This report presents the results of work package 3-4 of the SI4S project. This work package concerns the "innovation in service" aspect, i.e. what innovation in service industries is, how service firms innovate and the conditions for and impacts of the innovation process. It is a synthesis of national reports from seven European countries: Denmark, France, Germany, the Netherlands, Norway, Sweden, the UK. An overview of the national reports and their specific content is included in the appendix. As the service sector counts for between 60 and 80 per cent of the GNP and the service sector may get a leading role in economic growth and development, innovation is as important in services as in manufacturing. However, innovations in services have been characterised by two facts: 1. They have not been much studied, so our understanding of them has been poor. 2. Service firms have traditionally been little innovative compared to manufacturing firms - according to the national reports even if that conclusion should be shaded by the notion that innovation in services have been for a long time underestimated because of its relatively specific nature (which means that they are often incremental solutions of specific problems). Further, their innovation process is in some respect similar to that in manufacturing, in other respect different from it. The reports also tell that service firms are improving their innovation activities, but that they need to develop organisation and management of the innovation process and the innovation awareness could still be increased in many service fields. Our understanding of, and thus research in, the service innovation processes is poor. This report is a step in the direction of a greater understanding and maybe development of operational models that firms and political authorities could use.