACEI 14TH CONFERENCE VIENNA 2006 ph.d. candidate / poznan, poland the effect of culture and design on a nation brand come closer to the question of culture and design effect on a nation brand value, we would need to examine concepts on what nation brand value actually is. We shall also recapture terms already used in literature and clearly specify categories of variables that can describe a nation brand value.

THE FRAMEWORK: DESPERATE NEED TO MAKE SENSE OF IT ALL.

Early concepts on nation branding treated export promotion as the primary point of interest. Phillip Kotler and David Gertner defined nation brand mostly basing on its export enhancing properties10. In such a vision, place branding barely differed from origins marketing.

Even Simon Anholt seemed very much devoted to the idea that strong countries should produce strong global commercial brands. Running the same course of logic in the opposite direction resulted in one of the first approaches to measuring the strength of nation brand. It implied that country’s brand value would be proportional to its share in the top global brands ranking or in their accumulated value. This concept was used in Mark Leonard’s Public Diplomacy to portray to world’s top country brands11

Leaving the data aside for the other parts of this consideration, let us take a closer look at the logic underlining such approach to nation brand value.

First of all, as I have said before it takes into account only this part of brand strength that manifests in exports. In other words, it measures the ‘made-in’ effect. In a globalized world, exports surely serve as very powerful tool of gaining economic importance. However, due to exactly the same mechanisms of globalization, exports of goods (as opposed to services) might become less and less significant factor in an international competition. The free market uncompromised warrior and hero Milton Friedman not long ago proposed that all American production could be shifted to China to the benefit of the US. We do not have to share this radical visionary

10 The Journal of Brand Management, vol. 9, No. 4-5, April 2002 11 Mark Leonard, Public Diplomacy at http://fpc.org.uk/fsblob/35.pdf

15 MAREK BANCZYK ACEI 14TH CONFERENCE VIENNA 2006 ph.d. candidate / poznan, poland the effect of culture and design on a nation brand horizons to easily imagine a country whose power is not critically dependant on exports of goods. In export-only approach, the nation brand of such countries should amount zero while in fact, they can earn huge profits by attracting, say, direct investment and tourism. Even without export of services, theoretically the investment could be accompanied with a high-end know-how that in turn would manifest in high value-added market services. With large inflow of tourists, the country would definitely prosper and its prosperity would be accruable much to its brand.

Secondly, using share in the global value of brands as an equivalent of country’s brand value is very easily calculated and displayed. However, in practice there is no certainty if the size of share (i.e. the global success of brands from given country) has anything to do with the core nation brand properties. Though Nokia is associated with Finland now, it is hard to argue that its rise to power in mobile phones has much to do with its Finnish specifics. Even with Ikea, it is not so obvious if the Swedish style of living nurtured Ikea’s success or was actually reinvented by it. Do we really think of Dutch archetypical liberal virtues while choosing Shell station to fill the tank? It is highly doubtful. The fact that a brand originates from (or is simply headquartered in) particular country’s does not necessarily mean that its power or failure has anything to do with the country image as such. The core error is done while mistaking the sum of values of brands assigned to a country for the sum of exports attributable to the brand of the country itself. After all, no-name products with a ‘made-in’ labels in specific sectors can also display the strength of the country brand if they win competition with another country’s no-name products.

This case is even stronger if no-name products of one country win competition with branded items of another. It sounds distantly likely to happen but is not impossible. We might well know, say, Yaso-Yaso products and still buy the German cameras of names we never heard before. The conclusion is that a nation brand strong in exports does not necessarily need to be rich in global product brands of exported goods.

The short critic on the early views on nation branding is not meant to be a dramatizing catch through which to gather Reader’s attention and more strikingly portray the subsequent improvement of analytical framework. It is rather to point out

16 MAREK BANCZYK ACEI 14TH CONFERENCE VIENNA 2006 ph.d. candidate / poznan, poland the effect of culture and design on a nation brand that methodological accuracy was never a major concern for nation branding mainstream and that the flawed framework was present in the arena from day one.

There are three more analytical achievements that require longer description before we could propose the improved framework for the nation branding analysis. Two of them are further stages of development of the school of thought Simon Anholt introduced in early 2000’s. They are at the same time the most popular now and very likely to become standard.

The first framework is Anholt’s famous nation branding hexagonal model. Anholt sees nation branding as the polygon made of six key terms: tourism, export brands, foreign and domestic policy, investment and immigration, culture and heritage, people. In the original hexagonal model these aspects of nation brand are ‘six natural channels’ through which countries communicate their value. Already at this point we might become slightly doubtful how a country could possibly communicate through an foreign inward investment being, as the name suggests, a predominantly external phenomenon.

As the some of these ‘channels’ as described with words like ‘gift’ or ‘richness’ we might be at first tempted to just relabel the six aspects from ‘communication channels’ to, say, ‘sources of value’ or ‘assets’ but after a while we find out this does not make sense either. Tourism as phenomenon (not the infrastructure) is a volatile and dynamic picture of situation resulting from some sort of country’s assets but not being one of them. It sends some message to the world, but the message is neither strong (excluding the extremes, people seldom follow the tourism statistics to be able to tell if France is higher than Spain for instance) nor overly specific (people close to never follow very sophisticated tourism statistics that tell the tourist profiles for given countries).

We are still trying to make use of the model even though we don’t quite know what does the effective benzene-like hexagon represent apart from obvious associations with chemistry, or practical science in general. The six terms are not communication channels. They are also not assets.

The other proposal would be that they represent six areas through which the power of nation brand can be observed. Yet in such case foreign and domestic policy is out of place. The right policy might influence nation brand over a long period of time but it is certainly not the scale on which nation brand power can be measured. Once again: if we agree that purchasing a Toyota is to some extent caused by its Japanese origins, we would have terrible difficulties in arguing that the purchase is in smallest part determined by Japanese foreign policy. Or current Japanese leader. It applies even less to the domestic policy that inmost cases does not bother the buyer whatsoever.

The last ditch effort to save consistency of the hexagonal nation branding model might be to think of it as six arenas which treated carefully by the nation brand manager (government or similar body) can produce high nation brand value. It would be like: resources that eventually might turn into assets. This logic however doesn’t stand up to a first glance criticism either. How can one successfully manage national customs, mentality or anthropological properties of the people making the country? Imagine the global trend favors romantic lovers and fast-speaking ever-gesturing hot tempers. Can you make your people into that pattern if you are, say, Norwegian government? If Confucian attitude becomes suddenly the world’s leading paradigm replacing the American self-assurance and Western cult of individuality, can you make Polish people become a successful nation brand asset, if you know Poles tend to rebel and form resistance movements before they are born and after they die? No. the hexagon does not stand for resources either.

It is really hard to find out what criteria were applied in identifying the six parameters and why were there grouped in this way. Such a selection clearly mixes up the resources, assets, dimensions and channels. The sources of value and their visible manifestations. The controllable and the uncontrollable.

The only cohesive description we can produce to make six hexagonal properties belong to one type of terms can potentially be ‘aspects’. Which is certainly not a very precise category. Even in such case we cannot determine why some of the aspects are strangely overspecified, other ones are made of two separate terms and some other that seem obvious are actually not there. Why should we consider only export

18 MAREK BANCZYK ACEI 14TH CONFERENCE VIENNA 2006 ph.d. candidate / poznan, poland the effect of culture and design on a nation brand brands instead of – as proven before – the nation brand premium on exports in general or entire exports in general. Why investment and immigration form one aspect while they are not always interlinked? Denmark features relatively high immigration with low foreign investment while China or Poland are exactly the other way round. Then, if we consider culture and – especially – heritage, why geography and location are skipped? Apart from the green-yellow-blue trap, who can deny that Switzerland’s brand is in some part influenced by the country’s mountainous geography and Singapore’s – by its hub-suitable location?

In fact, we cannot realistically prove that the hexagon is anyhow justified as a hexagon. Why should it not be a heptagon or octagon? Or another polygon further up? I’d venture to say heptagon wouldn’t sell as they are too ugly and octagon would mean too many aspects to remember plus it is already known in architecture (as a traditional base to the Baptistery construction plan) Luckily we can also exclude the way down: pentagon is already taken by quite famous institution, square is too simple and triangle was already Pythagoras’s main research attribute.

Reassuming: the only rationale for hexagonism of a nation branding model that we can find is that hexagon is a polygon of choice given the branding perspectives of the model itself.

Despite all the above mentioned imperfections, the model could be still credited with some undisputed values: it is the first attempt to analyze the nation brand phenomenon theoretically, the first model based on more factors than just exports, the first model showing interlinking between several aspects of the nation brand. The problem with the hexagonal model is that it has not become history. Instead, it was recently revitalized in a ranking initiative launched by Simon Anholt in cooperation with the Global Market Insite Inc. company of Seattle, WA.

The newest achievement of Anholt’s methodological thought is known under the marketing name of GMI-Anholt Nation Brand Index. It is a intensively marketed ranking of countries rated along with the hexagon-based weighing scale while the input data are gathered through a massive market survey carried out in several countries of the globe. It is updated quarterly since early 2005.

In the GMI-Anholt NBI, both: countries selection and the nation branding methodology evolves from quarter to quarter. The 4th 2005 edition features the real revolution: atop hexagonal weighting and rating operations resulting in point score for each nation brand, there is a new dimension added: financial. This very move must be welcome as sharp turn to the right direction. Using financial valuation of nation brands does not only enrich the GMI-Anholt NBI. For a radical economic behaviorists (such as the author of this paper) it constitutes the most (if not only) valuable part of the entire ranking.

Some results from various stages of NBI will be reflected in the data table later on while preparing arguments for hypotheses. Now, let us just comment on the methodological appropriateness of place branding hexagons. It is advisable to refer also to Simon Anholt’s another model meant for place branding rankings, this time – the city branding. The CityBrandIndex provides more insight into methodological details and can be easier referred to the real life examples.

There is one predominant reason to elaborate on the place brands methodology of Simon Anholt in this paper. Deliberately or not, it does (especially in the city version) resemble a heavily flawed version of contingent valuation. Even the recently added financial valuation of nation brands uses the hypothetical license-fee approach which is nothing else that a open bid WTP elicitation where the good purchase is nation brand. Analyzing the methodological discourse in cultural economics might have possibly helped to avoid few errors the model is notorious for.

