The main purpose of the Employment Prospects in the Knowledge Economy (EPKE) research project was to examine the impact of the adoption and diffusion of knowledge generating activities on economic performance in Europe. The primary focus of the research was on considering employment generation and productivity growth and the demand for skilled labour in the context of increased investment in information and communications technology (ICT) equipment, contrasting EU performance with the US. The analysis was carried out at both the industry and firm level. The project first generated an internationally comparable industry dataset used in subsequent analysis, constructing estimates for employment and labour productivity growth for all EU countries and more detailed data containing estimates of capital input and labour quality for four EU countries, namely France, Germany, the Netherlands and the United Kingdom. Industry taxonomies were developed to aid in analysing the first of these databases. The research results need to be seen against a background of accelerating productivity growth in the US since the mid 1990s which most observers now acknowledge is linked to the use of ICT. The analysis at the industry and firm levels show the EU economies have been investing rapidly in new technology but as yet have not enjoyed the same productivity benefits as observed for the United States. All countries also show evidence of increased demand for skilled labour associated with the adoption and use of ICT and reductions in the demand for unskilled labour. However, from the mid 1990s EU countries have shown a capacity to create jobs, mainly in traditional industries but there is some evidence of job creation also in ICT intensive using service sectors. There is considerable variation in performance across EU countries.