As you may have heard, Dundee is a city on the way up.

With arts, culture and creativity very much in the forefront of its regeneration as older industries decline, its attraction of the Scottish outstation of London's Victoria and Albert Museum to the Tayside waterfront is at the heart of that, so it is appropriate a project bred in the city and shortlisted for an Arts and Business 2014 Award was conceived at a V&A event.

It is also significant the award is in the Digital Innovation category, Dundee and its hinterland being the fertile ground where new companies spearheading development in games technology thrive. One of these, Quartic Llama, founded by Tom DeMajo and Mal Abbas, met the National Theatre of Scotland (NTS) at an event in the city designed to engage the local creative community in the run up to the V&A opening.

The result was a project that took both the NTS and Quartic Llama into new areas.

Philippa Tomlin is creative learning co-ordinator at the NTS, opening up theatre to new audiences by devising projects that link to the company's main productions. In this case the work was the acclaimed stage version of Scandinavian horror film Let The Right One In, which premiered at Dundee Rep. She is a fan of the horror genre and her brief was to create a large scale community project in a city where the national theatre company had yet to do such a thing.

"The play has many references to puzzles, like the Rubik's Cube. With Abertay University making Dundee Scotland's capital of gaming, it made sense to link horror, gaming, and theatre, and by chance my colleague Pamela Walker got talking to Tom and Mal at the digital artists get-together, where they had created a light installation.

"And as a games development company they were interested in taking gaming beyond being on one screen in one place," says Tomlin.

Mal Abbas takes up the tale: "Quartic Llama is keen to push the boundaries of what a game experience is, and creating an alternative reality take on theatre was a perfect project. It was great for us, a small independent company, to be working with a big body like the NTS."

The result of the partnership was Other, a location-based audio game for i-Phone that quickly won rave reviews in the games press, a downloadable horror adventure that takes the player on a tour of present day Dundee using GPS tracking.

The project went much further than just the two organisations speaking to one another, however, and that was another new experience for the games developers. Writers' groups in Dundee were asked to come up with horror stories based on the city itself, and Other played with these stories to make the city the set of the game, building in tales of creepy schools and abandoned mill buildings. The youth theatre company at Dundee Rep supplied acting talent, and voice-overs and music were the work of local college students.

Says Tomlin: "It was a piece of live theatre with a cast of 83 that became a puzzle that takes you for a walk, so that even people you pass start to feel like they are part of the game.

"In theatre there has always been a great sense of games playing. We use games to create character and explore plot and themes. We invite the audience to our game of pretending, so gaming and theatre are very closely linked."

But Other was a unique initiative, and Tomlin is convinced it has put the NTS at the cutting edge of a new direction for theatremakers.

"I am really excited about the future of interactive audience experiences, using game design. The theatre that I would be very excited about making and seeing is digital theatre."

Abbas adds: "Much like a theatre performance, we wanted the audience to be enjoy a continuous, narrative-rich experience.

"This was a project that really opened our horizons and showed what was possible. breaking new ground as a location-based game."

The Herald is media partner for the Arts & Business Awards 2014. The winners will be announced at Glasgow's Theatre Royal on Friday October 24.