City brands were elaborated by GMI-Anholt machine just once to date. The executive summary of the report downloadable form the web-site sketches the main steps executed to produce the ranking. As in case of nation brands, the entire process is base on large scale primary market research.

The model used in city branding however, already at first look spurns initial concern. There comes another hexagon. It is somehow possible that city brand is based on exactly the same number of aspects as nation brands and they are analogically connected to one another but it appears somewhat coincidental. There is no direct

20 MAREK BANCZYK ACEI 14TH CONFERENCE VIENNA 2006 ph.d. candidate / poznan, poland the effect of culture and design on a nation brand counterpart of exports or export brands for the city brand. Foreign policy seems also a bit overblown in such case. Why should there be six aspects again? It is not number of aspects though that raises the major doubt. It is the method.

The GMI-Anholt CBI is constructed accordingly to a weighted score that each city is assigned. The primary data used for the score calculation is obtained via large international market survey (over 17000 respondents from several countries around the globe including Japan, Malaysia, Brazil, Poland and others). This forms an impressive and trustworthy approach to the very subjective phenomenon such as brand. However, looking inside the city brand valuation, we find ourselves in serious doubts.

Respondents are asked on the following aspects of each from the preliminary selected 30 cities: presence, place, potential, pulse, people and prerequisites. Of course, the p-alliteration is meant and distantly rings the bell of marketing mix 4p combination. Nevertheless, some problems start when first P is decoded. Presence in language of CBI means that respondents are asked whether or not they do know of the place at all, whether they have been there and so on. This is an analogy to a assisted brand awareness survey in the conventional marketing research. However, given the fear of showing geographical ignorance that regular respondents harbor such a question appears a very unreliable.

In contrary to the nation branding hexagon, with city branding at least all six aspects are clearly of the same category: these are the city brand assets. Well, almost – Presence is brand awareness and general opinion on it. Then, the further we get into the model, the worse it looks. Asking respondents in, say, Estonia on the city pulse of Mumbai or investigating Brazilians on their perception of people in Geneva is certainly interesting but it has little to do with the City Brand Value.

First of all, the ability of respondents to assess so abstract qualities of distant cities they have or have not ever been to is in best case imperfect. In worst – it is nearly an absurd. It is quite clear to everyone involved in the marketing research survey that lack of basic information among respondents can ruin any attempts of result interpretation. It is critically important in CVM surveys but not specific to them.

Moreover, there is quite well known bias that can be coined “never reveal your ignorance”. It is to be encountered when people are asked to rate something they think they should know while they do not. Having said that, the exercise or drawing conclusions on, say, average Estonian opinions on the city pulse of Mumbai seems a waste of time.

Secondly, even if the people asked, could potentially relate to the question and realistically form their opinions on the assets of distant towns, it would not help much. The value of brand is represented by brand’s ability to earn a premium and NOT on the opinion of customers on the corporate assets. Asking customers around the world about Coca-cola assembly lines would not produce much material that could be used to calculate Coca-cola real brand value and rank it in comparison to other brands. As long as people come to Mumbai to spend time and money, companies organize conferences there, investors pour in and talented graduates migrate to spend their most productive years in the city, who cares what opinion on Mumbai’s city pulse or prerequisites is predominant among Estonian ice hockey fans or Polish farmers? It is like conducting the contingent valuation based only on the ‘existence’ or – tentatively – ‘bequest’ value and leave all direct use, indirect use and option values neglected.

GMI-Anholt NationBrandIndex is early realization of the same logic. People around the world declare their opinions on other nations’ people, governance, immigration and investment, tourism attractiveness, culture and heritage. It is very impressive international poll-based research on cross-national attitudes and biases. Marketed as such, it would be a revelation, especially if the survey on national culture and heritage was conducted by the rules of CVM. It is not. The whole operation lacking slightest reference to at least one recognized valuation method becomes just another opinion poll. A fashionable, colorful excess with serious aspirations and dubious qualifications. Branding it as ‘first analytical ranking of world’s nation brands’ involuntarily downgrades the significance of the whole exercise. In the family of business strategic analysis methods, it continues the tradition of arbitrarily drafted grids and weighting scales with no methodological spine, exemplified all too well by the pseudo-scientic McKinsey portfolio model, to name one of the most popular

22 MAREK BANCZYK ACEI 14TH CONFERENCE VIENNA 2006 ph.d. candidate / poznan, poland the effect of culture and design on a nation brand cases. Is there any chance that a cultural economics influenced model would perform any better? We believe so.

THE EXPERIMENT: A CULTURAL ECONOMIST VALUES A NATION BRAND

The first assumption a cultural economist would make in such case, would be to focus on the revealed preferences. This is just an assumption but it would save a lot of futile workload by nation branders. Why go through the whole painstaking and always risky process of making people state preferences that can be observed anyway? There might be some rationale for it, however as we will show later on, the stated preferences techniques might bring not as much light to the nation brand value, as rather to the mechanisms that create it.

Despite not qualifying for the category of cultural good, nation brand certainly features some resemblance to it. First, it is a pure concept rather than physical substance or commercial utilitarian service. Its value is revealed in observable dimensions but the brand itself is a intangible surplus over several functional properties. Nation brands are not traded which makes it impossible to value them through transactional price. They can be also considered non-rival in terms of use.

This resemblance makes it interesting to consider nation branding valuation from the cultural economics point of view. The relationship of culture (as an asset) to a nation brand only adds to this picture another aspect. Last but not least, nation branding valuation is desperately needed in practice in order to verify sensibility of public policies in this field and to manage well the nation brands as such. This might bring cultural valuations into a new era since the game is played on one of the most important field of the knowledge economy: the quest for sustainable, innovation- based competitive advantage. Therefore it might be advisable to look at the nation brand valuation possibilities from the cultural economics angle.

We already examined the Anholt model. It uses market research to establish respondents’ ratings on various aspects of nation brand value and then aggregates the ratings into a synthetic score value. This methodology can be compared to a

23 MAREK BANCZYK ACEI 14TH CONFERENCE VIENNA 2006 ph.d. candidate / poznan, poland the effect of culture and design on a nation brand dissected, severely flawed contingent valuation. Even if it was not flawed at all, respondents had perfect knowledge on the issue and if they assessed a synthesized dimension (in terms of WTP) instead of six vague aspects, this approach would result in any success. The reason for it is the same as the reason why there is no Coca- cola CVM-based brand valuation. There might be some option, bequest and existence values of Coca-cola brand but compared to its strictly financial brand premium they are negligible, if any. The same applies to a nation brand, though its premium appears at least in three different dimensions: exports, investment and tourism.

In case of foreign inward investment, we cannot rule out a possibility of applying hedonic pricing. It would be interesting and theoretically appropriate to examine variables of property prices across several countries in comparable setting and extract the variable responsible only for the country brands. Moreover, this method is relatively often mentioned in cultural economics but quite seldom used. One of the key reasons cited is that cultural amenities are often encircled by a plethora of other types of attractions, real estates and venues which makes it difficult to separate the attributable variables form the prices or wages. It is easy to point out that in case of nation brand valuation this problem does not exist. Even the smallest countries are easily and clearly separable from other countries by official borders. Hedonic pricing might have actually more application potential in nation brand valuation than in cultural economics.

Another method potentially useful in identifying the value of a nation brand within the same dimension of foreign inward investment is economic impact analysis. Investment is a clear example of direct effect. It is even way more tangible and solid than direct effects typically named in EIM such as hotel expenses or meals. Moreover, the typical problem of EIM with establishing an accurate capture rate is reduced in this case. Foreign money transfers can be traced with much higher accuracy than trabsfer between regions not to mention counties or municipalities. The area of analysis, so often misconceived in EIM, is easily and clearly definable here. EIM is also suitable to measure nation brand value because of its ‘behaviorist’ approach. It captures tangible effects and nation brand. Being intangible itself, it entails primarily tangible effects.

Obviously enough, economic impact analysis may play crucial role in another nation brand value dimension – tourism revenues. This is almost purely EIM arena. However we must observe that as in any other dimension, there is always a critical question of the nation brand leverage, i.e. to what extent the brand itself can be accounted for tourism effects being easily calculated through EIM.

This dimension is not inaccessible for another method known in cultural economics – the TCM. Travel cost approach is also rarely applied (however more often than HPM) in cultural economics. The major drawback quoted are limitations with disentangling the travel costs for a specific cultural goods. Once again, a country, even the smallest one, is seldom purely just on the way. It requires more will to get in, it is much easier and more precisely observable through the customs statistics. Identification of country of origins in nation brand valuation causes TCM to naturally become a variant of zonal TCM (ZTCM12) without the whole hassle of zip codes research.

TCM can be potentially applied also in order to deal with the dimension of nation brand that is one of the most difficult to quantify and value in terms of money: immigration of talents. Economies like the US or the UK are often believed to derive parts of their powers and good shape from the gravity that makes talented individual from other countries move and flourish there to the benefit of the receiving economies. Travel cost method (including preparations needed to make a move) could offer serious help in this regard which is even more important than the previous TCM application because tourism dimension can be researched using other methods, while talents immigration probably cannot.

At the end of this short display of cultural valuation potential in nation branding, let us return shortly to the initially rejected CVM. As a stated preference method meant to capture especially non-use fairly abstract values, it loses to other methods when it comes to measuring the nation brand value in any of the 3 main dimensions. However, it might be helpful in finding answers for the questions referring to the very

12 Joan Poor, Jamie M. Smith, Travel Cost Analysis of a Cultural Heritage Site: The Case of historic St. Mary’s City of Maryland, Journal of Cultural Economics, No.28, 2004

25 MAREK BANCZYK ACEI 14TH CONFERENCE VIENNA 2006 ph.d. candidate / poznan, poland the effect of culture and design on a nation brand mechanisms of value creation, its sources and focal points. One of the key questions of this paper – whether or not culture is central to nation brand – could be facilitated with the use of CVM. Instead of naming ‘countries globally relevant in terms of economic value of culture’ we might simply execute a contingent valuation of national cultures and than compare the results with the nation brand ranking. The idea on CVM on the entire concept of country’s culture appears insane at first. But actually – why not? If we ask respondents who have never been to the seaside on such an abstract thing as WTA for eutrophication, why cannot we ask on WTA for, say, sudden disappearance of every trace of the German or American culture? The compensation for giving up an everyday experience of watching American movie or indulging Bach music might be more reliably valued than a complex deterioration processes observed in the archaeological sites. This is the field where multinational cross-country survey could bring intriguing and needful results.

