INTRODUCTION So-called 'countries in transition' are undergoing huge political and economic change, as a result of which they not only find themselves facing the challenges of adopting the market economy and western democracy, but also those related to becoming fully-fledged members of the emerging knowledge society. Western countries have come to face the challenges posed by the knowledge society after many years of rather stable and successful development, which enables them to benefit from these challenges by enhancing their development even further, in a geometric progression kind of way. At the same time, the 'countries in transition', the latecomers to the market economy, have to go at a double pace in order to place themselves on the path of rapid development and to survive in the knowledge-based competition. Being able to jump onto this path requires strong forces either from outside or inside of the countries, or both. The authors joined in this symposium believe that one such inside force possessing the 'multiplier effect' could be universities which should serve as the 'engine of progress', both exploring the benefits and problems related to the knowledge society and helping their countries to respond to its challenges in efficient ways. However, to rise up to this task, universities in the countries in transition, as indeed everywhere, must first of all undergo their own transformation processes. Only then they will be able to lead their countries to the higher stage of national economic and social development. Thus, the symposium will focus on the challenges and tasks facing the universities in the countries in transition which aim to join the knowledge society, with particular consideration of the university role in competence development, social innovation, and the evolution of regional clusters. PART 1 (1.5 hours) UNIVERSITIES AND THE KNOWLEDGE ECONOMY Chair: David Bridges, University of East Anglia and Von Hugel Institute, St Edmund's College, Cambridge, UK. This first session of our series of symposia focuses on the economic functions of universities, but examines these in relation to their distinctive contributions to the enhancement and production of knowledge: " the contribution of universities to the 'intelligence' of organisations, countries and societies and thence to their development; " different views of the way in which a the universities of a country in transition can contribute to the development of a knowledge economy; " the role of HE in innovation systems. Part 1 - Paper 1 of 3 The intelligence approach to national development Robertas Jucevicius, Kaunas University of Technology, Lithuania In the same way that psychologists speak of human intelligence, one can speak of the intelligence of organizations, countries and societies. The intelligence of the state could be defined as a set of capabilities possessed by its social systems, which are required in order to perceive and make innovative decisions on emerging problems with minimum expenditure of resources. Social systems in the state have to know and understand the nature of the processes taking place in their macro environment, including the challenges they may pose to the state, and to be able to act properly. The intelligence approach is important for every nation but especially for the less developed ones. Underdevelopment is more a state of mind than a consequence of environmental, social or technological impoverishment. The paper will examine issues related to the realities outlined above, including the differences between the notions of 'information', 'knowledge' and 'learning' society, the qualities of society which help it to respond to the challenges of the new reality and the concept of the 'intelligence of the state' as one of the promising approaches to national development. Part 1 - Paper 2 of 3 Questioning the higher education of a country in transition on its way to the knowledge economy Palmira Juceviciene, Kaunas University of Technology, Lithuania and Rimantas Vaitkus, Vice Minister for Education, Lithuania. Facing the reality of globalisation, instead of questioning the importance of the knowledge economy, a greater emphasis should be placed on the challenges it raises. These challenges are especially big for the countries in transition, and even bigger for higher education of such countries. How should higher education be developed in a country in transition to enable it to make a leap from planned economy and related economic, financial and social problems to the learning society and knowledge-based organisations? Although these questions are addressed by a number of authors from different countries, the continuing reforms of higher education in the countries in transition as well as significant differences in their development call for a deeper and more systematic analysis of the development of higher education, even if based on the example of a single country. In this paper, the authors will pose a number of questions to Lithuanian higher education which has been in the reform process for twelve years now. The key question being, in which direction should higher education be developed to become an engine moving the country to a knowledge society, issues such as the structure of HE, the relationship between disciplinary and multidisciplinary knowledge, the boundaries between fundamental and applied research, the modern curricula and study programmes, and the role of higher education institutions in accreditation of prior learning will be discussed. Part 1 - Paper 3 of 3 Higher education in a national innovation system Monika Kriaucioniene, Institute of Business Strategy, Kaunas University of Technology, Slavo Radosevic, School of Slavonic and East European Studies, University College London, Brigita Janiunaite, Institute of Educational Studies, Kaunas University of Technology This paper will analyse the role of universities in an emerging national systems of innovation in countries of central and eastern Europe (CEE). Reallocations from industry to services, from domestic to foreign firms, and from large to small firms have been accompanied by productivity improvements through better organisation, lay offs and creating value added through closer links with markets and users. However, these sources of growth are coming to end in several CEE economies and there are signs that CEE countries may be facing the next structural barrier to growth. Their long-term growth is likely to depend on accumulation of physical as well as of intangible assets. However, further growth of CEEC is increasingly dependent on accumulation of technology and on the quality of 'narrow' national systems of innovation, i.e on the quality of R&D and educational infrastructure. CEE are faced with the challenge how to develop their knowledge-based economy in which universities should play one of the pivotal roles. Based on this view of the problem paper aims to analyse several issues. First, what is the current state of transformation or the emergence of market based national systems of innovation in CEECs? Second, what is the current state of transformation of universities in CEE from the perspective of system of innovation? Third, which are expected developments, which would be needed for universities to contribute to knowledge-based economic growth in CEECs?