1. ENTERPRISE AND TRANSFORMATION: CHALLENGES FOR THE SERVICE ECONOMY J S METCALFE ESRC CENTRE FOR RESEARCH ON INNOVATIONAND COMPETITION THE UNIVERSITY OF MANCHESTER Presented to the “Social Sciences and Humanities in Europe: New Challenges, New Opportunities” Conference Brussels, 12-13 December 2005

2. Preliminaries All economies are: Knowledge based; Developing economies. Two questions to distinguish different economies: How is the production and use of knowledge organised? How does the economy adapt to innovation? These questions apply to China, India and Brasil as much as they do to Germany, Hungary, Portugal. Importance of the service dimension.

3. Service Value Added

4. The Service Economy Services as active innovators, contrary to the tertiary hypothesis. Three examples: The String Quartet paradox; Airport Capacity; Cataract surgery. Three lessons: Intertwining; Interdependent innovation payoffs; and, Organisational component to service innovation.

5. Lessons for Innovation Policy Innovation requires much more than invention. R&D necessary but not sufficient. Innovations as business experiments. Impact of innovation depends on economic and social responses in markets, social structures and organisations Two issues: What kind of S1T policy in a service economy? Better measurement. SSC rather than SIC!