There is one nation brand valuation model known to date that to some extent echoes the considerations stated above. The model created by the team managed by Prof. Roger Sinclair from the University of Witwatersrand in Johannesburg (WITS). For the private use, I will refer to it as WITS model.

WITS calls on the commercial brand definition and functions and assumes the major role of it should be maintained in nation brand concept. Thus: it assumes that nation brand value should be captured through financial premiums. Since nation brand is set to attract benefits in at least three fields: investment, tourism and exports, WITS takes these three benefit inflows, assigns what part of each (premium) is earned through the very influence of pure brand and calculates the average nation brand premium which is then related to the total GDP.

Moreover, taking good patterns form the commercial brand assessment, WITS incorporates the dynamic perspective by assuming that the resulting stream of benefits coming from nation brand through the three areas (part of GDP attributable purely to the brand and not to particular assets) is just an annual figure while even if the branding efforts stopped the nation image would continued to bring revenues over years. This is clearly the same assumption the capital market uses for future cash flows valuation. Going consequently farther, as in the capital market, in WITS

26 MAREK BANCZYK ACEI 14TH CONFERENCE VIENNA 2006 ph.d. candidate / poznan, poland the effect of culture and design on a nation brand model the annual nation brand value is discounted in consecutive years during a projected life cycle until it is considered exploited. This part of WITS is analogical to discounted cash flow (DCF) valuation of companies.

This is also the most problematic part both methodologically and practically. Expert method is in use when it comes to life cycle assessment (in the original South Africa brand valuation by WITS, Prof. Amartya Sen was responsible for this part). The second problem with WITS is that it is hardly thinkable to apply it from outside of the country being analyzed. It appears too detailed and too time- and work-consuming to become a basis for frequent rankings. Otherwise, WITS is by far the most consistent and methodologically flawless model of nation brand valuation developed to date.

It is interesting to observe one thing. WITS model in fact focuses only on the real economic interactions and accounts the financial flows. It is strictly limited to the specific area and sensitive to capture rate, does not double count the turnovers and allows only the external cash flows to be counted. In other words, its modus operandi resembles the most sophisticated EIM valuation.

THE PROPOSAL: ASSETS, DIMENSIONS, CHANNELS AND NO POLYGONS

Before creating hexagons or pentagons, one must decide on what categories of nation brand description are critical. The most known and popular model (Anholt) is not overly convincing in this regard. On the other hand, the methodologically clear WITS model focuses strictly on brand valuation. In order to to answer the basic questions of this paper we might need to go beyond measuring the nation brand value. It will be beneficial to find out what properties govern the mechanism of value creation and what assets are or are not central to it. This would require an outline of a basic framework.

We will predominantly work on three major categories of nation brand descriptive variables: nation brand assets, nation brand dimensions and nation brand communication channels.

Nation brand assets are defined as tangible or intangible properties of the nation (country, state) on which the nation brand is or potentially could be based. This category contains assets such as: national mindset, technology, geography, customs and traditions, history, culture, design, politics, qualification of people. It would be very beneficial to refer here to the interesting debate on hard and soft power of a nation brand13, yet it should not compromise the main course and goals of this paper.

Since there is no simplistic measure by which nation brand value can be captured, (such as CF in commercial brands) we should find and possibly precisely define the areas in which nation brand value becomes manifest and the quantitative variables crucial to these areas. Even though at some stage the concept of nation brand presents a common denominator to these areas, to a vary large extent they are independent from one another, i.e. the nation brand value can be revealed through any of these areas. We will call these areas nation brand value dimensions. I would like to name 6 nation brand value dimensions: exports, FDI, tourism, immigration, pride and cohesion, contest dominance. Out of these six fields, the first three are recognized in some works on nation branding. Not surprisingly, the previously mentioned Roger Sinclair’s WITS model is probably the most notable among these works featuring a consequent analytical approach. We assume that nation brand value is shown in each dimension independently. For the sake of simplification, we neglect the possible interactions and feedbacks between the dimensions and consider to total nation brand value to be equal to sum of values from all dimensions. Within the dimension, the individual quantitative measures we will call nation brand value indicators.

The dimension of exports is quite well described and understood. Historically, it was the first nation brand aspect that emerged as a serious issue. Nation brand value in exports means that people buy products on basis of country of origins. The key quantitative measure here can be the part of annual export figures attributable to a nation brand, i.e. part of export sales explainable in terms of pure willingness of the buyers to buy products from a given country.

13 Javier Noya, The symbolic power of nations, in: Place Branding, vol. 2,1, 53-67, Palgrave Macmillan Ltd, 2005

The FDI or foreign direct investment does not need much explanation either. The stronger a nation brand, the more investors are attracted by the country over and above the objective conditions for investment it offers. Contrary to a common wisdom saying that FDI is all about resources, cheap labor and office costs or tax breaks, the nation brand plays extremely important role in this area. Short glance on World Investment Report shows that common wisdom mentioned is nothing but a myth. Strong nation brands can attract massive foreign investment offering objectively less preferable business conditions than weak nation brands. The value indicator in this case can be the part of annual FDI attributable to the nation brand, i.e. such portion of investment that was motivated or justified by the country as such and not by technical conditions it offered.

Tourism presents slightly more complicated case since tourism related revenues are problematic in accounting while their role in shaping country’s future is often debated. It is argued that tourism as development driver is overrated because it stimulates non-innovative industries of low value added and innovation and non-sophisticated labor force. Moreover, countries (as well as regions or cities) rush into tourism promotion and neglect other areas while in fact, very few countries (regions, cities) can base their development solely or mainly on tourism and succeed. Most vocal exemplification of this standpoint were comments by the famous urban development specialist Prof. Joel Kotkin on New Orleans tragedy.14 On the other hand, tourism is less complicated with regards to attribution of the part earned by nation brand than the previous two dimensions: it is almost entirely attributable to a nation brand. Excluded are only visits clearly targeting relatives and families and other inflows of tourists who did not have choice about of destination (i.e. obligated to join events fixed in a given country). For valuation purposes, most suitable value indicator would be the portion of tourism revenues attributable to a nation brand. For more insights into dynamics and development, more interesting might be to analyze the number of visits, instead of revenues.

Immigration is way more difficult to be quantified and measured in monetary terms. As most open or half open economies such as US or the UK show, the economy

14 Joel Kotkin, Nowy Orlean czekal na smierc, interview with Gazeta Wyborcza, Poland, September 2005

29 MAREK BANCZYK ACEI 14TH CONFERENCE VIENNA 2006 ph.d. candidate / poznan, poland the effect of culture and design on a nation brand benefits from the influx of immigrants, provided they are not all treated like political refugees and offered government allowances. Normally, immigrants are very active and positive force that drives economy forward. This applies especially to the immigration of talents – young, success-hungry professional specialists, typically tertiary education graduates. It becomes arguably the most critical factor in the globalized knowledge economy. The potential value indicators in this case could be the number of immigrants influx per year and the net present value of their future contribution to the economy. Due to ongoing works on the details and paper constraints we will not consider this dimension in calculations.

There have been many stipulations on how victory in the World Cup in soccer can elevate nation’s pride and optimism and as such – increase the GDP by good few decimals. World Cup or other reason, nation that are proud of their nation brands perform better than those nations that are not. The same applies especially to regions. This is possibly the only internal effect of the nation brand. There is still a major work needed in terms of methodology of calculation and even more – a massive data collection. Therefore, pointing out that such a dimension exists, we must conclude that given existing data availability, we cannot include it in the calculations.

The last dimension relates to the part of country’s international importance called soft power.15Contest dominance simply means that certain country wins competition for organizing international events. The events bring many tourists, professionals and – ideas – not captured by tourism dimension (they MUST go to a given country because the event was arbitrally located there). This dimension is again extremely difficult to measure which rules against including it in the quantitative section of this paper.

There is a serious difference between the dimension of a brand value and the channel the brand image is communicated through. In response to some uncertainty and confusion in the literature, we need to clearly separate these two descriptive characteristics.

15 Joseph Nye, Soft Power: The Means To Success To World Politics, PublicAffaiers, New York, 2004

By nation brand communication channels we will mean all ways the country promotes its brand to the outside world. This will include certainly governmental and non-governmental public diplomacy and all marketing nation brand-centered marketing activities through international media, fairs and exhibitions, etc. Note that several achievements of a nation brand observed in particular dimensions: tourism increase, high FDI, immigration of talents, can be secondarily used in the brand promotion. This means that the information on these achievements would flow through the nation brand communication channels to the outside world. However, this does not mean that the information, or the very achievements, or even less – the fields of achievement (investment, tourism and so on) can be considered channels themselves, as they are in Anholt’s hexagonal model. Channel is a physical or virtual route through which something moves or is moved. Dimension is an arena in which a quantitative effect of something can be captured. Asset is the tangible or intangible property capable of being a source of benefits. These are all highly abstract categories but we must not allow them to interfere or overlap if the whole analytical apparatus is meant to work well.

As the basic terms and proposed conceptual framework for the nation branding are named and shortly described, it is possible to return to the core questions on possible impact of culture on a nation brand value. We will present an ideal course of methodological actions and then adjust it to the real life conditions and to the stage of research at the time of writing of this paper.

THE METHOD: OMNIPOTENT CUM OMNISAPIENT APPROACH

Let us assume that we one-day unrestricted access to the Truth. Then, calling on the best legacy of some earlier benchmark papers in cultural economics, let us assume such a thing as the Real Value (RV) exists for all three fields our consideration tries to cover. Thus: for each country we can determine the RV of:

- national culture (CRV), - national design sector (DRV) - nation brand (NBV).

Having done so, we might construct three rankings of countries accordingly.

Should such an omnipotent and omnisapient approach be executable, then determining whether nation brands depend on culture would come down to few fairly easy statistical operations.

Running regression analysis would allow us to produce three correlation coefficients:

-  between CRV and NBV rankings -  between DRV and NBV rankings -  between CRV and DRV rankings

The first two coefficients refer to relation between values of selected sectors – culture and design – AND nation brand value. The third coefficient would provide us with an additional though quite vital information on possible correlation between culture and design as two adjunct creative sectors.

