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The study objective was identification of the service industries that determine the rate and lines of development of a knowledge-based economy. The analysis covered the EU member countries and the years of 2008-2012. This report consists of four sections. The first one provides the characteristics of a knowledgebased economy and describes the role of services sector in progressing towards this stage of development. The second section offers a classification of services that led to establishing the category of knowledge-based services. The industries classified as knowledge-based services contribute directly to the creation, processing and distribution of knowledge throughout an economy. The following part presents a division of the EU member economies into four groups, depending on their advancement towards the knowledge-based economy as defined by two indices: the Knowledge Economy Index (KEI) and the Knowledge Index (KI). The study concluded on empirical verification of the significance of knowledge-based services within individual European economies. In a knowledge-based economy, where knowledge is the key factor in gaining a competitive advantage, it is just the services related to knowledge acquisition, distribution and creation that drive the economic growth. The development level of service activities classified as knowledge-based services largely determines the economy’s performance in knowledge creation, distribution and use. This is so because these activities directly contribute to the economy’s competitive advantage based on knowledge.

The Service Sector of a Knowledge-based Economy – a Comparative Study