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Methodology, Agent-based computational economics, Simulation models, Empirical validation, Calibration, History-friendly modeling, B41, B52, C63,

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We have witnessed a dramatic transformation of the USA and western European economies in just twenty years. Built on manufacturing, today these are indubitably services-based economies. The transformation raises a number of important issues for economists, and for evolutionary economists in particular for they have long highlighted the importance of innovation and structural change in their treatment of industrial organisation, employment creation, welfare, economic growth, and international trade. Our understanding of the innovation process, and its economic implications, were built on studies of manufacturing sectors. What needs to be changed? Are some theories and models no longer applicable? Do we need to develop new explanations, theories and models? Is innovation in service sectors fundamentally different to innovation in manufacturing sectors, or is there a set of common features? These are key questions that are now being asked.We suggest that, by studying services innovation, scholars of innovation have an opportunity to develop an integrated account of innovation that is applicable to both services and manufacturing, and which covers all aspects of the innovative process. This requires a reassessment of established theories and models, and the development and testing of new theories and models. In other words, it requires a thorough review of what (we think) we know about innovation.