The remaining part of algorithm would not pose problems either. Let us repeat the basic questions stated at the beginning of this paper in order to dissect the complex problem to partial theses:

BQ1: Does culture always strongly influence the nation brand? BQ2: Does culture always positively influence the nation brand? BQ3: Is culture the only factor that can simultaneously be a source of value, value communicator and revenue earner for the nation brand?

While we must observe that correlation does not mean causal mechanism, we can also point out thet LACK of correlation actually does mean LACK of causal mechanism. Following this line of thought, provided that by ‘strongly influence’ we mean correlates at least at 0,4, we could conclude that:

1) If   0,40 then BQ1 and BQ2 : possibly YES

2) If   -0,40 then BQ1: possibly YES and BQ2: NO

3) If 0   < 0,40 then BQ1: NO and BQ2: possibly YES

4) If -0,40 <  < 0 then BQ1: NO and BQ2: NO

BQ3 would require some more assumptions and equations, though.

First, we would have to assume that the BQ3 is not false itself, i.e. that culture IS a factor (the only or one of) that is simultaneously a source of value, value communicator and revenue earner for the nation brand.

Secondly, we would need to assume, that this ‘triple’ property of culture is evident in the correlation between CRV and NBV, thus: the more YES answers to BQ1-2, the stronger the property.

Finally, for the sake of simplification, let us assume that with regard to the influence on the nation brand, there are only two factors being examined: culture and design.

In such case, BQ3 would entail positive response if there was at least one factor of as strong ‘triple’ property as culture. This would be true if the other factor would result in the same or more positive combination of BQ1-2 answers.

In other words, if for culture we find that for instance case 2) is true then finding that for design case a parallel to 2) or to 1) is true would mean that BG3 answer is NO or: that culture is NOT the only factor featuring ‘triple property in regard to the nation brand value.

Technically, this algorithm could be presented as follows:

Substituting  by , we would need to repeat 4 cases mirroring the cases 1) to 4) and technically conclude that for the sake of this operation we create BQ1’ and BQ2’ being identical to BQ1 and BQ2 just that the word ‘culture’ is replaced by ‘design’.

This would create 4 mirror cases for , let us assign numbers: 1’) to 4’), so that:

1’) If   0,40 then BQ1’ and BQ2’ : possibly YES

2’) If   -0,40 then BQ1’: possibly YES and BQ2’: NO

3’) If 0   < 0,40 then BQ1’: NO and BQ2’: possibly YES

4’) If -0,40 <  < 0 then BQ1’: NO and BQ2’: NO

In order to answer BQ3, we would only need to calculate  and  and check which cases these coefficients fall into. This would produce a pair of cases representing the  and the . The final conclusion would be based on the following scheme:

A) For pairs: 1)-2’) or 1)-3’) or 1)-4’) or 2)-4’) or 3)-4’) the BQ3: possibly YES B) For all other pairs the BQ3: NO

Reassuming, having one-day unrestricted access to the Real Value data, we would have clearly answered the Basic Questions of this paper, and hence – clearly and decisively rule on the culture versus design impact on nation brand - probably by noon. In worst case – by tea time.

As usually in the economics, the omnipotent and omnisapient reasoning serves only as a model. The unrestricted access to truth is denied again and we have to count on the scarce empirical evidence. Obviously, we do not have the required data on Real Value so we will have to resort to numerous substitutions and/or changes in the path of conclusions in order to bypass the data gaps.

THE METHOD: SUBSTITUTION AND BYPASS APPROACH

Substitution will take place when, confronted with lacking Real Value data, we shall rely on figures, ratings or rankings serving the same general purpose but not necessarily giving us the full picture.

Bypassing will take place when, confronted with the very scarce or selective substitution data, we will drift from the conclusion path presented above and rely also on theoretical arguments.

The first dataset needed is ranking of countries by the value of their cultures. Obviously we do not have anything even distantly similar to such ranking. The very phrase ‘to rank a culture’ sounds not only politically incorrect, it appears a cruel joke on the contemporary international communication standards. A chainsaw response to the flowered lawn of multiculturalism. Arrogant, ignorant, unilateral, imperialist and other nice adjectives would possibly surround a researcher making an attempt to step into the taboo land of culture rankings and hierarchies. For a contemporary scientist, definitely a landmine area.

Even though we do not have such a ranking and we are truly aware of danger, we will not bypass this area. We need some input here if we are to move forward with the entire case and as long as we pursue the pure knowledge, no political correctness should pose a real barrier. Especially that, as will be shown, this landmine can be easily disarmed and no major taboos must be broken nor secular blasphemy committed.

Before proceeding, I would venture to make a remark that culture hierarchy sensitivity seems a little bit overblown if we relate it to the other valuation and comparison phenomena of the contemporary world. Sports is a ruthless platform of constant rankings and comparisons done on the purely national, ethnic or even racial criteria. There is little or none shame to state the superiority of African-American basketball players. There are several anthropological factors that would contradict the rationale for just comparisons of sport achievements between certain ethnic groups (in certain disciplines at least) and still – there is one universal or ‘absolute’ set of rules for all national teams or individuals and they are cruelly ranked each time a international games take place. It would be hard to simply conclude that culture

35 MAREK BANCZYK ACEI 14TH CONFERENCE VIENNA 2006 ph.d. candidate / poznan, poland the effect of culture and design on a nation brand impacts life of societies more heavily than sports. One visit at Maracana stadium during Rio’s derby game would probably seriously undermine such a conclusion. A glance on well documented statistics of individual and social displays of emotion related to sports would dismiss such conclusion ultimately. There is no substantial reason why, given the existing ranking of nations and ethnicities in the world of sports, there should be a non-conditional ban on any attempts to rank national or ethnic cultures.

Luckily, we do not need to push this observation since the type of ranking we would need should be based on rather insensitive criterion of economic value. Since there is no major political taboo related to measuring economic value of culture (at least nothing comparable to ethnic sensitivity), we can assume this landmine disarmed.

However, the way to solution of the lack of data remains steep. I am not aware of any compilation to date documenting all cases of economic valuation of culture from all countries through all methods. Which does not mean such a catalog does not exist or even less – that it could not be created within predictable future. After all, making an update to Douglas Noonan’s 2002 Annotated Bibliography and adding to it all other valuations should be possible. Perhaps – distantly, but still.

Even if this was done, adding results by countries wouldn’t make much sense. First – the studies do not cover all area of national cultures. Second – even if they did, we would not escape the still unanswered question on relationship between methodologies. The most advanced approach to this very serious issue made by Bruce Seaman in 2002, for all its depth and accuracy, focused only on two most important methods being contingent valuation (CVM) and economic impact (EIM). The question of TCM and hedonic valuation in this framework is still open. There will be more on this aspect in the later course of paper.

Of course, there is some help from the publicly available sources like UNESCO’s World Heritage List. Countries feature various numbers of sites on it. Unfortunately even if we assessed all of the WH treasures through the same method, say CVM, we would still arrived only at the very selective cultural heritage ranking. Which is not

36 MAREK BANCZYK ACEI 14TH CONFERENCE VIENNA 2006 ph.d. candidate / poznan, poland the effect of culture and design on a nation brand exactly what we try to verify since nation branding cliché we are challenging refers to the culture as to complex picture, not just to the heritage.

I’d venture to conclude that to my deep disappointment and concern, basing on the existing empirical data and available methodology, there is no chance of constructing a reliable ranking of countries by their accumulated economic value of culture. A substitution is certainly needed here.

Since the main goal of this paper is to undermine a seemingly general rule (on culture’s central impact on nation brand) and not to promote one, we would just need to find one or few contradicting arguments. In that case, without a ranking which means: without a complete regression analysis, we are still theoretically able to prove that the rule is flawed. We need at least a selection of countries though, that could be proven the status of globally relevant in terms of culture economic value.

Following the framework I proposed in earlier section, we would dissect the term ‘culture’ into manageable parts or sectors. In each sector there is some data worldwide to be referred to. As, whether we like it or not, CVM is probably the most popular cultural valuation method being at the same time highly universal through all culture sectors, I will use Noonan’s Bibliography to select first the countries of numerous or especially acclaimed contingent valuations. The selection will be reinforced then by several countries whose culture’s global recognition at least in one cultural arena is beyond serious discussions. It is not critical that such a list be complete. It is much more critical that each and every country on it be likely to have high position on the hypothetical CRV ranking.

There is 20 countries captured in the Annotated Bibliography. Out of these countries, I’ve chosen 5: Argentina, Italy, Morocco, Peru, and USA. Leaving the accuracy of such a global vision aside, It is hard to dismiss the international recognition at least of some parts of each country’s cultural spectrum: Argentinean tango, Italian opera, Moroccan Arabic architecture, Peru’s Machu Picchu and Inca traditions, American movie industry. Once again: this selection is not meant to represent the countries in question. It is just to make a point a minimal cost, that these countries (plus many others) are culturally relevant to the world’s audience.

Going beyond Noonan’s work I will quickly pass through the arenas, such as: tangible cultural heritage (sites, buildings), intangible cultural heritage (traditions and customs), museums, libraries, literature, performing arts, visual arts, movie industry, tv, crafts. urges to add several other countries. I’ve chosen another 6: Brazil, Germany, Russia, India, Greece and Egypt. Once again, I’d like to stress that this selection is neither representative nor complete. There are many more countries of cultures globally recognized such as France or Spain to name to just two. The selection is meant to show SOME countries from those whose cultures are internationally relevant.

The above stated assumptions lead to an arbitrary selection of countries that for one or more cultural assets earn worldwide admiration.

Table 1. Sample List of the Globally Relevant National Cultures

Country Sample cultural asset of global recognition Argentina tango Brazil samba Egypt pyramids

Germany classical music Greece sculpture India spirituality Italy opera Morocco Arabic architecture Peru Machu Picchu Russia Ballet, classical literature USA movies

It is tempting to make a short remark in this moment. If there is a use for stated preference method in nation brand valuation, this field seems particularly suitable. It would not follow the erroneous consideration of brand in terms of external benefits (instead of internal for which brand is meant) because only particular asset – culture – and not the brand value would be measured this way. The method of choice for such a global culture valuation might be CVM. A ranking of countries by their cultures

38 MAREK BANCZYK ACEI 14TH CONFERENCE VIENNA 2006 ph.d. candidate / poznan, poland the effect of culture and design on a nation brand valued through CVM would be quite good substitute to the Culture Real Value ranking described in the ideal case. Yet as long as CVM-based culture valuation of selected countries remains just a plan on the agenda of some hot temper young researchers, we need to stick to the vague and random yet sufficient selection of countries whose cultural assets enjoy undisputed global recognition.

THE NUMBERS: TO DESIGN A BRAND OR TO BRAND A DESIGN

Following the omnipotent/omnisapient general pattern of action, now we would need to find a ranking of countries by value of their design sectors. This is another moment where a substitution is needed. However, we can name data source very helpful in this regard. Interestingly, there is somewhat more insight into the design sector comparison between the countries than into the analogical comparison in the field of culture

The 2003 Designium project at the University of Arts and Design in Helsinki, Finland16was the world’s first initiative to rank selected countries by the degree of design application to the economy. The study used indices and formulas known from the World Economic Forum competitiveness report (also featuring ranking of national economies). As the source is the only one and both figures and indicators are reliable, with not much of a hesitation we take both: the 2002 design Ranking and the 2005 Design Competitiveness Ranking of the Designium ranking as a possibly close substitute for the DRV ranking. We stress at this point, that the selection of countries is NOT representative for the complete global picture, yet it is representative in the TOP20 zone of the Designium ranking. The selection of countries, even though wider in each edition, is still somewhat arbitrary in the bottom part.

16 It partly adopted methods used in Building value added through design by New Zealand’s Institute for Economic Research, 2002.

Table 2. DESIGNIUM ranking of countries by their use of design.

Rank Design ranking 2002 Design Compet. Ranking 2005

1. Finland Japan 2. USA USA 3. Germany Germany 4. France Switzerland 5. Japan Denmark 6. Switzerland France 7. Netherlands Finland 8. Sweden Sweden 9. Denmark Belgium 10. United Kingdom Austria

Of the other countries listed in the Sample List of Relevant National Cultures (Tab.1), those ranked in Designium full report below TOP10 are: Greece (37), India (30), Italy (23) and Ireland (19)

Since Designium ranking quite specifically reflects the nation policy support for design and coordination of so oriented programs, it would be sensible to attach here a ranking of countries by the estimated design sector turnover. Unfortunately, there are only few countries that make such statistics available (UK, USA, Netherlands) and due to the fact that design services are often accounted in the design-consuming industry, even with a strict control over the width of design subsectors classification, there is too much uncertainty to compare estimates across the countries. We might however bear in mind that particular UK’s design sector features relatively large potential with a relatively invisible support programs which makes UK probably the most underrated country in the Designium ranking.

Nevertheless, as we already coped with the substitutes for the ranking or countries based on the Real Values of the national culture sectors and design sectors, the last data gap is to be substituted in the field of nation brands.

As was pointed out in definition section as well as in framework description, the most accurate NB valuation model to date developed by Prof. Roger Sinclair is based on assumption that nation brand as any other brand is due to bring extra cash. We have

40 MAREK BANCZYK ACEI 14TH CONFERENCE VIENNA 2006 ph.d. candidate / poznan, poland the effect of culture and design on a nation brand labeled it WITS model and allowed the incorporation of extra benefits of non-financial nature under conditions that they are clearly contributing to the economy (thus: bring in extra cash at last) in the long run. Immigration of talents can be classified in this category.

The problem with the WITS model is that it unsuitable to nation brand valuation from abroad. One needs to interview investors, export-import experts, tourism operators or incoming tourists in order to establish the NB premiums for exports, investment and tourism. The immigrating graduates should be interviewed on the same basis as tourists, only further monetary conversion of the immigration premium would need some assumption since there is no reference in terms of immediate amount of money.

Due to the fact that we cannot assume the premium rates, we will not be able to synthesize neither three- nor four-dimensional brand value into one. In such case, the only advisable course of action would be to rely on the partial data related to the particular dimensions, i.e. to exports, FDI and tourism statistics.

The investment data are nice presented in World Investment Report (WIR). Export figures are the most vulnerable data, because we cannot determine nor assume the importance of origins. The buyer might be potentially unaware of the origins while the investor cannot be unaware of investment destination and so a tourists cannot be unaware of their destination countries. For exports, for the lack of better references we use the Share-In-Global-Brand-Value list.

This implies using the following data:

- tourism inflow (arrivals), - tourism revenues (USD), - toursim revenues per capita (USD) - FDI total (USD) - FDI per capita (USD), - share in the accumulated value of global brands (%)

The figures presented below (Tab.3) are taken from the 2004 WIR edition. We focus on the countries listed before in the previous two data sets (culture and design rankings).

From the figures, we can work out the substitution to the ranking based on Nation Brand Real Value. It would be composed of average from: investment ranking, tourism ranking and exports ranking. All three components and the resulting NB ranking are presented in Table 4.

Table 3. Design rankings and nation brand related data for selected countries.

DR DCR D- Country FDI Pop FDI/cap 2002 2005 av T Tusd T/cap Tusd/cap Switzerland 19255 7523934 2559,167 6 4 5 6530 9186 0,867897 1220,904 Netherlands 63854 16491461 3871,943 7 13 10 9646 10260 0,584909 622,1401 Sweden 23242 9016596 2577,691 8 8 8 3003 6167 0,333053 683,961 UK 118764 60609153 1959,506 10 11 10,5 27755 27299 0,457934 450,4105 Ireland 25845 4062235 6362,261 - 19 19 6982 4729 1,718758 1164,137 France 43250 60876136 710,459 - 6 6 75121 40842 1,233998 670,9033 Germany 198276 82422299 2405,611 - 3 3 20137 27657 0,244315 335,5524 Denmark 33818 5450661 6204,385 9 5 7 3358 5669 0,616072 1040,057 USA 314000 298444215 1052,123 2 2 2 46077 74481 0,154391 249,5642 Belgium 32779 10379067 3158,184 - 9 9 6710 9185 0,646494 884,9543 Singapore 17217 4492150 3832,686 22 16 19 5705 3787 1,269993 843,0262 Finland 8015 5231372 1532,103 1 7 4 2840 2060 0,542879 393,7782 Austria 8840 8192880 1078,986 - 10 10 19373 15351 2,364614 1873,7 Italy 13575 58133509 233,5142 - 23 23 37071 35656 0,637687 613,3468 Greece 1089 10688058 101,8894 - 37 37 13969 12872 1,306973 1204,335 Japan 8323 127463611 65,29707 5 1 3 6138 11202 0,048155 87,88391 Estonia 387 1324333 292,2226 - 32 32 1750 806 1,32142 608,6083 Argentina 10418 39921833 260,96 - - 100 3353 2563 0,083989 64,20046 Morocco 215 33241259 6,467866 - - 100 5501 3921 0,165487 117,9558 Brazil 32779 188078227 174,2839 - - 100 4725 3222 0,025123 17,13117 Peru 810 28302603 28,61928 - - 100 1203 1078 0,042505 38,08837 Egypt 1235 78887007 15,6553 - - 100 5746 4548 0,072838 57,65208 Russia 2710 142893540 18,96517 - - 100 9164 5226 0,064132 36,57268 India 2319 1095351995 2,117128 - 30 30 3371 4769 0,003078 4,353852

Sources: World Investment Report 2004, World Tourism Organization facts and files 2005, US Government global population census, Designium 2002 and 2005 reports

FDI – foreign direct investment total figure in USD millions, Pop – total population of the country, FDI/cap – foreign direct investment per capita in USD, DR 2002 – position of the country in Designium 2002 ranking, DCR 2005 – position of the country in the Design Competitiveness Ranking in Designium 2005 edition, D-av – average position in Designium rankings, T – annual number of tourist arrivals, Tusd – annual receipts from tourist arrivals, T/cap – annual tourist arrivals per capita, Tusd/cap – annual tourism revenues per capita

Table 4. Nation Brand Value Dimensional Substitution preparation for selected countries. Dimensions: Investment (FDI/cap), Tourism (Tusd/cap), Exports (GBVS).

Country FDI/ca I-R Country Tusd/cap T-R Country GBVSw E-R p Ireland 6362,261 1 Austria 1873,7 1 Finland 76,46 1 Denmark 6204,385 2 Switzerland 1220,904 2 Switzerland 66,45 2 Netherlands 3871,943 3 Greece 1204,335 3 USA 22,78 3 Singapore 3832,686 4 Ireland 1164,137 4 Sweden 11,09 4 Belgium 3158,184 5 Denmark 1040,057 5 UK 9,90 5 Sweden 2577,691 6 Belgium 884,9543 6 France 8,21 6 Switzerland 2559,167 7 Singapore 843,0262 7 Germany 6,07 7 Germany 2405,611 8 Sweden 683,961 8 Netherlands 6,06 8 UK 1959,506 9 France 670,9033 9 Japan 3,92 9 Finland 1532,103 10 Netherlands 622,1401 10 Italy 1,72 10 Austria 1078,986 11 Italy 613,3468 11 Ireland 1 20 USA 1052,123 12 Estonia 608,6083 12 Denmark 0 20 France 710,459 13 UK 450,4105 13 Belgium 0 20 Estonia 292,2226 14 Finland 393,7782 14 Singapore 0 20 Argentina 260,96 15 Germany 335,5524 15 Austria 0 20 Italy 233,5142 16 USA 249,5642 16 Greece 0 20 Brazil 174,2839 17 Morocco 117,9558 17 Estonia 0 20 Greece 101,8894 18 Japan 87,88391 18 Argentina 0 20 Japan 65,29707 19 Argentina 64,20046 19 Morocco 0 20 Peru 28,61928 20 Egypt 57,65208 20 Brazil 0 20 Russia 18,96517 21 Peru 38,08837 21 Peru 0 20 Egypt 15,6553 22 Russia 36,57268 22 Egypt 0 20 Morocco 6,467866 23 Brazil 17,13117 23 Russia 0 20 India 2,117128 24 India 4,353852 24 India 0 20

Sources: World Investment Report 2004, World Tourism Organization facts and files 2005, US Government global population census, Designium 2003 and 2005 reports FDI/cap – foreign direct investment per capita in USD, I-R – position of the country in this selection of countries if ranked by foreign direct investment per capita, Tusd/cap – annual tourism revenues per capita., T-R – position of the country in this selection of countries if ranked by the tourism revenues per capita, GVBSw – the share of value of brands originating from respective country in the total value of the global top 100 brands weighed by country’s population, E-R – the position of the country in this selection of countries if ranked by the share in global brands value, countries with no existing share in global brands ranked equally 20th position i.e. 10 places below the country with the lowest existing share. Eventually, after few averaging operations for three NB dimension rankings (by investment, tourism revenues and share in global brands), as well as for two design rankings (Designium 2002 and 2005), we can conclude more useful table of data:

Table 5. Nation Brand Value Consolidated Dimensional Substitution (NBV CDS) ranking and average design ranking for selected countries Country I-T-E av NB-R Country D-R Switzerland 3,67 1 USA 1 Sweden 6,00 2 Germany 2 Netherlands 7,00 3 Japan 3 Finland 8,33 4 Finland 4 Ireland 8,33 4 Switzerland 5 UK 9,00 6 France 6 Denmark 9,00 6 Denmark 7 France 9,33 8 Sweden 8 Germany 10,00 9 Belgium 9 USA 10,33 10 Netherlands 10 Belgium 10,33 10 Austria 11 Singapore 10,33 10 UK 12 Austria 10,67 13 Ireland 13 Italy 12,33 14 Singapore 14 Greece 13,67 15 Italy 15 Japan 15,33 16 India 16 Estonia 15,33 16 Estonia 17 Argentina 18,00 18 Greece 18 Morocco 20,00 19 Argentina 19 Brasil 20,00 19 Morocco 19 Peru 20,33 21 Brazil 19 Egypt 20,67 22 Peru 19 Russia 21,00 23 Egypt 19 India 22,67 24 Russia 19

Sources: World Investment Report 2004, World Tourism Organization facts and files 2005, US Government global population census, Designium 2003 and 2005 reports. I-T-E av – the points calculated from arithmetic averaging positions of the country in this selection of countries if ranked by nation brand dimensions: FDI/cap, Tusd/cap and GBVS respectively, NB-R – position of the country in this selection of countries if ranked by average points I-T-E av, D-R – position of the country in this selection of countries if ranked by Designium average position It is necessary to point out one methodological operation: in order to compare averages of rankings, the countries we re-ranked in each case on basis of this very selection, i.e.: let us say some countries were ranked in Designium 3rd and 4th, then if among countries of the above selection (24 countries) countries ranked 1st and 2nd in Designium are not present, then the 3rd and 4th are re-ranked to 1st and 2nd. The D-R

45 MAREK BANCZYK ACEI 14TH CONFERENCE VIENNA 2006 ph.d. candidate / poznan, poland the effect of culture and design on a nation brand column applies only to this particular selection of countries, however is based strictly on Designium outcomes. We may also come back at this point to the GMI-Anholt National Brand Index for the 4th quarter 2005, specifically for its financial dimension:

Table 6. GMI-Anholt National Brand Index for 4th Quarter 2005, Country NBI value (USD bn) NBI R USA 17893 1 Japan 6205 2 Germany 4582 3 UK 3475 4 France 2922 5 Italy 2811 6 Spain 1758 7 Canada 1106 8 Australia 821 9 Netherlands 792 10 Denmark 772 11 China 712 12 Russia 663 13 Switzerland 558 14 Belgium 456 15 Sweden 398 16 Ireland 300 17 India 291 18 Mexico 281 19 Norway 276 20 South Korea 240 21 Turkey 189 22 Portugal 189 23 Brazil 181 24

Sources: GMI-Anholt NationBrandIndex 4th Quarter 2005,

NB Value – the financial value of the nation brand of the country expressed in USD billions and based on the license-fee approach presented in GMI-Anholt NationBrandIndex 4th Quarter 2005, NBI-R – position of the country in this selection of countries if ranked by GMI-Anholt NationBrandIndex Value,

In Tables 5 and 6, countries selectively picked as culturally recognized worldwide are printed in bold. Countries falling into design top ranking are in italics.

As we can see in the nation brand value ranking (NBV CDS – Tab.5), the selected culturally recognized countries occupy mostly the bottom of the table (unless they are design countries at the same time). In the Anholt ranking, they are scattered from bottom to top across the scale. GMI-Anholt NBI is respondents’ declarative judgments seemingly sensitive to the attractions of the globally recognized cultures. Even in this ranking, indisputably relevant cultures of countries like Russia, India or Brazil locate in the bottom half of the table. This implies that culture factor does not explain the position of the country in the nation brand hierarchy.

At the same time, top design countries (Tab.5 in italics) overlap almost entirely with the top nation brands (Tab 5. column NB-R). Moreover, even the top half of NBI ranking contains more (US, France, Spain) or less (Canada, Australia, Denmark) globally recognized national cultures that share one common characteristics: almost invariably these countries locate high in design rankings (which is represented by italics in Tab.6) Or in other words: ALL top nation brands (of NBV – CDS ranking) locate in the same time in the Top 15 Design Countries ranking. This, in turn, implies that design sector might be crucial to understanding the nation brand value.

In the following section, we will present selected specific arguments to support this the two implications stated above.

THE HEADLINE: BRANDING THROUGH CULTURE LIKE SURFING A VOLCANO

First, we need to return to the Basic Questions. As stated in the earlier sections, since we are proving the general statement on culture’s key role is false, we are only obliged to find a single contradicting case.

In order to do so, we will now create hypotheses exemplifying such false cases per every Basic Question.

BQ1: Does culture always strongly influence the nation brand? Hypothesis One: Culture may have weak influence on a nation brand

Hypothesis One - Empirical arguments:

1A) Denmark’s culture is far from being globally recognized which does not deter Denmark from being apparently strong nation brand

1B) The same applies to the Netherlands. The international image of this nation, even if its uniqueness and pronounced profile could be confirmed by hard data would most probably center more on sociological and political positioning than on culture. And the Netherlands nation brand doesn’t suffer from it which suggests that culture does not have to be central to nation branding.

1C) Argentinean cultural assets are commonly recognized though they do not appear to help much in creating a strong nation brand. There is no major move in foreign investment, nor in tourism, not to mention the share in branded exports, while geographic and cultural assets are definitely on the Argentinean side. It might take more than two to the tango, sometimes.

1D) Greece underperforms in terms of 2 out of 3 nation brand dimensions presently analyzed. There is not really serious investment attraction and no signs of achieving nation brand premium in exports. On such a background, the tourism factor shines much brighter. However when we consider the population size, countries like:

Austria, Singapore, France and Ireland perform as good as Greece or better. It is so despite the terrific cultural achievements of Greeks in nearly every aspect and sector. This cultural load of Greece possibly still radiates on its nation brand as among the selected countries, Greece is classified 15th (NB-R, Tab.5) The radiation is, nevertheless, seemingly too weak and more likely than not –cannot be much stronger.

1E) Egypt features similar radiation of culture on nation brand but even weaker than Greece (if any). The historical and cultural riches do not seem to strengthen the brand even in the flagship area: tourism. In terms of tourism revenues per capita out of 25 countries selected Egypt ranks 20 which does not appeal as grand achievement. There might be other factors spoiling the situation, however cultural strength of Egypt is clearly not a sufficient countermeasure to them.

1F) Brazil is one of the toughest parts for a nation branding specialist: approaching 200 millions in population, strikingly recognizable and rich in terms of culture, very unique in image and practically every asset one may think of, Brazil manages to draw about the same foreign investment as tiny Belgium. The number of tourist arrivals for Brazil is about one third of that of Poland, just to name the first comparison country. Lack of at least one global brand, given Brazil’s size and impact it has in the field of pop culture and sports, also speaks for itself. If such a undoubtedly pronounced, vital and specific, globally recognized culture does not increase the power of the nation brand Brazil in any way manifest in the measurable dimensions, then it is hard to think of a less recognizable cultures that might be really ‘central and indivisible’ from nation branding in terms of value generation.

Hypothesis One - Theoretical arguments/explanations:

1G) As Simon Anholt brilliantly points out, nation branding reduced to one possible asset, say: geography, inevitably evolves towards a common image of “blue sky, yellow sands, green grass” repeated by every other country in their tourism-oriented strategies. It makes the consecutive national tourism promotion campaigns almost indistinguishable form one another. BBC offers a good example: the smiling couples all in chic tan jump into the turquoise water and only at the end of the spot you are

49 MAREK BANCZYK ACEI 14TH CONFERENCE VIENNA 2006 ph.d. candidate / poznan, poland the effect of culture and design on a nation brand able to tell what country is it about since you prompted to live your myth somewhere, smile because you are elsewhere and so on. Eventually, the differentiating effect of the ad appears negligible, if any.

Further on, Anholt claims that assets such as: creativity, imagination, music, spontaneity etc. remain relatively untouched by nation brand positioning strategies, while most countries insist on focusing their brand building endeavors on assets like: precision, tradition, reliability, quality, technology most of which are already quite successfully exploited by the existing nation brands.

These are both sharp and insightful observation of Simon Anholt. However, they apply to greater area than just the blue-yellow-green tourism promotion trap or everybody-wants-it-German-like export promotion trap. Forced into somewhat self- governed mechanism of brand positioning as a process, national culture images tend more often than not to flatten. And, oddly enough, they also appear to show some mainstreaming effect. Wherever national culture is portrayed, diversity, vitality, passion and colorful authenticity become dominant ‘sales pitches’.

In worst case scenario, culture’s contribution to nation branding may shrink into a pop-folk accessory, an adhesive tribal tattoo on the same chic tan body of main character in a predominantly cliché blue-yellow-green commercial. The effect of such an operation, even though initially potent, must wear thin after a few repeated campaigns the same way the blue sky stereotype does. Last but not least, due to the mainstreaming effect of common views on culture, it also misses the main target which is brand differentiation.

1H) The needs of the markets, also those applicable to a nation brand, as well as the focus points of economies may stay the same for long or change quite quickly. Agnieszka Winkler in her groundbreaking Warp-speed branding showed how volatile in the technology era can be even those branding rules we considered carved in stone. The value assets and positioning bases must be managed somehow. Even if culture could be managed at any level, it would never be able to catch up with the changes in economies. Formation of the intangible cultural heritage, relevant in this

50 MAREK BANCZYK ACEI 14TH CONFERENCE VIENNA 2006 ph.d. candidate / poznan, poland the effect of culture and design on a nation brand point, is a matter of ages. That’s why the references of nation branding to cultural assets cannot be too direct and too stiff.

1I) Some arenas of culture (such as visual or performing arts which significantly differ from tangible or intangible cultural heritage), show certain level of unpredictability. Their future face is always unknown and their present face is uncontrollable. On the other hand, nation brand within some restraints must be a manageable concept. It requires some precision and assumes reliability of assets it calls on. Taking points 1H) and 1I) together, we could conclude that culture as a premium asset of nation brand positioning can be compared to a volcano: it may explode causing nation brand value to sky rocket, or may remain passive and silent for years. No stable connection can be established.

1J) Whether we like it or not, culture is often believed to be opposed to economics. Bearing that in mind, we must remember that despite its resemblance to culture in terms of valuation specifics (“over and above the tangible assets or functional properties”), the nation branding as any other branding is strictly a marketing concept and as such remains a matter of economics. This breeds inevitable collisions of interests and positions. The tensions between ‘culturalists’ and economists are obviously present in the current discourse of cultural economics. Most probably it will remain so. The critique of culture valuation by prof. Arjo Klammer of Erasmus University represents only a mild, high-end example of such a tension. It is easy to imagine ‘culturalists’ reluctance to sacrifice a sacred arena of culture in order to win the rivalry in a profane arena of branding. This will naturally weaken the possible ties between nation branding wizards and culture chaplains. Especially, that some art sectors are thought to harbor strong, seemingly inherited, resentment to capitalism with all its trademarks. The problem is that there is little chance to deny that a brand, be it product or nation brand, belongs to the flagship trademarks of capitalism.

BQ2: Does culture always positively influence the nation brand? Hypothesis Two: Culture may have negative influence on a nation brand

Empirical arguments:

2A) French cars are commonly considered as superb in styling and elegance but not in technology. I am not discussing the real merits but the picture in people’s minds. Even though invoking French culture in car marketing would bring some benefits with regard to styling, the car producers seemingly conclude there would be more effect on the negative side. Styling is a front-end feature anyway, while technology is not. Unlike German counterparts, “Frenchiness” of French cars is not commercially exploited since there is little in French culture to assure steadiness and reliability that can be easily named among critical success factors in automotive positioning.

2B) India does not use its cultural assets to promote exports of IT services. The Subcontinent has several outstanding traditions, but in the contemporary world, its most recognizable asset would probably be the long-standing power of its deep and visionary spirituality. This phenomenon is well exemplified by the international career of the word ‘guru’ in the arena of languages. The fascinating world of colorful spiritual beings somehow does not correspond to the world of binary signs, exactness and cold logic. The world class of Bangalore IT specialists does not derive its global recognition from the Indian culture. In certain aspects, it carves its image on the opposite side.

2C) German fashion companies present the case similar to that of French cars but stronger. Hugo Boss and Jill Sanders made quite an effort to eradicate its German origins from public image, aware of the common international connotation of German culture. It is not a question of positive or negative. It is a question already within the positive side. German culture enjoys strong and positive associations in global perception but positive does not have to mean helping in global competition in all industries. The same positive cultural association can be beneficial in car industry, neutral in, say, food industry and damaging in fashion industry. This is not German problem. This is general problem with culture. It is indeed ‘jenseits von Gute und Boese’.

2D) Culture-based nation branding faces even more serious problems when national culture is associated negatively in given country. Polish office furniture manufacturers

52 MAREK BANCZYK ACEI 14TH CONFERENCE VIENNA 2006 ph.d. candidate / poznan, poland the effect of culture and design on a nation brand can win quite good market share in several German cities and maintain it despite cheaper competition because, surprisingly enough, they base on product differentiation in both materials and design. But this advantage lasts only for as long as they manage to hide the country of origins. The connotation of Polish culture in Germany is predominantly negative to that extent that it can ruin an otherwise successful marketing campaigns for export goods.

2E) To show some positive accent at the end of this sequence of arguments, the very successful Swatch campaign meant in part to revitalize the image of ‘Swissness’ is actually another example of potential negative impact of culture on the nation brand. Swatch did not utilize the Swiss culture as its asset. It rather fought against it. That core observation cannot be changed by the fact that the fight resulted in success and a new dimension to traditionally pictured noble banker stereotype of a Swiss was added. The conflict between culture image and branding criterion is what really matters in this argument. In addition to that, deconstructions of national image are very difficult and success seems more an exception here, than a rule.

BQ2: Does culture always positively influence the nation brand? Hypothesis Two: Culture may have negative influence on a nation brand

Theoretical arguments/explanations:

2G) Brand is a promise. Culture grows well on the soil fertilized by freedom and constant challenge to boundaries. It is unlikely to be contained in any marketing concept obliged to keep any promises, even when it comes to concepts as seemingly flexible as nation brand. In a long term, there is very unlikely course of action to be foreseen without a harm done either to the brand or to the freedom of culture.

2H) Culture’s dependence on personal creativity and uniqueness oddly enough poses a threat to culture-focused nation branding. By definition, in a free society it cannot be managed. Planning a nation brand on arena that depends on unpredictable individual variables seems like endorsing a corporate strategy that assumes the consecutive CEO’s in the next 50 years will show the same profile, say,

53 MAREK BANCZYK ACEI 14TH CONFERENCE VIENNA 2006 ph.d. candidate / poznan, poland the effect of culture and design on a nation brand be a bit melancholic, admire Laurie Anderson music and despise De Koenig’s paintings. Relying on creative individuals as such is always risky in issues requiring stability and persistence over decades. You might successfully create an almost archetypical image for a nation brand and then comes one successful movie director and deconstructs it. Pedro Almodovar is admired worldwide and rightfully viewed as macho-stereotype destroyer, a typical promoter of atypical view on Spaniard culture. Fernando Meirelles is undeniably Brazil’s cultural asset. Yet his stunning “Cidade de Deus” rather didn’t help Brazil’s Board of Tourism in its struggle to project a safer and sunnier picture of Rio holidays to the international crowds.

2I) Culture seen though the intangible heritage of traditions, social stereotypes and customs appears merely to ‘heavy’ load in an arena that requires flexibility. If you market a product and then, due to a sudden scientific discovery some of its properties are harmful, you can still modify it and reposition. Once you successfully build an image based on cultural stereotypes that persist for ages, it’s done. No matter what the market says. Let us assume the world returns to some radical ideas of the sixties and embraces them. They rule. Can you suddenly reposition Bavaria and make it a synonym of libertarian psychedelic pleasure garden? Very unlikely.

2J) Culture is indeed much more that its economic valuation might involuntarily suggest. It’s a plentitude of vectors, a mix of very persistent and very volatile phenomena. Some of these vectors bring more economic value, while the others bring less.

Nation branding is a long-term financially-oriented concept. Its value can be measured in many dimensions – four, five or six but the mission of nation brand is two-dimensional: to appeal to as many individuals and institutions as possible (dimension one) as strongly as possible (dimension two). Once again nation branding shows some similarity to culture valuation. In CVM the two dimensions mentioned are represented by the number or percentage of non-zero WTP (dimension one) and the mean WTP value (dimension two).

We have already shown that multilayered space of culture cannot be reduced to a flat nation brand with its clear set of functions. Now, we imply that there can be no fixed

54 MAREK BANCZYK ACEI 14TH CONFERENCE VIENNA 2006 ph.d. candidate / poznan, poland the effect of culture and design on a nation brand way of interaction when we set nation branding inside the field of culture. The interaction will be highly variable. Physics offers a good comparison. Nation branding is like moving a particle of iron inside the electromagnetic field. It can move along the filed power lines, in which case culture actually helps build nation brand. It can move in perpendicular direction, in which case culture is neutral. Yet it can also move against the field power lines in which case culture plays against the nation brand.

Finally, if we add to this picture that unlike electromagnetic fields, the filed power lines of culture are not parallel and consist of many stable and unstable directions, we will arrive at the approximate idea of difficulties with the culture-based nation branding.

BQ3: Is culture the only factor that can be at once source of value, value communicator and revenue earner for the nation brand?

Hypothesis Three: Design may be simultaneously the source of value, the value communicator and the revenue earner of a nation brand

Hypothesis Four: Design may have weak or stronger influence on nation brand but its influence is always positive.

Empirical arguments:

3A) The first and the second edition of Designium reports shows that top countries in terms of design reach also top positions in the ranking by competitiveness of economies. Since nation brand by definition increases the competitive advantages of a country, the larger selection of countries, the more probable is that nation brand value hierarchy should be proportional to economy competitiveness hierarchy and that design influence stretches on all brand value aspects: sourcing, communication and revenue earning. The individual ranking of countries by dimensions of nation brand value such as: investments, tourism and exports also shows proximity to the design ranking. Moreover, design factor shows stronger influence on nation brand

55 MAREK BANCZYK ACEI 14TH CONFERENCE VIENNA 2006 ph.d. candidate / poznan, poland the effect of culture and design on a nation brand ranking than culture factor does which implies design is more likely than culture to feature the triple brand value property.

3B) It can be argued that the high positions of USA, Germany or France correlate with their globally recognized cultures, we must point out that all these countries enjoy also high position in design ranking so it can well be the design impact that is central to their success.

3C) Countries such as Denmark, Belgium, Finland, Netherlands, Singapore and Sweden show high positions in both rankings of nation brands (the NBV dimensional substitution originally constructed for this paper and GMI-Anholt NBI from 4 th quarter 2005). It is very unlikely explainable in terms of their global cultural influence. Instead, all these countries show high design ranking position, while some feature spectacular design achievements.

3D) Considering that some selected culturally relevant countries such as India, Russia, Egypt or Argentina (in global perception) bottom the table of nation brands while at the same time these countries are distant or non-existent in design ranking, there is very high probability that design has greater impact on nation brand than culture has. Which also means that: if culture is value generator, communicator and revenue earner for nation brand, then design is even more so.

3E) Even if there are countries in top register of nation brand rankings that are not necessarily top design countries (Ireland in the NBV DS, Spain and Canada in GMI- Anholt NBI), all the top 10 design countries are high in nation brand rankings. This implies that while being not always the decisive force, design always influences nation brand in positive way, however stronger or weaker. Theoretical arguments/explanations:

3G) The very act of design meant as a process assumes integrating artistic (or cultural) values, technology and marketing/economics in order to create an added value that enhances competitiveness of companies and improves the quality of life. Design means also a set of characteristics of a good being an outcome of this act and often serves as the first message communicating the value of the good. Finally,

56 MAREK BANCZYK ACEI 14TH CONFERENCE VIENNA 2006 ph.d. candidate / poznan, poland the effect of culture and design on a nation brand design is the key component of margins earned. Therefore, there is actually little surprise that design functions simultaneously as a source of value, communicator of value and a revenue earner for any concept of brand, including – nation brand.

3H) Design has very direct and obvious impact on the export dimension of nation brand value. It is the main reason for the phenomenon of nation brand premium in exports.

3I) There is more subtle though easily provable impact of design in the investment dimension. The critically innovative, high value added divisions of corporations are not being easily shifted from one country to another despite the changing infrastructure, labor costs and tax benefits among the countries competing to absorb FDI. Design in terms of specific cluster of educational institutions, business orientation, social attitude, number and qualification of professionals can produce in a country sort of unique nest of properties and conditions that provides very attractive for the most promising types of foreign investment. Let us not forget that FDI inflow figures for Denmark in a specific year can be higher than for China. The design impact on investment also appears stronger than the analogic impact of culture. After all Milan earns much more foreign investment than Florence.

3J) Design’s influence on the tourism-related component of nation brand value is relatively hardest to explain, however – it is still fairly evident. Design influences tourism in at least three ways. All tourism promotion is in fact advertisement activity which falls into the broad definition of design we assumed in this paper since it bases on graphic and multimedia design. Secondly, all tourist facilities, the first and second contact with the country are typical arena for designers, both graphics and interior oriented. Finally, once the sector develops and earns some international fame (not necessarily very wide), design sector commences to live its new life as tourist attraction. Fairs and exhibitions are good example of this phenomenon. Architecture is probably the most definite example of design as tourism attraction per se. We do not use it extensively since the sector of architecture for its size and specifics is sometimes excluded from design and forms its own class. From the pure definition point of view, it certainly is a design sector.

3K) From Bauhaus time till now, design has marched along such capitalist terms as mass production, cost calculation and margins. In times of marketing prevailing over cost advantage and product differentiation prevailing over pricing, this symbiosis seems stronger than ever. Unlike culture, design is strongly affiliated to the world of consumption and lifestyle. It is almost synonymous with some aspects of this world, such as branding for instance. Therefore it seems a naturally better candidate to back the nation branding on than a complex, volatile and unpredictable sphere of culture.

3L) Design incorporates some aspects of culture and translates them into the language of business. We can venture to say that design enables the most tangible and stable realization of the cooperation between market and culture without harm to any of the fields. It is still innovative yet manageable. Avant-garde yet feasible and marketable. Design is certainly not such a rich phenomenon as culture itself but this paper does not intend to verify richness and numbers of possible layers of sectors. It intends to answer whether culture’s impact on nation brand is central and bigger than impacts of other factors. It appears that with regard to nation branding, design may take it all.

THE FINAL: UNITED WE’LL STAND OR TOWARD A FUSION

In fierce competition of a globalized world, nation brands become increasingly important. As was the case of commercial brand, nation brand evolves from the soft marketing concept to the financially describable intangible property.

Knowing what are the principal assets nation brand can be based on/or expressed through and which assets generate most brand revenues would help us create better brands and more rationally utilize the resources. In order to verify commonly repeated conviction of culture’s dominance over other nation brand assets and its strong association with the nation brand value, we propose an improved theoretical framework. We set three hypotheses that deny the strength and the direction of the culture-nation brand association and suggest to look at the design sector as possibly more important nation brand asset. To prove the hypotheses, we would need to solve few simple equations using correlation coefficients between country rankings by

58 MAREK BANCZYK ACEI 14TH CONFERENCE VIENNA 2006 ph.d. candidate / poznan, poland the effect of culture and design on a nation brand culture, design and nation brand value. The first one is most problematic, therefore in future we propose running a CVM survey to establish a ranking of selected countries by the aggregated WTPs for the respective national cultures. Due to the present lack of such empirical data, we must have skipped the equations. We substituted the Real Value ranking by closest possible data sets and when even this seemed problematic - we by-passed the data gap and referred to comparable phenomena present in the commercial markets.

Using data from CVM valuation of culture, World Investment Report, World Tourism Organization, Designium Ranking and even Anholt’s NationBrandIndex, we conclude that there all three hypotheses could be verified positively. This suggests that culture is neither most important nor most specific factor influencing the nation brand value, that it can produce negative impact on the brand and that design sector can become a more reliable base for a nation brand since its impact on brand value is more stable and always positive. During the process we reveal and analyze several methodological aspects of nation brand and culture valuation.

Nation brand valuation as any brand valuation refers to its INTERNAL function, i.e. to generating advantages for the owners of the brand and drawing benefits from the external world (non-owners) to the internal (owners).

The key error committed in the most well-known nation brand assessment and ranking models to mistake the internal for the external function. This is probably because normally, the internal world is limited to one owner (company) and the external world is personified by plural customers, societies, etc. In nation branding, the internal world actually mans the whole country and its people, while the external means other countries and peoples.

As nation brand function to be valuated is pointed towards the party of transaction, it should not be measured by methods meant for measuring ‘externalities’ such as CVM. There is quite direct analogy to the commercial brand in this regard. The public opinion on Coca-cola brand value is not equal to its brand value. Assessing place brand through questions on its specific assets (people, pulse) appears even farther away from merits. The hypothetical Coca-cola brand valuation exercised through

59 MAREK BANCZYK ACEI 14TH CONFERENCE VIENNA 2006 ph.d. candidate / poznan, poland the effect of culture and design on a nation brand asking customers opinion on specific assets, e.g. the corporate office interior design or ergonomics of the production lines would seem a farce.

We determine WTP for nature parks or archeological sites because we believe their direct effects toward within (to the owner or manager of the park or site, most often – a state) are not so important. What is important is the effect on the external parties, meaning the society. The benefits from a brand flow all to the owner or manager (government) of a brand so determining its value by asking external parties their opinions or internal party (citizens) their WTP is a clear misunderstanding.

WITS model is close to EIM approach in the way that it assumes only real cash flows and it deals with the same targets: the entire society seen through certain money journey channels (direct effects, indirect effects, induced effects). However, EIM treats society as external party, it measures the effect of one dollar spent by tourist Mr. Giannini in the hotel of Mr. Johnson has to all Smiths in the whole country no matter what they did or did not that night. WITS takes society as the internal party. It helps understand what effect one dollar all Smiths pay in taxes supporting the state and its international image has to all Smiths benefiting from foreign investment, tourism revenues and export revenues.

The course of action taken by the brilliant nation branding guru Simon Anholt in his attempt to set ‘the first analytical ranking of world’s nation brands’ appears vulnerable to easy and well founded criticism in the most important point: methodological consequence and scientific rationale. In this regard it echoes the worst traditions of strategic marketing models, such as McKinsey’s multifactor grid for portfolio analysis. For all differences in time and specifics of the two models, they have one thing in common: they lack solid theoretical base. In marketing portfolio analysis, financial market theory and microeconomic empirical data come with a rescue mission. In case of nation branding, quite much can be offered by cultural economics.

This does not imply straight away that nation brand is very similar to the cultural good and as such can be assessed with use of the same methods. In fact Anholt, involuntarily treats nation brand as sort of ephemeral and multifaceted cultural property and this is exactly where he misses the target entirely. Nation brand is not

60 MAREK BANCZYK ACEI 14TH CONFERENCE VIENNA 2006 ph.d. candidate / poznan, poland the effect of culture and design on a nation brand meant to produce external benefits. Collective nature of nation brand owner should never be mistaken for its externality. Nation brand was not invented by few good men to save the mankind. Nation branding is a natural consequence of sharpening competition in the globalized economy and it basically uses the mechanisms from commercial product markets but takes them few notches up. Nation brand is still a brand which implies it is meant to bring benefits to its owner. These benefits are earned by intangible and sometimes highly abstract properties that form a nation brand but the benefits themselves are quite tangible and easily definable. In most cases, they are even way easier convertible to monetary measures than the cultural goods, since their traces are easily observable. Already at that early stage of dealing with the problem of nation brand valuation, cultural economics would provide some help.

We can clearly see that several cultural valuation methods can be potentially applied to nation branding. Moreover: their application potential seems wider than in the very cultural economics because of two reasons: 1) some methods face specific limitations in culture that are significantly reduced or non-existent in nation branding, 2) we can clearly see the possibility to apply more than one method in one dimension. Of course, the critical question of cultural economics returns here. What is the relationship between the methods? Are they substitutes or complements? To what extent? The famous paper of Bruce Seaman17 marked a major step forward in this regard, brought the debate to the new heights and among other effects inspired the author of this text. However, the question is getting more difficult since other methods enter the hitherto CVM-EIM duel. What is the possible EIM-HPM relationship in case of nation brand value dimension of investment? What is TCM- EIM relationship in case of tourism? Oddly enough, it appears that nation branding more actively than culture forces us to take such methodological issues up. This may be a good field of comparison since there are less limitations but more urgent needs for an integrated framework. Which is to say, nation, or wider: place brand valuation might turn to create the best opportunity to date for a successful synthesis of valuation methods. The resulting fusion model could help us both value the place brands and control mechanisms central to successful place brand creation and

17 Bruce A. Seaman, CVM vs. Economic Impact – substitutes or complements, presented at the Contingent Valuation of Culture Conference, University of Chicago, February 2002

61 MAREK BANCZYK ACEI 14TH CONFERENCE VIENNA 2006 ph.d. candidate / poznan, poland the effect of culture and design on a nation brand management. Such a challenge would require special co-operation of place brand specialists and cultural economists yet as presented above the two arenas are closer to one another than is commonly thought. Hopefully they will soon become mutually unbiased and familiar, too. In this case, familiarity may breed a joint success instead of contempt. Whether it does or not - remains to be seen.